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Tired of paperwork and shrinking reimbursement, many practicing physicians are eager to move from patient care to management. Meanwhile, some boards are adding a medical degree to the list of qualifications needed in their next CEO. Sounds as though the ideal candidates are lining up for ideal positions, but there's a mismatch between the candidate pool and the institutions.

Many applicants have acquired management credentials, often adding a business degree to their medical degree. But the broad management education they receive from business schools has little relevance to running a hospital. And even when physician candidates do have managerial experience, often it is limited to clinical leadership roles, such as president of the medical staff. The result is that even as boards are clamoring for physician executives, there's a dearth of them with the requisite experience to be a CEO.

With few CEO-ready physicians out there to recruit, health care organizations would be wise to concentrate on growing their own. And rather than sending doctors to business school, they should emphasize on-the-job learning — a philosophy familiar to anyone who went through residency training. Given bottom-line or business development responsibilities for a piece of the enterprise and with appropriate guidance, doctors quickly can develop the operational skills that will complement their medical expertise. Let them demonstrate that they can lead. Then they can be judged as to their readiness to take on senior executive roles.

Indeed, two converging health care trends suggest that greater numbers of physicians will be joining the executive suite. First, after decades of focusing on driving out costs and building market share, hospitals and systems now find they must compete for patients based on quality of care and clinical integration with practicing physicians. As health systems increasingly focus on quality measurement and reporting, a physician leader who has devoted a career to providing health care could be a better fit than a nonphysician administrator.

At the same time, many physicians who are tiring of the treadmill, where they spend too much time on insurance paperwork and too little time on patient care, have gone to work for hospitals. And many of those newly employed physicians would prefer to be managed by someone with an MD after his or her name and, indeed, this has long been common at academic medical centers.

Despite the trends, physician CEOs remain a relative rarity. According to a 2009 study in Academic Medicine, fewer than 235 of the nearly 6,500 hospitals in the United States were run by physician administrators. Clearly, the traditional paradigm, in which doctors focus on patient care and nonphysician managers run day-to-day operations, remains dominant. Although it has long been suspected that having physicians in leadership positions is valuable for hospital performance, until recently, there was no empirical data to support this viewpoint.

But a recent study published in Social Science & Medicine suggests that having a physician in charge at the top is connected to better patient care and a better hospital. Based on a review of 300 top-ranked American hospitals, the study found that overall hospital quality scores were about 25 percent higher when doctors ran the hospital, compared with other hospitals. For cancer care, doctor-run hospitals posted scores 33 percent higher. The study did not posit any reasons why the physician-led hospitals performed better, but as study author Amanda Goodall told The New York Times, it may be because doctors better understand what she called "the business of health."

Although the results of her study were stronger than she expected, Goodall said they were consistent with other research she has done, which indicates that research institutions perform better when managed by scientists, and professional sports teams win more games when managed by former players. Such leaders are more likely to understand and create the conditions under which their fellow core workers will function best.

That message resonates with Mark Novotny, M.D., chief medical officer at Cooley Dickinson Hospital, Northampton, Mass. "A hospital is not producing cars," he says. "An executive who understands the product and has the operational skills is in a really good position to influence change. The trick is to go to the doctors and say, 'What matters to you?' and not to tell them what to do. When you ask, you find that what matters to them is very close to what matters to the trustees. "Too often, boards and management teams get panicky about financial performance and start telling docs, 'You need to do this, you need to do that,'" he adds. "But doctors are like engineers; they're very independent, very mobile. They'll tell you, 'I don't need this, I can leave.'"

Developing Future Leaders

Novotny's own resumé provides a road map for the aspiring physician executive. After 20 years in private practice, he joined Southwestern Vermont Medical Center in Bennington as head of its medical group. After improving financial results in Southwestern Vermont's physician practices, he was promoted to CMO. At the same time, he was studying system theory, Lean management, Six Sigma and process improvement. On his watch, the hospital was able to improve outcomes measurably. "I found that really satisfying, and from a medical management standpoint, it was a great way to connect with my colleagues, even if I did take a bit of razzing for wearing a suit," he says. When the hospital's chief executive retired on short notice, Novotny became interim CEO.

