May Cover Story: Questions to Expect From the CEO
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How do we grow our margins? Do we need consultants? Our ED wait times are how long? Your CEO has some questions. And it’s no game.
It may come in a meeting room with every other senior executive at the hospital waiting for your answer. It may come in an e-mail over the PDA just before you board a plane. It may come in the hallway. But one day it will come: the question from the CEO that you are not ready to answer.
You may not face the questions posed here. Or maybe you will. Some questions will be so out of the context of any previous discussion that there is no preparing for them. But it is a helpful exercise to start thinking about strategic questions that could pop up at the whim of the CEO. It may save you someday.
Who are our star managers?
You know that freshman supervisor who’s putting in the miles on the floor and untangling schedule disputes without alienating the rest of the staff? He or she might become the person who keeps your hospital running like clockwork a few years down the road. Without careful attention to that supervisor’s tenure track, however, your hard-working manager might find greener pastures at the medical center across town.
Ensuring that the pipeline of future leaders is intact is a key concern of executives. CEOs want to know what the organization is doing not only to attract the best and brightest talent from outside, but also to identify people with leadership potential inside, says Kenneth R. White, Ph.D., a professor and the director of the health administration graduate program at Virginia Commonwealth University in Richmond. And since good supervisors often mean happy employees, measuring managerial quality can improve employee retention and satisfaction rates, as well.
Discerning the star manager from the average one is sometimes an exercise in the obvious. Managers with leadership qualities typically demonstrate early commitment to clinical or service excellence, says Melvin Dowdy, Ph.D., executive director of the Center for Spirituality and Leadership at four-hospital Bon Secours Richmond (Va.) Health System. They also have a track record of engagement. “People with leadership potential typically have shown an interest in developing others, not just themselves, and they can translate the system’s mission in language that’s personally expressed, not just reading the statement on the wall,” he says.
Several evaluation tools are useful in identifying future leaders. Employee surveys reveal who’s having trouble relating to staff, while annual scorecards show whether managers are meeting financial, productivity and quality goals. Shawn Ray, M.S.N., R.N., serves in the two-year-old position of chief retention officer at Barnes-Jewish Hospital in St. Louis. She uses dashboards to monitor managerial targets and tracks departures every pay period, looking for that telltale sign of managerial trouble: increasing turnover.
Ray reports to the chief nursing executive and attends director and manager meetings. She also sits in on nurse-dominated shared governance committees, so she gets the benefit of multiple perspectives while keeping leaders up to date on turnover and vacancy rates. “If it’s not in the forefront, they’ll just forget about it,” Ray says. Still, her day-to-day conversations with managers and their staffs are the most reliable indicators of a supervisor’s performance.
Simply identifying top managers isn’t enough, however. “Star managers will leave one organization for another if they don’t sense there’s upward mobility,” says White. The CEO’s question could be, “What plans do you have for grooming the star managers for the next job?” Hospitals should identify quality managers early and have a development plan in place.
Bon Secours Richmond’s Center for Spirituality and Leadership, which was created in September 2005, is working with a group of 25 nominated employees—from supervisors to senior-level vice presidents—to help them tap their leadership potential. “We’re looking for people who are also good at what we call ‘followership,’ not just leadership,” says Dowdy. “How good are they at participating in teams? Are they able to build a shared commitment and accountability to outcomes? And are they as willing to be held as accountable as they intend to hold others accountable?”
In a similar vein, roughly 550 of the managers employed by Carolinas HealthCare System in Charlotte, N.C., attend two-day leadership development institutes three times a year. As part of the education process, supervisors evaluate and categorize their managers as low, medium and high performers to determine where development is needed.
“You can have a great employee, even a great manager, who just might be in the wrong role,” says Dana J. Voss, Carolinas’ manager of employee retention programs. “It’s not micromanaging. If you don’t groom your employees to be future managers, you’re going to have poor managers. If you don’t treat your managers fairly, they’re going to leave. And it starts from top down.”
Why are our emergency department wait times so high?
When executives at Sacred Heart Medical Center realized their emergency department was essentially closed for a month in 2003, they didn’t even ask why. They just wanted it fixed.
The Spokane, Wash.-based medical center was on divergence 87 hours each month that year. The hospital’s average total wait time was five hours; patients had to wait about 82 minutes just to see a physician. “What filtered down from the upper administration was, ‘You can’t go on divergence anymore. You really need to make this stop,’” says John L. Reamer, director of emergency and trauma services. “We were probably losing $8 million in ambulance diversion, not counting the 7 percent of patients who left without being seen.”
