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Healthcare Library

Creating a Healthy Hospital - The demand for Physician Executives

Written by: William Fulkerson, Jr., M.D.
Chief Executive Officer
Duke University Hospital Deedra L. Hartung, M.A.
Vice President, Practice Leader
Cejka Search

The Increasing Demand for Physician Executives

Physician executives are in demand. And, this demand is accelerating. Hospitals and health systems are clamoring for physician executives to lead a variety of efforts across their organizations. Physicians are being asked by hospitals to assume key roles leading, developing and improving systems and programs that address:

• Financial outcomes
• Quality outcomes
• Operational outcomes
• Clinical outcomes

What is driving this increase for physician leadership? Since the Institute of Medicine’s (IOM) Crossing the Quality Chasm (1996), which documented the serious and pervasive nature of the nation’s overall quality of healthcare problem, and the subsequent document, To Err is Human: Building a Safer Health System(1999), knowledgeable and savvy physician executives with advanced training in evidence-based medicine, systems of quality improvement, and in healthcare business and finance have become increasingly in demand. Subsequent recommendations from The Leap Frog Group encouraging public reporting of healthcare quality and outcomes, and the new Centers for Medicare and Medicaid Services (CMS) and the Leap Frog Hospital Rewards Program that provides incentives and rewards for hospitals that are both high in quality and efficient in resource use, are adding to the demand.

CMS, like Voluntary Hospitals of America (VHA) and The Leap Frog Group, all have new pay-for-performance initiatives in which hospitals are clamoring to participate. In May 2005, CMS reported that financial incentives to reward hospitals for quality care work have resulted in better care and fewer complications. Hospitals in the top 20 percent of each clinical category expect to receive Medicare incentive payments. In fact, as the project continues, Medicare will reward high performers with bonuses totaling $7 million per year. Poorly performing hospitals may also face financial penalties in the third year. These programs require sophisticated leadership. Pay-for-performance metrics can’t be obtained without knowledgeable physician leaders leading the endeavors.

In addition to quality, safety, and pay-for-performance initiatives, other healthcare developments are spurring the demand for physicians in leadership roles. These include the rise of new specialty hospitals or acute care tertiary/quaternary hospitals for specialized programs in heart care, cancer care, rehabilitation, neurosciences, orthopedics, etc. In addition, health systems, realizing the need to “be ahead of the pack” and inundated by horizon scanning reports forecasting significant new technologies, services and programs, are launching innovative “research and development” think tank operations for their systems. These “R and D” operations will identify, analyze and evaluate these new technologies for possible adoption and investment. Some of these same advances in technology as well as in biomedicine and genomics are also creating the need for physician medical ethics leaders.

At a time when physician leaders are in higher demand, previous recruitment processes for identifying and selecting physician executives has become ineffective. Finding and choosing the right physician for these leadership positions has been difficult for hospitals and hospital executives. Previously, physicians were promoted to leadership positions such as Medical Director or Vice President of Medical Affairs because they were “popular” physicians within their respective medical staff. Although many of these physicians possessed some leadership skills, they did not possess business, financial, or hospital operations experience nor the associated educational preparation and training. They were not “healthcare or business administrators.” In a recent session on “Selecting Physician Leaders” at the American College of Healthcare Executives Congress in Chicago (March 2005), only three out of approximately 300 healthcare executives raised their hands to indicate that they were happy with their current choice of physician executive. Understanding the criteria and process required for better identification, recruitment, and selection of effective physician leaders requires a vigorous process.

In this article, we identify roles and contributions physicians are and will be making to healthcare organizations in relationship to financial, operational, clinical, and quality outcomes. We also present some key criteria and a methodology and search process that organizations should consider when recruiting and selecting physician leaders in order to select more effective leaders. We also describe a few differences in the focus and leadership style of physician leaders versus non-physician leaders and how organizations can support physician leaders for continued success in these new roles.

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The Healthy Hospital

We are using the term “healthy hospital” to reflect the closer integration and interdependence of physician and non-physician leadership roles across all functional areas of a healthcare organization. Achieving the outcomes being demanded and required by payers, governmental agencies and consumers for safer, more efficient, and more profitable healthcare organizations is dependent upon effective physician leadership. Physicians are assuming leadership roles in each of these organizational areas.

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Financial Outcomes

Physicians have a unique understanding of healthcare; they understand healthcare delivery, what is being created for the patient, and patient care – perhaps more than anyone else. In addition, numerous graduate programs in business, health administration, public health, and medical management are giving physicians the administrative expertise required for true leadership and executive roles. With their understanding of healthcare plus the additional education, physicians are better prepared to impact, lead, and improve financial outcomes and success for health care organizations.

