Industry disruption at all corners has shone a spotlight on executives in health care as trust in hospital organizations slides in the U.S. Meanwhile, other sectors of health care are similarly feeling higher levels of scrutiny from patients according to the same barometer.
With any industry amid disruption, the pressure typically mounts on top management to determine ways to keep pace with, if not stay ahead of, rapid change. That’s no different in health care. And along with that comes higher levels of scrutiny from inside and outside the organization.
“There is so much going on in the industry, both from a regulatory perspective and innovation/tech perspective, as well as potential new entrants and all these innovators in digital health, there is a fair amount of pressure on leadership at health care organizations to be innovative and to meet the challenges of the changing environment,” says Brad Fluegel, principal at BMF Advisors and a former executive at Walgreens, Wellpoint and Aetna.
In particular, Fluegel says pressure on leadership has come from the accelerating rate of partnerships and alliances as well as merger and acquisition activity in health care. “There’s a feeling if you aren’t participating in this vertical consolidation, you’ll be left out and in a weaker competitive position,” he says. Fluegel also believes that the rate of innovation and new entrants from the tech world has also led to higher levels of scrutiny.
Some CEOs embrace the new entrants and vertical integration. Allina Health CEO Penny Wheeler, MD said at the Health Evolution Summit the collaborative environment between payers, providers, life sciences, tech companies, and other types of organizations will help connect all areas of the care continuum.
“I actually think these disruptors, this vertical integration, I think that’s a good thing,” says Wheeler. “[Anthem CEO] Gail Boudreaux said that Billie Jean King told her that, “Pressure is privilege.”
Thus far, this disruption hasn’t had an impact on executive turnover, at least in hospitals and health systems. According to a report from the American College of Healthcare Executives, hospital CEO turnover has remained steady at 18 percent for five years running. But while the numbers haven’t gone up—they haven’t gone down and that’s problematic, says the ACHE.
“Organizational restructuring, the movement of CEOs to different positions within health systems, and the fact that many CEOs are reaching retirement age, all contribute to this high level of turnover in hospital CEO positions,” says ACHE CEO Deborah Bowen. In fact, 2019 CEO turnover in hospitals alone is the third highest among all industries, according to a report from Challenger, Gray and Christmas, trailing on government and tech. When you add in CEO turnover in other sectors of health care, such as payers and life sciences companies, the industry vaults to the top.
The high cost of care
Every health care CEO has patient issues front of mind. When it comes to patients, the issues of cost and access are typically at the center of dissatisfaction. Even if the problems aren’t new, they continue to be a focal point for health care executives.
“Cost is an existential issue that’s always there. It’s not new. Every year people say they can’t pay any more and every year we pay more. The continuing increase in costs being placed upon governments, employers, and families are a continuing problem. When we say family premium costs are [more than] $20,000 per year, that’s a substantial slice of household income,” Fluegel says.
What’s new, he says, is health systems are feeling more of the heat when it comes to costs. Fluegel says that providers were insulted from these problems because people tend to like their physicians and those organizations employ people in the community. However, more observers are recognizing hospitals have as much to do with those high costs as payers and life science companies.
HealthEdge CEO Steve Krupa adds that cost and coverage create significant pressure for health care leaders because of a continuing frustration with health system from the American public. “The idea of how expensive care is and that not everyone is covered creates significant pressure on the industry. The industry has to solve those problems itself or you may get the whimsical solutions the government might propose,” he says.
According to a survey in mid-2019, Americans borrowed an estimated $88 billion in one year to pay for health care. Moreover, one-in-four Americans have skipped treatment because of the cost, and nearly half fear bankruptcy in the event of a health emergency.
A new E in CEO: Chief Encouragement Officer?
The role of the CEO in 2020 isn’t limited to mahogany-lined C-Suite executive rooms and budget meetings. Outside appearances should no longer be limited to ribbon-cutting ceremonies and scheduled events. CEO’s presence must be on the ground floor of their organizations and in the communities they serve, says Don Williams, CEO of Iroquois Memorial Hospital in Watseka, Illinois.
“CEOs have to got to get out of their office. It’s just imperative. You must have strong people around you in leadership roles and empower them to do their jobs,” Williams says. “We have to become the vision casters for the organization and we’ve got to get out in front of the issues. We can’t hunker down in our offices and treat them like fortresses fighting the battle of health care. We’ve got to get out and get out on the front lines.”
Williams has seen the issue of access, in particular, grow in prominence in rural communities, such as the ones they serve at Iroquois Memorial Hospital. He says that health care organizations must go where the people are located, rather than have them go to the hospital. Expanding access requires innovative ideas, the willingness to build partnerships and a changing mindset from the CEO.
“For me personally and where I think CEOs have to go is becoming the chief encouragement officer. CEOs, over the last 10 years, have fallen into the trap of believing they’ve got be the expert on revenue cycle, reimbursement and everything has taken this health care driven by reimbursement mentality,” Williams explains. “While that’s incredibly important, you need to have a different mentality. you need to be servant leaders. How do we meet the basic needs of people? CEOs have to be willing to take time to serve people.”
CEOs advice for other CEOs
Krupa similarly believes the mindset of health care leaders needs to change for these challenging times. He says they need to be more transparent and open about issues — if things can’t be explained easily to the public and to your employees, no one will follow your lead. He also advises CEOs to look towards other industries when it comes to understanding what patients want.
Krupa recommends taking stock of how other industries have changed products and services to create greater and greater value for their constituents and trying to apply that to health care.
“The enabling force of change is the will to look at your business and ask, ’How can I deliver value to my members? How can I deliver high quality care at a lower price? What tools do I need to do that?’” Krupa adds. “Look at retail, automotive, any of the other industries, the companies that are taking that approach are leading and pulling ahead of the pack.”
In order to build a cultural mindset that enables change, Fluegel advises executives to pull together quarterly strategy days. These meetings can focus on broader opportunities rather than the day-to-day problems they’re typically focused on.
Paraphrasing Microsoft founder Bill Gates’ quote about people overestimating change in the near term and underestimating it in the long term, Fluegel says the notion applies to health care right now.
“The world won’t change tomorrow. This is a difficult industry to disrupt in the near term,” Fluegel says. “CEOs need to stay calm, don’t panic, don’t overreact and keep your eyes on the long term.”