Slowdowns in the ED are not unique to Sacred Heart. From 1993 to 2003, the number of emergency department visits in hospitals nationwide jumped by 26 percent, according to the Centers for Disease Control and Prevention, and increased wait times are the inevitable result. “We have seen ED wait times growing nationally,” says Lisa M. Sgarlata, executive director for emergency services at Fort Myers, Fla.-based Lee Memorial Health System, which has three acute-care hospitals. This issue wasn’t always high on the CEO priority list, Sgarlata says, but the problem is garnering more national attention now because the Joint Commission on Accreditation of Healthcare Organizations and other regulatory centers are asking, “What are you doing to fix this problem?”
Unfortunately, there is no quick fix, says Carol Haraden, Ph.D., vice president for the Institute for Healthcare Improvement in Cambridge, Mass. “Fixing the ED means fixing the hospital,” she says, adding that executives should be concerned about efficiency and flow within the ED as well as efficiency and flow outside the ED. “Does the ED segment out ‘see-and-treat’ patients from the patients that need to be admitted? Where are the bed blockages?”
But the challenge for hospitals isn’t simply identifying the problems, says Reamer. “There is not an ED director or staff nurse who doesn’t understand why people can’t be moved out of the ED. What they don’t know is how to fix the problem.” Determining how much time is spent on each process and knowing how other organizations are addressing wait times is a good start, says Sgarlata. Organizations also need some way to monitor flow, adds Haraden. “You need to know what’s empty, waiting to be cleaned, waiting to be discharged.”
Sacred Heart took that advice. After implementing at least 13 new IT systems, including a hospitalwide, real-time monitoring system, the 520-staffed-bed hospital’s total wait time dropped to three hours. The wait to see a physician was only 26 minutes in 2005, and the hospital was on divergence less than 22 hours total that same year. “I can see the bed status and staffing ratios in other departments,” Reamer says of the monitoring system, adding that hospitals also need a real-time management system of pending workload and an electronic patient-tracking system in the ED to stay on top of wait times.
The most significant lesson Sacred Heart ultimately gleaned from the process was how to change, Reamer says. “We had to change our mindset and culture that it was OK to wait an hour in the ED.”
Should we join a RHIO?
For Larry Tanner, the president and CEO of the New Britain (Conn.) General Hospital, the answer is yes. New Britain is an early supporter of a regional health information organization, or RHIO, that is sparking interest across the state. Incorporated earlier this year, the e-Health Connecticut project promotes electronic data sharing among a diverse—and sometimes competing—group of stakeholders.
New Britian is the flagship hospital of the Central Connecticut Health Alliance, one of three integrated delivery networks supporting the nascent data-sharing effort. Its goal: streamlining care delivery. “We are under intense pressure to take care of the uninsured,” Tanner says. “RHIOs may not be a hospital’s first priority, but there is no way that hospitals cannot be intimately involved in them. So you can’t just walk away from them.”
Tanner is in a growing crowd. Some 100 RHIO projects now dot the U.S. map, according to some counts. Reminiscent of the community health information networks of the mid-1990s, RHIOs have received a major push from the federal government, particularly by former National Coordinator for Health Information Technology David Brailer, M.D., Ph.D. Though the largely vendor-driven CHINs filed, many in the healthcare community say RHIOs will last. “Hospitals believe that RHIOs will improve care,” Tanner says. “We see information technology as a critical part of our future. In a small state like ours, individuals go to multiple settings for their care. The collection, storage and transfer of their health records is a big concern. Economics is our driving issue.”
Even RHIO true believers like Tanner, however, assert that hospitals need to look before they leap into a local data-sharing project. To complicate matters, there is no standard consensus on what an RHIO is. One person’s RHIO may simply be another’s wide area network that is owned and controlled by a dominant hospital seeking to cater to local physicians. That’s one reason RHIO experts urge hospital, medical group and health plan executives to ask hard questions before committing. Despite the RHIO bu, there are many compelling reasons to adopt a wait-and-see attitude, they say. “In some cases, hospitals should join, but others should just say ‘no,’ ” says Christina Thielst, a Santa Barbara, Calif.-based health management consultant who helped incorporate a local RHIO.
