Regardless of the outcome of this presidential election or other political agendas, the healthcare system of this country, which has been described by most industry observers as in crisis, is poised for significant change. One of the primary problems associated with healthcare is related to cost. Not only are healthcare costs significantly greater in the United States than other industrialized countries, but they continue to increase. The chairman of the Federal Reserve Board, Ben Bernanke, recently noted that healthcare represents about 15% of this country's gross domestic product and with similar growth will represent 22% by 2020 and 50% by 2050. This projected growth could have a devastating impact on the United States.
A compounding issue is related to population growth, as well as, increased life expectancy. The report, "Health, United States," by the National Center for Health Statistics indicated that life expectancy at birth has increased from 47.3 years in 1900 to 77.8 years in 2004. As our population lives longer, more healthcare resources are necessary, which increases demand for these resources. The baby-boomers have also begun to reach traditional retirement ages. The increase in demand for healthcare coupled with an increase in healthcare costs are the primary issues precipitating this crisis in our healthcare system.
The effective application of information technology has been suggested as a potential mitigating factor for this anticipated crisis. Leadership competence in information technology is crucial and can be enhanced through the adoption and application of an appropriate leadership style, such as transformational leadership.
Transformational leadership
This leadership model is described as a process in which followers trust, admire, and respect their leader, and are consequently motivated to do more than they were originally expected to do. The concept of transformational leadership was introduced by J.M. Burns in 1978 and enhanced my B.M. Bass in 1985. The four components of transformational leadership are charisma, inspiration, individual consideration, and intellectual stimulation.
Charisma. Transformational leaders motivate workers to exceed established performance standards and to transcend their self-interest for the good of the organization. For this to happen, workers must identify with their leader's values and vision of the future. This process is dependent on the leader's concern for workers in return for their trust. Transformational leaders can change an organization by identifying the need for change, articulating a new vision, and generating commitment to the new vision.
During the early part of the 20th century, Max Weber proposed the concept of charisma. Several components of Weber's concept are that charismatic leaders have outstanding traits and skills, they arise during times of crisis, they propose and support extreme solutions to crises, followers are attracted to charismatic leaders because of the inspiration they receive through their relationship with such leaders, and charismatic leaders' gifts are validated through successful experiences. Several personality characteristics are associated with charismatic leaders, including:
They are expressive verbally and physically.
They exhibit self-confidence.
They are self-directed.
They have insight into the needs of their followers and have the ability to use these needs to persuade followers.
They are free of internal conflict.
They are eloquent speakers.
Crises, such as anticipated in the healthcare industry, have been defined as situations that lead to the emergence of charismatic leaders who provide salvation to the people in crisis. People in crisis feel that they have lost control and charismatic leaders bring solutions and order. Successful, stable organizations might not need charismatic leadership. Conversely, failing organizations that must change to survive often need charismatic leadership, and crises need not be chronic to support a charismatic leader.
The followers of charismatic leaders seek fulfillment by association with their leader. By identifying with the leader, these followers can satisfy psychological needs. To gain the leader's approval, the followers meet the leader's high expectations and standards. A sense of responsibility is created by the leader's confidence in the followers.
Inspiration. Inspirational leaders motivate workers to go beyond self-interest. This ability is based on the leaders' capability of communicating a vision that motivates workers. Workers' acceptance of the vision expressed by inspirational leaders is essential. Workers must want to attain the vision, and the desire will change the workers' focus from daily concerns to a vision that stimulates their best efforts. Workers believe that inspirational leaders are:
Sensitive, enlightened, and knowledgeable. Generate pride in the organization.
Demonstrate high levels of activity, self-confidence, and determination.
Have a sense of mission.
Have expectations for high levels of performance.
An important ability for inspirational leaders is conveying the meaning of the organization's vision. These leaders can provide meaning with comparisons to competitors, ideals, goals, the past, traits, and other stakeholders. Inspirational leaders also might use symbols and slogans to help convey meaning, which can be useful for simplifying complex messages.
Inspirational leaders must be conscious of their impression on others because it will determine how they are respected, which will in turn affect their ability to influence. Impression management is important because people determine personal characteristics from limited information. The workers' perceptions of their leaders influence their confidence in the leaders. Leaders can manage the impression they make through their dress, speech, and appropriate connections with those they visibly interact. By managing the impression they make, leaders can make a positive impact on the success of their leadership.
Successful inspirational leaders establish high expectations of worker performance, and workers tend to meet expectations that can be difficult to achieve, but are reasonable. Workers who achieve high expectations also exhibit a sense of purpose that is expressed through strong feelings for the organization, its mission, and its vision. Leaders can increase their probability of success by managing the workers' expectations and sense of purpose.
