Leading Healthcare Innovation Amid Disruption

Two top CEOs share their philosophies on fostering an environment of entrepreneurship at their organizations.

This article appears in the September 2015 issue of HealthLeaders magazine.

While healthcare innovation is alive and well in the United States on the clinical level, innovation in administration and the delivery system has been sorely lacking for decades, says Michael Dowling, president and CEO of the 19-hospital North Shore-LIJ Health System, which has an enviable track record of growth in its traditional acute care offerings, as well as a solid attempt at vertical integration through its owned insurance plan and multiple pre- and postacute care sites.

Over the past decade and a half or so of Dowling's leadership, the health system has grown to 54,000 employees with an operating budget of $7.8 billion, but growth doesn't necessarily reflect innovation, he says. In fact, growth to such a large size has a better chance of inhibiting innovation on the delivery side, which is why Dowling is so focused on making sure he fosters a work environment that encourages innovation and risk-taking.

Unlike deciding whether to acquire a physician practice, an insurance company, or a competitor hospital, a CEO can't develop an innovative culture with his or her signature. It's a softer skill, and the best an organization's top leader can hope to do, according to Dowling, is set the stage.

The CEO's role

The most important contribution the CEO can make toward innovation is fostering a culture through which it can thrive, says Dowling. The CEO certainly can't drive the innovation, but he or she can certainly squelch it if not careful.

"It's almost impossible to sustain innovation if it's driven by the CEO," he says. "That said, if the CEO or senior level of the organization puts a wet blanket on new thinking, you won't get any new thinking. I've been in organizations with CEOs who basically had the attitude of 'The way we've done it is the way we will continue to do it,' so from that perspective, the CEO's role is critical."

Dowling says the first order of business for a CEO in creating the right atmosphere is by evaluating the leadership at the senior, management, and supervisory levels. That's where you evaluate whether you have open-minded leaders who are quick to percolate and evaluate new ideas through the organization, he says.

"You can talk about it a lot from on high, but if you don't have the people who want to support such an effort, you're dead," he says. "Early in my tenure, I focused on the leadership, and we've made enormous strides."

Dowling came to North Shore-LIJ in 1995 and became president and CEO in 2002. Many of the current leaders at North Shore-LIJ were not leaders 10 years ago, he says, adding that during his tenure, hospital leadership positions have experienced close to 100% turnover. He says that's not necessarily because he's fired people, but that he's found people who welcome the opportunity to grow and expand, so you promote those people or you lose them.

"Most were people who were in the system but not in leadership," he says. "Being given responsibility is a positive motivator and it has to happen over time—you don't make it happen over a weekend."

Cross-promotion

What excites Dowling the most as a senior leader, he says, is releasing the potential in people by allowing them the freedom to evolve, grow, and experiment.

He recently promoted a person to head of human resources at North Shore-LIJ who has never worked in the field. It's not the first time he's promoted people across disciplines.

"When you're not wedded to having done that before, you come in with a fresh view," he says.

Not that Dowling does all the evaluating when seeking leaders to promote, but he looks for certain attributes: people with creative minds, people who are not hostage to precedent, people who allow others the freedom to express themselves, and who are not risk-averse or otherwise afraid of failure.

"We know that quite a few of the things we do will fail, but we misuse the word failure," Dowling says. "When you improve based on that, you learn the failure is largely a success."

One example: In the early 2000s, North Shore-LIJ decided to take a full-risk contract with Oxford Healthcare (then independent but now a subsidiary of UnitedHealthcare). The contract called for North Shore-LIJ to take full capitated rates for all of Oxford's Medicare lives. Dowling says fundamentally, the deal, which North Shore-LIJ exited after three years, was a financial albatross for the health system, largely, because the physicians refused to take risk.

By all measures, the experiment was a failure, "but we learned a wonderful lesson that was very instructive when we decided to create our insurance company, and very helpful in how we do risk today," Dowling says. "While it was a financial failure, it was a learning success. Success is going from failure to failure without losing enthusiasm."

Presenting new ideas

Another part of building a culture of innovation lies in providing a structure for employees to share ideas. North Shore-LIJ offers an opportunity for frontline employees to present their ideas before a committee every six weeks or so, Dowling says. From those presentations, further action may be taken, up to and including developing new products for commercial use, even outside the organization (see related story, page 40).

And every year, the health system holds a formal innovation awards ceremony that recognizes innovation and other achievements at the annual board meeting. Dowling says the majority of the meeting time is reserved for presenting these awards, which can go to individuals or teams of employees.