According to Thielst, healthcare organizations should examine an RHIO’s mission statement and management structure before joining to make sure it is a good fit for their organization. “Who will benefit? Who will lead? Who has joined? Who has not? Once CIOs have answered those questions, they can make an informed decision,” she says. The author of a self-published guide on RHIO formation, Thielst says understanding a RHIO’s initial project is critical for would-be participants. “If the start-up project is e-prescribing, then you could feel assured it could lead to financial savings, patient safety and improved efficiency,” she observes. “But if the lead project is too cutting edge, it may not be worthwhile.”
Regardless of what data-sharing project a RHIO tackles first, examining the organization’s business plan is crucial, says Carol Marinovich, a senior vice president at Fleishman-Hillard in Kansas City, Mo. The former mayor of Kansas City, Kan., Marinovich is the nonexecutive co-chair of Healthe, a budding Missouri RHIO driven by local employers. Its potential sponsors include H&R Block, Sprint Nextel and Cerner Corp., which is donating software for the first three years. “One way to make a RHIO financially sustainable is for it to be paid for by employers,” she says. “The RHIO itself is not a moneymaker.”
Healthe is still constructing its business plan, although participants will pay on a per-member, per-month basis to support a data-sharing network. The RHIO hopes to aggregate demographic and claims data, lab results and immunization records on local citizens, sharing the data among hospitals and physician groups. No hospitals have agreed to participate yet, although some are considering joining the effort as an employer, Marinovich says.
Despite the potential RHIO pitfalls, however, not joining a RHIO carries some costs, too, Thielst says. “If other hospitals are part of a RHIO and not you, you should want to know why,” she says. “The community will look at a RHIO and wonder why one hospital is trying to improve safety and quality, but this other one is not. From a PR standpoint, there is potential to lose by not joining.”
One RHIO emerging in Tennessee has had no trouble luring partners. Centered in Kingsport, CareSpark was charted in January 2005 and now includes three health plans, 18 hospitals and a handful of physician groups, says Liesa Jenkins, executive director.
Wellmont Health System and Mountain States Health Alliance joined CareSpark in search of cost savings. Already highly automated, the health systems offer physician portals, but have had trouble getting local medical groups to use the portals to access patient data. Luring physician practices into the RHIO fold would trim costs and improve care, she adds.
But Jenkins is the first to admit that untangling RHIO economics will be challenging. CareSpark’s audit revealed that financial benefits would accrue primarily to employers and health plans, with physician groups seeing only nominal returns. “Right now there are very few financial rewards for physicians investing in IT,” she says. “Under the current payment system they get paid the same whether they have an EMR or not.” Physician groups, consequently, have been reluctant to join CareSpark, Jenkins says.
Physician groups aren’t the only ones questioning a RHIO’s economic merits. Tanner wonders if the Connecticut RHIO can be economically self-sustaining without government backing. Healthcare IT projects, he observes, invariably sport huge price tags. “At our hospital alone, we are pondering a $30 million investment for CPOE, bar coding, and automated prescribing. These are slam-dunk naturals. But how are we supposed to do these things when we are facing big cuts from Medicare?”
Tanner’s question is one of many that hospital and medical groups will ponder when RHIOs come their way.
Do we really need consultants?
The question may seem deceptively simple to the management team that just brought in a group of outside experts to lead a department redesign, financial turnaround or strategic planning process. Yet those on both sides of the client-consultant dividing line say taking the time to examine the question critically is one of the fundamental underpinnings of a successful consulting relationship. It’s a question that’s often overlooked by organizations seeking a quick fix to their current problems.
“One of the things that we try to do here is really leverage our internal capabilities and only bring in outside resources that add value or build on our in-house strengths,” says Steve Houston, operations director of planning for Alegent Health, which owns eight acute-care hospitals and is based in Omaha, Neb. “We try not to go for a lot of end-to-end, out-of-house solutions, and I think that allows us to get the biggest bang for our buck.”
A key to this approach, however, is understanding your organization’s capabilities and developing specific targets for the project consultants. In Alegent’s case, an organizational strength is the ability to dissect data. “We have a strong analytical department in-house, so as we start to outline our requirements for an outside consultant, we spell out clearly that we’re not looking for someone to come in and crunch a lot of numbers for us,” says Houston.
This process of self-assessment and creating project expectations ultimately results in the development of a formal request for proposals. “I’m a big fan of RFPs,” he says, explaining that formulating an RFP forces management teams to be clear on what they expect from the consultant, which in turn helps the consultant understand what a client needs. “Clearly defining at the outset what the objective of the project is, what the deliverables are, what the timeline is going to be—those are some pretty basic steps, but they’re often overlooked by organizations,” Houston notes.