Inspirational leaders must develop a realistic vision of the future that will motivate workers. The vision provides the goals that direct the activities of the organization. Leaders must be able to communicate the vision in such a persuasive manner that others are willing to commit to it. Successful implementation of a vision requires determination and persistence from leaders.
There are differences between charisma and inspiration. Charisma is related to workers' personal attraction to leaders. Inspiration is related to workers' attraction to a vision. Charismatic leaders may have both a vision and personal attraction for workers. Inspirational leaders do not have the same personal attraction as charismatic leaders, but they articulate a desirable vision.
Individual considerations. Individual considerations are related to interpersonal skills. Leaders exhibit concern for the workers' development through assignments that provide opportunities for growth. Important elements of individual consideration are insight and empathy. Considerate leaders know the developmental needs of each worker and should know what motivates and interests the workers. Through insight and empathy, leaders ensure worker's concern for organizational needs and their adoption of the organization's vision.
Intellectual stimulation. Intellectual stimulation is related to the encouragement for workers to become innovative and creative. It can cause workers to consider situations and issues in new and different ways. Four methods of intellectual stimulation have been identified, and leaders can use any or all of these methods.
Leaders can rationally try to convince workers to solve problems.
Existential leaders identify many possible solutions to a problem. An acceptable solution is developed by appropriately combining elements from the various possibilities.
Leaders might use empirical data gathered from other sources to identify a solution.
Idealist leaders can use intuition with a minimal amount of data to identify solutions to problems.
Transactional leadership
In contrast to transformational leadership, the principal concept in transactional leadership is the exchange that takes place between leaders and followers. Leaders define followers' actions as exchanges for something of value to workers. These leaders establish goals, provide directions, and reinforce behavior with rewards. In general, if the work and the environment do not motivate followers, leaders must provide incentives. This leadership style is defined by the dimensions of contingent reinforcement and management by exception.
Contingent reinforcement. Contingent reinforcement consists of rewards for workers who attain performance goals. The rewards are dependent on the workers' effort and attainment of specified goals. Leaders' behaviors can enhance this process. These behaviors include precise instructions, participation in standards development, support, and consistent performance.
The forms of contingent reward include benefits, praise, and recommendations. Benefits can take several forms such as pay increases, better assignments, a more desirable schedule, or additional time off. To be effective, praise must be based on work well done. Recommendations might take many forms, including additional pay, job advancements, bonuses, and recognition for outstanding job performance.
Management by exception. When leaders practice management by exception, they act on mistakes, faults, and failures to attain performance standards. Workers are informed of these deviations and punishments can be implemented. If performance standards are attained, workers are allowed to continue without additional direction.
Passive management by exception is when leaders take action after the deviations have been identified. Active management by exception is when leaders actively attempt to identify deviations by developing systems and processes to monitor for deviations.
Leadership continuum
Leaders can exhibit both transformational and transactional behaviors. This is especially relevant to healthcare chief information officers due to their need for vision development and execution of informational strategies of the organization. Transformational leadership enhances the effectiveness of transactional leadership; they are not mutually exclusive leadership styles. Transactional leadership satisfies the separate goals of leaders and workers, while transformational leadership ensures the close alignment of these goals.
This crisis of healthcare has been described as a point of inflection. Information technologies will have a significant role as healthcare organizations respond to this crisis, and these leadership styles can help healthcare information technology leaders more successfully address this healthcare crisis.
Larry Barnes is the vice president and chief information officer at Salina (KS) Regional Health Center. He also has a doctorate in management of organizational leadership.
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We are already seeing some signs of how the credit crisis and economic downturn is impacting the healthcare industry—hospitals are laying off staff and cutting money-losing service lines. But the healthcare building boom is not dead—just postponed.
The factors that led to the explosion of construction cranes looming over healthcare facilities still exist—demand, technology, demographics, obsolescence, customer experience, efficiency, and the need for additional space. Construction projects well under way will likely continue forward without missing a beat, while remodeling or expansion efforts in the early planning stages may be delayed or revamped.
For instance, Fairview Health Services announced that it was laying off about 150 to 200 employees, as a result of treating a higher burden of uninsured and underinsured patients combined with fewer inpatient admissions. Fairview may consider postponing upgrades to its main lab, but construction on its new children's hospital in Minneapolis would not be affected, according to the Minneapolis Star Tribune.
Robert Levine, senior vice president for healthcare at New York-based Turner Construction Co., says that the healthcare construction market is still strong. Healthcare usually represents about 10% to 15% of the company's business, says Levine, but this year its volume of healthcare projects is closer to 25% to 30% of their workload. "There are some jobs that we are working on that should have started by mid-2009, and now we are being told they might slip six months but they are not coming off of the board," Levine says.