But while few doubt that physician executives can favorably affect patient outcomes, their ability to maintain budgets and respect the bottom line often remains a question. Few physicians have had administrative training or experience in financial management. They may never have written a business plan, plotted a strategy or managed more than a few people. A clinician most often works one-on-one, in contrast to an executive who deploys teams. Only the physician who can make that transition will make a successful CEO.

On the other hand, those teams consist of physicians, nurses and other medical professionals, and among those individuals, a physician executive has an element of credibility a nonphysician administrator may not match readily. At challenging times, team members may adhere more strongly to individuals like themselves — those who have been there and done that.

Accordingly, hospitals increasingly are opting for an internal succession plan that includes physicians who are known to everyone and who are part of the environment. But if trustees want sufficient numbers of physicians to be ready for senior executive positions, they must ensure that their hospital's executive management team is identifying respected medical professionals with management aspirations and executive leadership potential, and providing them with opportunities to manage, develop their leadership abilities and take responsibility for operations.

Some hospitals send physicians back to school to take courses in topics like quality management, health law and entrepreneurial thinking. In conjunction with certain business schools, the American College of Physician Executives offers master's degrees tailored to physician executives. Some large health systems, like Partners HealthCare, in Boston, offer their own broad curriculum of classes. Additionally, many business schools have added programs tailored to the needs of aspiring physician executives.

Internal Opportunities

These are all worthy endeavors, but course work is no substitute for direct experience. Studying finance or negotiating skills is not the same as owning the bottom line for an operating unit or facing off against an adversarial bargaining unit. Even clinical management roles, like medical director of ambulatory care, which do not involve tasks like managing capital or other key functions of the management team, aren't enough. Those doctors often get marginalized rather than grow to become senior partners.

This leads to an inevitable Catch-22: hospital boards looking for leaders have looked inside and seen respected physicians without the requisite administrative experience for executive management roles. The physicians then respond, "I've done everything I've been allowed to do."

Hospitals that truly want doctors in decision-making senior roles might have to implement some major changes to their hierarchy and structure. It may be disruptive in the short term, but will create the opportunities for growth that physician executives need.

One idea is to carve out operations with some natural relation to clinical operations, like imaging, nursing or pharmacy, to give a physician management responsibility. The physician leader must be given real responsibility to maintain standards, manage staff and keep to budget. Some physicians will stumble or even fail but, with proper mentorship and oversight, the high-potential physicians will gain meaningful management experience.

You may wind up with a physician who has been given operational responsibility who is now reporting to the chief nursing officer, a chain of command that traditionally would be considered odd. The key is to be flexible. You may have a chief operating officer who is amenable to giving a piece of operations to a physician, as part of a bigger strategy to develop internal talent.

"You've got to pick the right people, but when you've got physicians who are interested in management, who are committed to your organization, put those people in positions of responsibility," says James Raczek, M.D., CMO at Eastern Maine Medical Center in Bangor. Trustees and administrators often question whether "doctors are going to be able to balance the clinical imperative with the ability to manage a department, a division or an organization, but they can learn these skills as well as anybody else. What's necessary is having a commitment to physician leadership development in your organization. Ultimately, some will rise to the level of CMO or CEO, or chief operating officer, which I see as the in-between role. But you have to invest in that development, and it's expensive," Raczek says.

The reward for that investment may not be visible immediately but, over time, developing physician leaders will result in greater alignment between management and practice, a more harmonious workplace and, ultimately, better patient outcomes.

John Denson (john.denson@kornferry.com) and John Ferry, M.D. (john.ferry@kornferry.com), are senior client partners specializing in health care services for Korn/Ferry International, Los Angeles.