At Hoag Orthopedic Institute, a 70-staffed-bed joint venture hospital between physicians and Hoag Memorial Hospital Presbyterian in Irvine, California, CEO Dereesa Reid agrees that the top leader's role is to empower the culture of innovation.

"Innovation is not just one person," she says. "There's no greater legacy than to create an environment where people are proud of what they're doing."

To create that kind of atmosphere as the CEO, she says, both she and her physician partners continuously recognize individuals for their contributions that improve the patient experience, that cut waste, or that improve employee morale. "I'm a big believer that our few leaders need to get out in front of this," she says.

At Hoag Orthopedic, that happens largely through the Quality Process Improvement committee, which has between 30 and 40 members at all times, including top leaders representing pharmacy, administration, the hospitalists, nursing, orthopedists, and physician board members.

"It's a really tightly run meeting, less than 1½ hours, but includes a series of presentations, often by individuals who are encouraged to develop their professional growth by making such presentations in front of an influential group," she says.

That's an important part of elevating all employees such that they understand the organization's top leaders are willing to listen and recognize the importance of that employee. Getting past some employees' reticence is a big key toward building the culture of innovation, she says.

That doesn't mean the process isn't somewhat grueling, and competitive.

Setting priorities

"One of the things I try to be disciplined about is, there's only a few things we can do very well," says Reid. "In highly innovative organizations, you have more ideas than you can possibly do."

The highest priority ideas, not surprisingly, are the ones that drive value. And while data is very important, Reid eschews overanalysis, leaning instead on the right thing to do for the patient. She says Hoag Orthopedic's philosophy toward whether to launch an idea is very data-heavy, but that she hasn't invested in data-mining software or other ways to crunch data. Instead, they pull data out of their systems and analyze it with simple Excel spreadsheets.

"We want speed, to stay as close to the source of truth in the data, and not spend a lot of extra money for additional applications to grind up this data," she says. "We're going to do it simply with Excel worksheets because I can get to the data faster." Successful efforts are valuable, in and of themselves, but also can boost morale.

"You have to recognize all the wins, but as leaders we can't forget that when people take risk, where there's an opportunity to do well and they do achieve something, they feel better about themselves," she says. "And as they feel more empowered and confident, they treat people better. And when souls get fed with personal accomplishments, they take better care of patients."

Beyond healthcare

Exposure to other industries is a big plus for top leaders in a healthcare organization, says Dowling, noting the lack of evolution in the delivery systems and administration of healthcare. There's only so much one organization can do to bridge an innovation gap that's been abetted by the antiquated fee-for-service payment structure that still dominates much of healthcare, but organizations can better prepare themselves by seeing how other industries deal with a payment structure geared on value, as almost every other industry does.

"We're the exception," Dowling says. "This is why I believe you've got to expose yourself to organizations outside of healthcare as well as those who are trying new things all the time in healthcare. Go to other parts of the country, because there are great things happening everywhere."

Hoag Orthopedic gained exposure to innovation culture outside healthcare directly through its CEO. Reid is an accountant by training whose career developed in both semiconductors (she once worked for Texas Instruments) and in the agriculture industry before coming to healthcare several years ago. She's led Hoag Orthopedic for the past four years.

"I was with TI for a very short time, where I was a cost accountant, but that experience really taught me what innovation was," Reid says. "There was an expectation that everyone in the organization had to be on a multidisciplinary team. Those teams had to do white papers that went straight to the top of the organization, so, frontline or midmanagement, you had a deliverable that you knew the very top of the organization would look at critically."

She's implemented very similar work groups at Hoag to develop not only an esprit de corps, but to really ferret out ideas that are already there. More than even the specific ideas that germinate from such groups, the exercises stress that anyone can contribute to bettering value.

The long view

Dowling says innovation means looking at the healthcare delivery world not as it is, but where you think it should be years from now. "And not being happy with what exists," he adds.

 "If you look out years from now, you'd realize a couple things quickly. One, the customer is going to be a huge determinant of what healthcare is going to be in the future, so look at your organization from the outside in, not from inside out. It's not 'What makes you comfortable,' it's 'What does the patient/consumer demand?' "

He says consumers/patients will have more choices, they'll be more technologically savvy, and they will be more educated. A helpful motivator: "If you're 50 years old and you have a 20-year-old kid, spend your time asking whether that person would tolerate the way we currently operate," Dowling says. "He would not."

Reprint HLR0915-4