Those hospitals postponing projects may even gain an advantage in pricing for subcontractors and materials. "Where prices were going up 7% a year, which is what we are still anticipating. The weakening economy will moderate the prices, so if there is a delay to the project because of the financing there won’t be a penalty for pricing going up," says Levine, adding that there may even an abatement of pricing.
Still, many hospitals will scale back plans to upgrade and expand their facilities. And they will evaluate even more closely (if that's possible) where their money should go. For instance, updates to a patient room that is outdated but functional may be put on hold. But updates to the cardiac wing may go through—especially if that is one of the hospital's core services.
The credit squeeze could potentially widen the gap between the haves and have nots in healthcare, as well. Hospitals that are positioned well financially will be able to move forward with their construction or expansion efforts, but hospitals with weaker finances may have to put projects on hold, which could make them even more vulnerable—especially if patients view their hospital as rundown facility and seek treatment at the shiny new hospital up the road. "There are many hospitals that are only marginally profitable and can only afford so much new debt as it is. This will make it that much worse," says Frank D. Kittredge, Jr., senior principal for facility planning at the Noblis' Center for Health Innovation.
I spoke with a hospital CEO recently who told me that just as most people are hunkering down, hospitals are doing the same. Hospital CEOs should be prepared to answer some tough questions from their governing board, as well, adds Kittredge. "I can see boards questioning whether we can afford to spend all of this money now. Do we want to use up our debt capacity or line of credit because then we won’t have reserves in case we do see a slide in census or bad debt and free care really spike," he says.
I don't have the answers. But the credit crisis will probably just reinforce areas that hospitals need to focus on like core service lines, efficiency, return on investments, staffing, and quality, because the downside to making a mistake is much greater.
Carrie Vaughan is leadership editor with HealthLeaders magazine. She can be reached at cvaughan@healthleadersmedia.com.
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Bill Byham, chairman and CEO of Development Dimensions International, a human resource training and consulting company, discusses how the right network can help new executives avoid costly mistakes.
Sen. Charles Grassley, the ranking Republican on the Senate Finance Committee, is pressuring the University of Texas M.D. Anderson Cancer Center to account for its charitable-care practices as part of his ongoing crackdown on tax-exempt hospitals. Responding to pointed questions about everything from the hospital's relationships with insurance companies to bill-collection policies to fundraising activity, M.D. Anderson officials this week delivered four bound volumes of data to Grassley. The Iowa senator has been investigating tax-exempt organizations, including hospitals he says don't provide public benefits equal to the subsidies they receive.
Birmingham, AL-based Physicians Medical Center Carraway expects to get an immediate cash infusion from its landlord to allow it to make payroll and keep the century-old hospital open for the immediate future, hospital officials said. Physicians Carraway has run out of money, and its line of credit was frozen by GE Capital earlier. Board trustees turned to the hospital's other creditors for help to try to avoid filing for bankruptcy.
General Motors is ending health coverage for more than 100,000 salaried GM retirees and their dependents Jan. 1 to save the $3.3 billion it spent on retiree healthcare in 2007. Retirees will receive $300 a month in their pension checks to buy healthcare. They can begin enrolling in Medicare as early as October 15, a month earlier than Medicare's enrollment for everyone else.
Almost one-third of people under 65 in the Florida county of Miami-Dade and one-fourth in Broward County, FL, lacked health insurance in 2005, according to Census Bureau figures. As have many other studies, the report found a wide disparity among racial-ethnic groups. Hispanics in Florida were far more likely to be uninsured, at 38.6%. Black non-Hispanics had a 26.7% rate, the highest rate for blacks found anywhere in the country.
A number of health reformers call for insurance tax credits that people could use to shop for individual health policies on the open market. Competition and freedom of choice would help the health system, the thinking goes. But findings from a survey of individual insurance shoppers show that 15% of people looking for insurance online were deemed "uninsurable" for standard coverage by most insurance carriers.
GPs in England gained "eye-watering" pay increases of 58% under a revised NHS contract that reduced their working hours, the Commons public accounts committee said. The committee found the contract, which allowed family doctors to opt out of care outside office hours, cost the Department of Health more than expected over the three years to 2006. Partners in GP practices were rewarded with bonuses for meeting performance targets that were designed to give patients a better service.
The New York Department of Health has cleared Stony Brook University Medical Center in cases involving four families whose children had been treated in the now closed pediatric cardiac surgery program. In 2006, weeks after the department closed the medical center's pediatric cardiac surgery program because it lacked a full-time surgeon, four families filed complaints with the Health Department. They had similar stories, saying their infants, born with heart defects, were treated for stomach problems instead of having cardiac surgery.
