For several years, the healthcare industry has been teetering on the brink of upheaval.
With the launch of the Affordable Care Act (ACA), it's now facing a state of emergency – one in which the current changes are shining a spotlight on the fact that healthcare has become a fragmented industry of silos. Today, the onus of navigating the healthcare system is put on consumers (patients), which is further complicated as they are passed from doctor to doctor, department to department, and specialist to specialist.
Looking at this fragmentation from the outside – with its inevitable lack of coordination and communication – it's easy to connect the dots to the most prevalent problems we see in the industry today, what one expert calls "the three sins of healthcare": the cost is too high, the quality is too low, and the access is highly inconsistent.
The ACA addresses one of these and that's access – and this affects one consumer group in particular. Ten million Hispanics have now become eligible for health insurance and 10% of those signing up on the insurance exchanges are indeed Hispanic, according to a report by PricewaterhouseCoopers (PwC) Health Research Institute. Like every other major industry throughout the country, healthcare must own up to the fact that Hispanics are the fastest growing consumer group they must reach and serve.
Fixing the inefficiencies while at the same time dealing with the changes taking place within the industry, especially the changing demographics and the influx of new patients brought on by the ACA, will require a different type of leadership than traditionally found in healthcare. It will require more people from the business world, less reliance on those with medical backgrounds only, and a profound shift in management styles and leadership techniques.
I recently spoke with several leaders within the healthcare industry or with strong ties to it. I asked them for their perspectives on the state of healthcare today, how it got that way, and what kind of leadership is needed to take it where it now needs to go.
They all agree on one thing: leadership has not kept up with the industry's evolution as healthcare transitioned from a cottage industry to big business over the past 25-30 years – nor do they now have the required change management competencies to effectively lead and rapidly turn-around the reinvention of the current healthcare business model.
I first spoke with Dr. Gene Lindsey, former President and CEO of Harvard Vanguard Medical Associates and Atrius Health, who made it clear that, "Today's healthcare leaders must deal with all of the issues associated with running a business: contracting with suppliers and others in the value chain, compliance and regulation issues, IT infrastructure, HR, etc. There are some capable physicians who grew up within the cottage industry who are now moving into this complex business environment – but not nearly enough to fully populate the c-suite or with the acquired knowledge to take on dual healthcare and business roles."
He continues: "Ten years ago, one of the key capabilities required of the c-suite was to understand the mindset of the practice. They needed to keep the doctors happy, and this meant bringing them along slowly to the more organized practice of medicine.
"Now we're talking about physicians assuming a place on the management team, if not actually leading the team. Many of them don't see themselves as leaders and/or don't want the responsibility that goes with it. They prefer the role of expert in their field – perpetuating the culture of fragmented silos – rather than as manager of the environment around them. So more and more organizations are looking outside healthcare for leaders with MBAs and experience in other industries because physicians have yet to make the transition from revenue generation to what's being referred to as value-based purchasing in the healthcare industry."
According to Dr. Lindsey, this means that: "The people who are going to be the most rewarded are those who get the best results in managing patients and use resources most efficiently and eliminate waste. This will require a focus on customer service and population-based issues, while not forgetting the needs of the individual patient. It's a totally different mindset and physicians with a traditional way of thinking will have a hard time making the transition without business experts to help them understand the changes, learn the required new skills and develop a more business-minded focus."
With the changing dynamics in healthcare and a GDP reaching 20% in the U.S., Dr. Michael Soman – President/Chief Medical Executive of Group Health Physicians, a professional corporation of nearly 1,400 physicians and clinicians – also noticed the need for change after practicing medicine for 17 years. "At that point I saw that there was an enormous leadership gap in healthcare," he says. "From a business point of view, healthcare was still being run as a cottage industry. As a doctor, I could do whatever I wanted to do, with no guidelines, and with no one looking out for quality."
This leadership gap had been building at least since 1965, when Medicare was passed into law. Dr. Soman went on to explain why:
"As a result of Medicare, healthcare GDP went from 6% in 1960 to 7% in 1970 and continued growing throughout the 70s and 80s. Carving out a particular portion of the population and treating them in a unique way created a lot of market opportunities – and that's when MBAs became interested in running healthcare as a business, as a market-driven system. We went from cottage industry to big business strictly as a function of the growing GDP."
If that's the case, why did the existing healthcare system go on for so long?
"The system had its own momentum," says Dr. Soman. "It was complicated and costly but satisfied enough people that there wasn't a universal mandate for change. This despite the fact that we pay too much for healthcare that doesn't deliver on quality and offers inconsistent access. 134,000 Americans die every 5 years not from disease but from lack of access to healthcare.
"At the same time, physicians abdicated their leadership role. Even the American Medical Association (AMA) never had more than 50% membership, and now it's maybe half of that. MBAs created the business frameworks and physicians stayed on the sidelines treating patients but away from the greater societal changes."