Others share Houston’s viewpoint. “Having watched organizations engage in some pretty large consulting contracts, sometimes it was not clear to me what they were engaging them for,” says Patrick Shumaker, president of the Cedar Park, Texas-based Healthcare Delivery Design Group. “Are you hiring the consultant to identify where your issues are, or are you hiring them to basically fix your organization?”
This institutional soul searching also helps determine how the information will be used after the project is completed. “It’s a little like doing diagnostic tests,” says Shumaker. “If you’re not going to use the information or if it is not going to change what you’re doing, then why bother?”
Like Alegent’s formalized RFP process, Shumaker urges organizations to invest initial time and effort to define a project’s scope and determine the roles everyone will play. That kind of clarity, he says, is important for the client and the consultant to develop specific objectives and accurate project timeliness.
Just having a timeline, however, is not always enough to keep a project on track—a development that can lead to organizational misgivings about the project or the consulting relationship.
“Where so many projects fall down is getting information from the client,” says Frank D. Kittredge Jr., a senior principal with Mitretek Healthcare in Austin, Texas. “Sometimes it just takes longer than you’d think.” To avoid such pitfalls, organizations should designate individuals in key areas, such as finance or operations, to serve as the “go-to” people for consultants to obtain information about the organization or its market.
Kittredge also urges clients not to just hand off the project to a consultant and then wait for results. “I do best with the most demanding clients because they are the most engaged. They’re on top of it, following the schedule, and we have substantive conversations about the issues,” he says. “The clients who are really demanding, questioning, and in my face all the time are going to get the best product.”
Why do we have to do a joint venture with the docs?
Making the case for joint ventures with physicians can be one of the most difficult strategic challenges chief financial officers face. But given the rapid growth of the joint venture business model, CFOs likely are getting a lot of practice. Business partnerships with critical specialists can be an effective way to gain alignment of incentives, but in the early stages, such ventures show up as a revenue loss on the black and white of the balance sheet. CFOs have to convince less financially savvy board members and other executive team members that they should share proceeds from procedures from which hospitals traditionally collect all the reimbursement.
“Historically, a lot of JVs have been defensive moves, so we have to repackage the explanation,” says Greg Pagliua, senior vice president and CFO at Centegra Health, a two-hospital system headquartered in Woodstock, Ill. “But you still have to go through the planning process and the rigor necessary to make a good investment.”
As more complex procedures are made simpler through technology and move to an outpatient basis, he says, hospitals have to be open to partnering with physicians or risk facing open adversarial competition from physician groups, such as an orthopedic group or surgical group that was once an ally. “I’d rather take some of the money than lose all of it,” Pagliua says.
But the devil is in the details, and significant potholes can wreck a business venture with physicians. CFOs, with their precise accounting mindset, can be good exorcists. But can they be good salesmen? CFOs charged with explaining why a joint venture is the best strategic move might win that battle but ultimately lose the war if equity arrangements, governance structures or succession planning for departing physicians aren’t carefully plotted.
“I’m a fan when it makes business sense, but walk into it with your eyes wide open,” says Pagliua, who adds that these arrangements need to strike a balance so that they benefit both the hospital and the physicians involved. When CFOs want to preserve the level of revenue a given physician group generates at all costs, he says, “that’s where you get problems. If I need to, I’ll build business another way, but the reality is that we’ll do more of these.”
But joint venture decisions don’t have to be reactive. Sometimes CFOs can go on the offensive. “You try to do everything you can to avoid it because you don’t want to give up a piece of the pie,” says Doug Myers, senior vice president and CFO at Children’s Hospital & Research Center at Oakland (Calif). But if CFOs have constant communication with the hospital’s specialty physicians, he says, they can determine whether a group’s interest in joint venturing or going out on their own is genuine or posturing. At that point, lay the groundwork through confidential strategic discussions with your board members and with your CEO, he says. In fact, in certain circumstances where CFOs know potential private equity partners are approaching physicians, “you might even take the lead in it,” he says. “The last thing you want to do is go to the CEO with some horrible news that was never mentioned before and was disclosed to him by someone other than yourself.”
That’s why, more than ever before, communication skills are at a premium in the CFO chair.
“We can’t make the product. We’re the ones who say how can we grow the revenue side by working with planning people and strategy people on your untapped patient base,” says Pagliua. “CFOs are seeing more and more of that expectation.”
Joint ventures, whether in imaging, surgery or other areas, can be fraught with peril, but there’s no special mystery to them as opposed to other strategic business initiatives, says Myers. More critical than any specific project an executive team might propose to board members is that CFOs realize the need to evolve from their reputation as bean counters with few ideas of their own.
