Hospital CEO has been the dream job for healthcare administrators for decades. But the top job increasingly isn't the top anymore, as organizations merge, holding companies morph into operating companies, and metrics for success change. Can you adapt?
Hospital CEO has been the dream job toward which thousands of healthcare administrators have strived for decades. Opportunities for advancement have usually been good, and jobs at the top have been relatively plentiful and relatively stable, for at least a couple of generations. The role of hospital CEO has always carried status—in many communities, the hospital CEO leads the area's largest employer, after all. You're considered a pillar of your community, and the remuneration hasn't been bad, either.
At that level, you get to run the show, make strategic decisions, and demonstrate your skills, often acquired over decades in lower levels of responsibility in that organization or others.
But the pipeline to the top might be drying up, or at least not running anywhere close to the capacity it did until recently. Part of that is because the top job increasingly isn't the top anymore, as smaller organizations continue the quickening pace toward consolidation with larger and larger partners. Even in organizations that have already been subsumed into larger organizations, the freedom to operate independently of the larger organization is rapidly being constrained as those holding companies morph into operating companies.
So now, all of those positive attributes of the hospital CEO job are in flux.
Are hospital CEOs becoming an endangered species?
I won't go so far as to claim that. But as hospitals become the last resort for healthcare organizations whose metrics of success hinge not on how many patients they can funnel through the system at x dollars per patient day, but in how efficiently those patients are cared for, the job of running the hospital isn't the top of the food chain anymore. That trend is only going to continue to play out, and talent may follow.
As the site of the most expensive and most interventionist care, hospitals are increasingly seen as last resort in the healthcare continuum: if other, less expensive interventions fail, the hospital is the default, but it's the last place an at-risk health system wants its patients to be.
That's not to say top leaders won't still be necessary to run the hospital side of the business. But as current and upcoming leaders aspire to the top hospital spot, they ought to be aware that skills needed in the future of healthcare administration are changing.
New performance and compensation metric
For many current hospital CEOs, the transition can be disheartening. Turnover is up, partly because of the increasing pace of experienced CEOs retiring because their future leadership role seems likely to be diminished. Instead of focusing on executive strategy, as a subset of a larger system, that CEO's most important function might be employee and physician relations and implementing a strategy thought up by someone else in a faraway office. Hospital CEOs face a narrower scope of control. Once, the CEO might have cut joint venture deals with influential physicians or provided the vision for the new patient tower, and his or her incentive compensation was determined by easily understood financial metrics. Any part of compensation based on outcomes defined quality as a patient satisfaction score.
Now, she might be less involved in strategy and facilities and her compensation—at least the incentive part of it—is based on patient outcome measures that are much more complex. Quality scores are derived much more granularly.
Compensation committees, at least the more innovative ones, are basing incentive compensation on SCIP measures, evidence-based medicine follow-through, and whether the organization he runs is exceeding the norm on those measures or not. For a health system CEO, as much as 40% of compensation may be based on these measures.
These metrics may be measured over several years, with compensation awarded as targets are reached in a so-called rolling bonus cycle. That approach may more effectively measure success in multiyear projects like an IT rollout or establishing a new medical group. Quality is getting easier to measure because it's being defined for executives by their payers. They can argue with doctors about what quality really is, but they're being measured by these metrics.
As for strategic contributions to the organization as a whole, individual hospital CEOs—whose titles are increasingly being morphed to "president" at many larger organizations—are also being measured on whether they've grown their organization's integrated solutions. Did they meet targets on physicians in their integrated environment? Did they execute the integration strategies the larger organization set forth? If they have a health plan, did they get a certain number of members? Did they meet certain targets for IT integration?
On the other hand, talent is talent, and those who can change with the times will still get great leadership opportunities. With all these big physician groups now becoming part of the whole in many regions, someone has to run them. An old saw says that running a practice is nothing like running a hospital and folks who can run one can't generally run the other very well. My prediction: this adage will become less and less true as both organizations' success depends on variables outside the profit-and-loss statement, and both types of organizations are increasingly evaluated on quality and customer service. And besides, isn't that what integration is at least partly about?
There will always be jobs in healthcare leadership. But the nature of the leadership required is changing dramatically. Titles may change, too, and the roles and expectations.
Can you adapt?
Philip Betbeze is the senior leadership editor at HealthLeaders.