As hospitals strive to adopt new technologies that decrease medical errors, improve access to information for their physicians, or provide new advances in patient care, acceptance by medical staff is not always automatic. Physicians are being asked to lead this sometimes difficult cultural shift to adoption of new technology. Physician leaders are playing key roles in prioritizing capital needs, identifying new innovative technology for adoption, and leading system-wide implementations for electronic medical records, computerized physician order entry systems (CPOE), digital radiography (PACS) systems, etc.

Service line development opportunities are also being led by physician executives, sometimes in partnership or co-leadership roles with non-physician executives. These partnership roles are becoming increasingly used in heart institutes, cancer hospitals, and neuroscience centers. Physicians know the business; they bring credibility to the marketplace for consumers and to referring physician networks. They serve as the instigator and champion for change to new and better practice standards and they now bring business expertise gained through MBA, MHA, MPH, or MMM programs.

Physician leaders are also leading and facilitating mergers and joint ventures with other physician groups or hospitals. They have an understanding of competitive environments; they understand factors that are more likely to create differentiation in the marketplace and whether or not the merger is attractive to certain physicians, thus making success more likely.

Fundraising and development initiatives are taking advantage of physician’s leadership credibility with potential donors. Most major gifts are related to relationships with physicians or staff. Physicians are able to “tell the story” and convey the need for new equipment or facilities to keep a hospital or community competitive, providing access to state-of-the-art technology.

The demand for physician leadership in the areas of compliance, documentation, and leading initiatives around publicly reported quality data can’t be overstated. Testifying before Congress on fair and just reimbursement practices is commonplace. Negotiation with third party payers on coverage issues and leading large-scale disease management and evidence-based medicine practices to enhance clinical outcomes, efficiency, and reimbursement, are key and now required for pay-for-performance incentive payments.

Developing preferred vendors for products at competitive prices and decreasing variation among physicians with similar patient panels and practices goes hand in hand with high quality and appropriate resource utilization: delivering “the right care, in the right manner, and in the right place for the right amount of time.” These are outcomes physicians are being asked to lead.

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Operational Outcomes

Physician leaders are key members of operational teams dealing with staffing, strategic planning, capital equipment selection and allocation, and program development. Physician leaders can differentiate what is required from what is desired by physicians or staff in many circumstances. Efficient patient flow and throughput is an incredibly important area both to patients and physicians so that appointment delays are decreased, access to care is improved, and scheduling is predictable. These are all things with inputs controlled greatly by physicians that require physician leadership in order to facilitate continual improvements in efficiency and productivity.

Improved access to patient information for physicians in the hospitals, remotely in their office, or for payers and referring physicians are important initiatives which physicians are leading. These patient communication initiatives increase physician satisfaction, drive new referrals to the hospital, and improve productivity. Physicians are playing decision-making and advocacy roles to place patients in the right level of care across the continuum. They are helping develop clinical pathways that identify best practices for care delivery from prevention all the way to homecare, outpatient therapy, or nursing home care. Optimization of resource utilization coupled with best care practices are key physician roles.

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Clinical and Service Outcomes

Traditionally, physicians have led peer review processes, risk management initiatives, and medical staff functions involving medical staff by-laws, rules, and regulations. Today, physician leaders are also the new drivers of quality and cost for hospitals. Whether with CMS, VHA, Premier, The Leap Frog Group, or with other pay-for-performance systems, physician executives are providing leadership in the establishment of programs for disease management and other evidence-based medicine initiatives that are resulting in improved clinical and service outcomes and incentive-based reimbursement to their organizations. Absent this kind of leadership, hospitals realize they will forego millions of dollars in potential reimbursement.

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Regulatory Outcomes

There is an increasing importance being placed on public quality data reporting and consumerism that is gaining momentum among patients in the United States. These public reports will dramatically affect the brand value of hospitals as well as the physicians practicing in them. Physician leadership is increasing to facilitate the practice changes, practice standards, and appreciation of quality metrics by medical staff in order to have an outstanding practice for top recognition. Continual legislative reforms or proposals are requiring informed medical leadership advocacy for our hospitals and systems. Legislative proposals for reimbursement changes, regulatory standards, and increased public scrutiny show no signs of lessening. More physician/non-physician leadership coordination is allowing for appropriate response to these changes.