“We’ve been the messengers over the years, and we’ve discovered that they shoot the messenger,” Myers says. “With that in mind, we’ve merged more into operations and working more with the CEO and COO so that we’re realizing the strategic plan.”
What are you doing to grow our margins?
In the past, chief financial officers weren’t expected to grow margins. CEOs expected CFOs to provide impeccable accounting and stay behind the scenes. But expectations have changed dramatically as hospitals search for new revenue sources to support the parts of the organization that don’t make money.
“You’re trained to look at numbers and get them right,” says Michael Freed, executive vice president and CFO at Spectrum Health, a seven-hospital integrated delivery system in Grand Rapids, Mich. But many CFOs—especially those at multihospital systems—don’t generate or calculate the numbers anymore, and if the people he or she hires get them wrong, “you’re probably going to lose your job,” says Freed. “Quite a few years ago, I crossed that bridge. Now my responsibility is more to help this organization plan its way down the road.”
More and more CFOs are echoing that attitude. Freed says growing margins at Spectrum depends on a variety of initiatives, but on the hospital side, nothing is bigger than the system’s efforts to integrate scheduling and clinical systems at all of Spectrum’s satellite facilities. Outside the hospital proper is where healthcare providers will grow in the near future, he says. Driving efficiencies by using the same information systems at all facilities in scheduling, registration and billing is not only better for the patient, but gives Spectrum a competitive advantage by allowing patients to move through complicated procedures with minimal effort.
For instance, should a patient need carotid artery surgery, he or she would need to see a physician ahead of time, conduct lab work and schedule a procedure, among other steps. In an integrated system, says Freed, the lab work could be done outpatient, the surgeon would see the patient on an inpatient basis and any other diagnostic tests could be done ahead of time. “By the time they admitted you to do the surgery,” says Freed, “the preadmission work shows what you’ve had done, and we don’t need to ask you the questions all over again, because the EMR has been populated already.”
Freed says the CFO’s role is to not only help people navigate business decisions, but also to be a salesman in financial matters; for example, making the business case to physicians regarding how the integrated electronic medical record benefits not only the hospital, but also the physicians who are challenged to change their behavior as part of such a major initiative.
If they can’t see it, they can’t find their way there, says Freed, who likes to create visual aids when talking to physicians and others outside the finance team to help simplify financial matters. “I have to show them what’s in it for them. If you can’t show them how it’s going to enhance their productivity, you’re only going to be met with resistance.”
What not to say
There are some key words and phrases that a CEO never wants to hear. Every junior executive fresh out of the management training program should know not to say “can’t.” But it still happens. Whether it’s in a hospital or a widget factory, even seasoned executives will sometimes let these words slip out:
CEOs hate to hear the word “can’t.” It implies an unwillingness to explore all options for a solution. So what to do when the CEO poses the seemingly impossible? Don’t just promise to “get back to you on that,” follow-up with some sort of action plan…quickly.
“That’s not in my budget.”
The CEO knows what the budget is. The board breathes down his or her neck on a constant basis about what is in the budget. If the CEO asks you to explore a project outside the annual budget, do the research first and present options.
“That’s not my department.”
This is a seriously dangerous response. Not only does it imply an unwillingness to adapt, but it also implies the CEO does not understand the job descriptions of his managers.
“I’m not sure that (insert name of biggest office jerk) is the best person for this.”
The CEO doesn’t want to hear about personality conflicts at a time when he or she is assigning tasks or seeking information. There is a time and place for team dynamics to be discussed, but this may not be the best time, or the best avenue.
“I don’t know.”
For a while, conventional business wisdom suggested that it was healthy to admit when you didn’t have an answer. Don’t believe a word of it. If the organization is moving toward better planning and more transparency of information, the answer should be somewhere nearby. “I will find out” may be a better bet.
“I need more time.”
Be especially careful about using this phrase if you don't have a darn good reason for it, especially as the deliverable date gets closer. CEOs expect you to be able to budget your time well enough to deliver quality work on the date you agreed to.
“We have a problem.”
The CEO never wants to hear this statement unless it is immediately followed by, “and here is my suggested solution...”
CEOs might want to hear that two-letter word now and then, especially when the questions are “Is JCAHO visiting next month?” or “Are our orthopedists leaving?” But when you do respond in the negative, make sure you are not defining your capabilities or those of your team.
—Jay Moore, Philip Betbeze, Jim Molpus, Kara Olsen
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