Marc Hafer, CEO of Simpler, a consulting firm to the healthcare industry, sees this as less an abdication of leadership than an acceptance of the status quo – one that was not about to change. As he sees it, "Historically there hasn't been a lot of change in the industry, so business went about in traditional ways – building new capacity into the system thinking the environment would always be moving in a positive direction. Money was spent on brick and mortar and technology – anything that was assumed to deliver higher quality healthcare."
But in reality, things became more inefficient and fees kept increasing without regard to the true cost of healthcare. As Hafer explains:
"New facilities, new technology, high compensation for physicians and technicians – all were of little concern in a fee for service environment. From a business standpoint, you could generate fees regardless of outcomes and without needing to be efficient; you could just charge more for the inefficiency. The future model of healthcare will be one of improved quality and efficiency because payment reform is tying payment and reimbursement to quality and efficiency. You have to perform at a higher level because – from a patient perspective and that of the average citizen – they expect higher quality and they don't want to pay for poor outcomes and system inefficiencies."
Clearly, a new business model is needed in healthcare, but what kind of leader will it take to effectively deliver it?
"My sense as an outsider is that CEOs of the past were externally focused," says Hafer. "They were the fundraisers, the faces of the organization in the community. They were not internally focused on operations or systems, whatever their background, physician or not. Now they are not going to survive for long in that role if not focused on how well their organizations are performing on a daily basis.
"The mergers and acquisitions taking place – acquiring physicians groups and integrating them into the culture – require new skillsets that CEOs of the past were not required to have. Successful CEOs of the future will be able to pull together large organizations that are efficient and effective. They won't just tack on another clinic or hospital without thinking about the ramifications first and they will be more ready to deal with the unintended consequences of growth."
So is a leadership shift at the top that doesn't necessarily have a healthcare background inevitable?
Hafer goes on to say that, "Many physician leaders could handle the changes but they first have to recognize when they don't have the skills to move the organization forward. They must make sure those on their team have the complementary skills they lack so that they can build an efficient organization and deal with the cultural issues brought on by mergers and acquisitions."
I asked Paul Dechant, CEO of Sutter Gould Medical Foundation, what happens when you do have to bring non-medical business people into the healthcare c-suite, and how they can best work with the medical establishment.
His response: "You have to be aware that the people running healthcare now have come up through the traditional ranks and have been fairly insulated – not by choice but because there was a lack of necessity up until now. So the question is one of identifying the opportunities and then determining how best to move forward together."
More specifically, he says, "One of the most important things is getting physicians to change from autonomous individuals to working in teams. If you look at it from a pure manufacturing standpoint, the physician is the most expensive resource in terms of patient care and the most limited one in terms of the number of physicians there are for the number of patients trying to see them. You have to make sure any business innovation you introduce is also helping them to be more efficient, and sometimes that's a team effort.
"For example, electronic health records (EHRs) have actually made it more difficult for the physician to be efficient because of the data entry demands that we have put on them in the exam room. It's not like the old Marcus Welby days when the doctor simply made a notation on the patient's chart.
"Of course it's good to have a complete record of the patient's medical history, health issues, medications etc. readily available in the EHR, but it comes at the expense of the physician having to collect all of that information in the exam room. Their hands are on the keyboard and their eyes are on the computer instead of on the patient.
"So this is one example where we can highlight the benefits of working on a team – much like a surgeon would never go into the operating room without their support team so that they can focus on the surgery. Similarly, we developed a team model for care whereby the physician isn't working alone with the patient. Having a teammate in the exam room to accurately record everything in real time allows the physician to maintain face to face contact with their patient the entire time, to make that personal connection without being distracted by the computer or having to rely on their memory later to record anything they might have missed. Not only is it a better experience for everyone, but it allows the physician to be more efficient and increase the number of patients that they can see – which more than pays for the expense of having the additional teammate in the room."
My last conversation on the state of healthcare leadership was with Clayton Corwin, President of StoneCreek Company, an organization that specializes in developing effective real estate strategies and solutions for healthcare providers. He sums up the situation thus:
"Healthcare is a huge and complex industry sector, struggling with change and disruption affecting virtually every aspect of the business. But the umbrella challenge facing the industry is changing its culture so that the behavior of every participant aligns with the needs and wants of the healthcare services consumer. Industry leaders need broad based management and organizational skills; team building abilities; financial and business acumen; governmental and political awareness; and a base of industry knowledge. In short, the type of skill set required for any senior executive successfully leading an organization in a complex business and regulatory environment.
"Leadership will also require courage – courage to start with a blank sheet of paper and challenge the status quo at every front. Approaches to many aspects of the business that worked satisfactorily in the past may have no application in the future world of healthcare."