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Safety Outcomes

The Institute of Medicine continue to refine and expand their recommendations regarding the restructuring of care delivery to address related issues of healthcare management practices, workforce capability, work design, organizational safety culture, as well as reforms in health professions educational programs to encourage the adoption and utilization of core competencies across healthcare organizations, communities, and educational institutions. Patient safety, clinical quality outcomes, and efficiency measures are driving our healthcare systems. Sophisticated physician leadership in developing systems to reduce medical errors, improve quality of care, and improve utilization of resources and associated efficiency of services delivery underlies the rising demand for physician executives. Combined with this is the whole area of institutional medical ethics, an area with increasing emphasis in our institutions because of the dramatic changes in genetic research, biomedical interventions, and the rising care for the uninsured. Knowledgeable physicians with advanced education in medical ethics are being sought by numerous organizations.

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Current Physician Leadership Roles

Physicians are in or being recruited to leadership positions across the spectrum of healthcare organizations and for numerous roles. Many of these positions are full-time while others allow for continuation of some level of clinical practice. Whether as the CEO, COO, Chief Medical Officer, Vice President of Medical Affairs, or in newer roles such as Senior Vice President of Research and Development, Chief Medical Ethics Officer, or Chief Quality Officer, physician leadership roles are increasing to meet the needs of the evolving healthcare environment.

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Recruiting and Selecting Effective Physician Leaders

The identification, recruitment, and selection process for effective physician leaders should not be unlike that for any other healthcare executive. This may appear simplistic but without specification of key criteria required and a vigorous search and interview process, organizations run the risk of selecting a physician who is “burned out,” in “pre-retirement mode,” a “popular” physician, and/or one without a proven track record of expertise. Completing a position description with specific responsibilities, expectations, accountabilities, and scope of authority is critical. Organizations need to identify the required academic training, certification, specialization, and employment history desired. Do you want a physician with an MBA, MHA, MPH, or MMM? Most organizations do. Specification of areas of expertise must be identified. Will the physician lead pay-for-performance, quality, or patient safety initiatives? If so, what is their formal training and experience? What has been their scope of responsibilities? Is experience at a national level required? Are you looking for proven operational expertise?

Organizations must also identify the right leadership style that fits their culture, their executive team, and their medical staff. Many organizations are seeking physicians to lead innovative research and development initiatives and requiring examples of the candidate’s previous innovative endeavors. Does the physician need to balance multiple constituencies – Board, administration, medical staff, employed and private physicians? Does the candidate’s healthcare vision fit the vision of your organization’s executive team and that of the Board? Do they use their intellect and abilities in a manner that will serve your organization well? Do you want a decisive, action-oriented leader or does the position call for more of a process-oriented leader? What do others who have supervised, worked with, or worked for the individual have to say about their leadership? Identifying these criteria up front seems simple and obvious but organizations have learned it is absolutely critical for success.

Remember that physicians who are clinically “burned-out” or in “pre-retirement mode” or who try to convince you that he or she is perfect for your new leadership role will not be an effective leader. Organizations must conduct a thorough search process, evaluating a slate of candidates for comparison of strengths and abilities. Selecting those who are capable of leading multi-disciplinary teams, who understand organizational dynamics, and who have the proper training and experience and track record in the specific area of need, will bring successful outcomes.

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Leadership Styles

Organizations have sought to understand the differences in leadership styles each executive team member brings to the table. Physicians, like non-physicians, are a product of their own genetics, culture, family backgrounds, academic training, and preparation. Understanding a few differences may facilitate acceptance and improved team effectiveness. Again, most of the differences are derived or developed because of differences in training and academic preparation. Most non-physician executives are trained in thought leadership and are process driven, team oriented, consensus builders, and facilitative. Physicians, on the other hand, are trained to be decisive, data driven, action oriented, more individual focused and values driven.

Understanding how these differences may come to bear in meetings and situations can be helpful. In reality, for effective leadership, whether physician or non-physician, you need all of these characteristics to be successful.

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Positioning Physician Leaders for Success

Organizations need to teach, coach, mentor, set expectations, determine clear accountabilities for physician executives exactly as they do for anyone else in their organization. Embracing diversity in thoughts and styles of leadership is important. Physician turnover in leadership positions is often due to the fact that a complete search process with definable position responsibilities was not completed, physicians were not given sufficient authority, accountability, ability to influence budget, or provided support in their leadership roles. Some physicians went into and left these jobs because it was never a “real job” to begin with, only a “token” physician role.

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Summary

The changing healthcare environment is creating a broader involvement and demand for physician leaders. Given proper education and training, as well as a rigorous selection and recruitment process, physician leaders are making significant contributions in our healthcare organizations-ensuring that are organizations are safer, more efficient, and more profitable.