In troubled waters, hospitals need an able captain
By Michael Sandnes
Health care is one ofthe most complex and difficult businesses—and it only looks to grow more so in the years to come. High customer demands for increased technology and better quality of services, reduced reimbursement and increased indigent care costs, plus a confluence of recent events—a slowing economy, increased government regulation, an aging workforce and aging facilities—make the field particularly challenging today.
However, effective executive leadership can often insulate an organization from many of the pitfalls brought on by a difficult environment. Great leaders encourage trust, commitment, and professionalism; generate consensus among management teams and boards; and add value to the organization’s future direction and public trust.
What traits belong to successful CEOs and boards and how do they help their organizations thrive? Here is a checklist:
1. Everyone in the organization has a vested role in its future success. Effective boards must be proactive, interactive and promote a culture that supports outstanding governance and change. They must possess the right mix of experience, skills and capabilities. And, as changes in regulations and government oversight are enacted, both at the state and federal level, the skills required by the facility’s leadership must also change—and become more sophisticated.
Successful CEOs must challenge and encourage their boards to lay the foundation for effective decision-making. They must maneuver trustees away from becoming too involved in the day-to-day operation of the facility at the expense of seeing the bigger picture. The board’s job is to address strategic planning and the hospital’s long-term vision and mission. The CEO’s responsibility is to challenge the board to focus on strategic initiatives and, if needed, to make tough decisions.
As a cautionary example, when a 278-bed acute care facility located in a rural setting in the Midwest started to experience financial difficulties, it became quickly apparent that the financial “point man” on the board of directors, a local accountant, did not have the necessary experience and skill and, as such, sent the CEO down a path that eventually led to the hospital’s closing.
2. CEOs lead the way in accommodating change. This involves initiating new approaches to the delivery of health care in terms of quality, cost, customer services, marketplace relationships and compliance. Employees must have a clear sense of direction on where the organization is going and what matters most. For example, many health care systems have existed for many years but fail to acknowledge a changing marketplace that includes significant changes in Medicare and Medicaid reimbursement. At a time when the cost of health care in the United States stands among the most expensive in the world, they lack up-to-date operating systems, accountability, and effective communications.
3. Leadership communicates effectively. Failure to communicate sufficiently is a problem common to all businesses, but can be especially true in a “high-tech, high-touch” industry like health care that is preparing for major reform. Maintaining a focus on the ultimate goals of health care delivery and understanding the need for open and honest communication is critical to the organization’s long-term success. The CEO who spends little time actively involved with hospital staff and keeps employees in the dark, offers little direction and minimizes his or her accountability. As a rule, health care systems that have leaders who inspire and teach employees are more likely to be successful. Staff who are inspired by their leaders create a health care system that distinguishes itself from the competition.
4. Senior management recognizes talent and employs the best. Employees must be encouraged to develop their abilities. Relatively few health care organizations recognize employees for their good work in terms of giving employee awards or performance-tied incentives. Younger employees often receive little, if any, mentoring. And, since quality employees in the health care industry are in great demand, they tend to leave if they feel ignored or neglected. Finally, in addition to recognizing talent, an effective CEO must take action against those “bad apples” in senior management who cause turmoil and turnover.
5. Leadership stays a step ahead of the competition. The recent decision by the Berger Commission in New York City to close hospitals because of “over bedded-ness,” is likely to be repeated around the country. What do these health care organizations all have common? Aging facilities, no cash, outdated services, an aging medical staff and an inability to keep up with the competition. In order to convince patients, third-party payers, employees and medical staff that the organization has merit, the strong CEO knows enough to return to the basics of health care and become a low-cost organization that provides great health care services.
As an example, the CEO of an acute care facility in the Northeast, which had recently filed for Chapter 11 bankruptcy protection, conducted a market service evaluation that resulted in the decision to shut down certain areas of the hospital. What emerged was a smaller, more profitable organization that was able to continue to meet the community’s needs. A continuous focus must be maintained on building a talented workforce and a quality organization that promotes excellence.
6. Successful organizations become ultimate marketers and customer service providers. Many CEOs are so focused on financial success that they fear taking any risks, and fail to see the value of marketing. Yet, there is virtually no risk in marketing, if the right people are in charge of it. Marketing brings in business by developing and cultivating referral relationships and involves everyone in the organization from the CEO down to the housekeeping staff. It comprises everything from the type and quality of medical services to the presentation of food served to patients. A CEO can focus on tight expense controls, but he or she must not neglect marketing services and/or customer service programs.
An enterprise’s success and business model can change overnight with the right marketing and communications strategies. Recently, I was in central Florida, consulting with a community hospital in a blue collar town with a seasonal retired population. This hospital created a major heart center of excellence for its patients. Its leaders recruited some of the top heart surgeons in the country and demonstrated outstanding clinical outcomes.
7. Leaders eliminate inefficient financial systems. A lack of efficient accounting and billing systems can result in outdated contracts with managed care companies that pay lower than market rates; participation in outmoded purchasing programs that don’t take advantage of discounts; and inadequate recruiting efforts that can lead to high utilization of agency nurses. All of these practices have a negative impact on a hospital’s quality of care and costs.
Strong leaders maximize accountability by giving their department heads monthly statements regarding each department’s profits, losses and their performance within the organization’s overall operational structure.
8. The CEO and the board stay on top of developments within the industry, including regulatory changes. Within a highly regulated environment, strong hospital leaders must stay abreast of a dynamic landscape. They must network with the competition and attend trade association meetings to support appropriate grassroots efforts that advocate for hospitals relative to regulations and reimbursement on the federal and state levels. Within the industry, changes will continue to occur, and leaders must not only be aware of the changing climate, but be prepared to roll up their sleeves.
9. Leaders think creatively. A CEO must have a vision yet be flexible enough to move in the direction dictated by the marketplace. CEOs who insist on providing the same traditional services after emerging from bankruptcy, for example, are often likely to end up driving into the same potholes. Instead, they need to explore new alternatives that will be financially feasible, serve the community, support the operation, and fit within their mission.
Health care will continue to struggle. Times will remain tough, and only the best will thrive and survive. As a result, the destiny of many health care organizations is irrevocably tied, perhaps more than ever before, to the skills of their leadership team.
Michael Sandnes is a managing director of health care with Executive Sounding Board Associates, Philadelphia. He can be reached at (410) 783-0098 or at msandnes@esba.com.
This article 1st appeared in the March 2008 issue of Trustee Magazine.
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