At a time when they arguably need qualified executives the most, the nation's integrated delivery systems are encountering a shortage of skilled leaders.
The gap, say concerned healthcare leaders and recruiters, is showing in longer searches, higher compensation packages and declining board satisfaction with applicants for top jobs.
That was certainly the case at ViaHealth, a four-hospital system in Rochester, N.Y. When ViaHealth went hunting for a new chief executive last year, the search took nine months and more than 1,000 hours of work by a volunteer search committee, even with the assistance of a national recruiting firm.
Meanwhile, tumbling profits at many healthcare systems have prompted lenders and investors to question the caliber of their leadership, resulting in a surge in demand for top candidates. Many believe the problem has been exacerbated by a full-employment economy and expanded opportunities for healthcare executives in other fields (See chart, p. 39).
At the same time, the growth of complex delivery systems and a tougher reimbursement climate have expanded the skills demanded for the top jobs.
"The healthcare field is as difficult and complicated in terms of financial management as it has ever been," says Gary Mecklenburg, president and chief executive officer of Northwestern Memorial Hospital in Chicago. Mecklenburg is also chairman-elect of the American Hospital Association's board of trustees.
"We are competing with every other organization out there for talent. It is scarce, it is expensive, and finding those people has never been more challenging," Mecklenburg says. His own institution has turned to nontraditional management tracks, such as moving nurses into executive roles, and does extensive mentoring to feed the pipeline of future leaders.
A handful of industry leaders including Mecklenburg are attempting to find an industrywide solution. They've come together with the nation's graduate programs in healthcare administration to develop a plan to re-engineer the training and development of future leaders.
The 12-month collaborative effort, funded with a $200,000 grant from the Robert Wood Johnson Foundation, will culminate in a first-ever industry summit to address the training of future healthcare leaders, scheduled for Feb. 8-10 in Orlando, Fla.
The goal of the invitation-only event, tagged the National Summit on Education and Performance in Health Services Management and Policy, is to engage "150 of the best thinkers in the field" says Jeptha Dalston, president and CEO of the Association of University Programs in Health Administration (AUPHA) and the Accrediting Commission on Education for Health Services Administration, two of the sponsoring organizations.
Also involved is the Healthcare Research and Development Institute (HRDI), a Pensacola, Fla.-based think tank composed of executives from 35 leading hospitals and systems.
The groups hope to involve professional and trade associations such as the American College of Healthcare Executives (ACHE), the American Hospital Association, the Healthcare Financial Management Association and the Medical Group Management Association. Payers will also be invited.
"What is the proper education and training for women and men who want to be healthcare leaders? It's a very different formula than it was when I graduated 20 or 30 years ago," says Dalston, who was president and CEO of Hermann Hospital in Houston from 1985 to 1991.
Organizers of the effort acknowledge that it won't be easy to agree on a new formula, however. Academics, healthcare professionals and recruitment firms have all blamed each other for the problem, Dalston says.
Going to schools. One issue is revitalizing the nation's graduate programs in health services administration. Dalston acknowledges that there is "great variability" in the quality of graduate programs and says education generally is "simply out of sync with the demands of the 21st century." In addition, many students view a master's degree in business administration as a more versatile choice.
Based on anecdotal evidence, healthcare administration programs are not growing at the pace of other professional graduate programs, such as business administration, Dalston says. The association's 82 graduate program members awarded 2,000 degrees in 1998, the latest year for which reliable data are available, says AUPHA Chief Operating Officer Lydia Reed.
Stephen Loebs, chairman of the graduate program in health services management at Ohio State University, says healthcare systems have failed to define a clear career path for future administrators and, in some cases, have dropped fellowship programs that give graduates their first employment opportunities. "To some extent it's almost Russian roulette for women and men trying to figure out how they can position themselves," he says.
But it will be difficult to come up with a standard curriculum in an environment of rapid change. The AUPHA noted in its grant application that there is skepticism within the industry as to whether a "coherent and compelling body of knowledge for the study, art and practice of health administration" exists. In addition, educational outcomes measurement, which is one of the project's goals, is uncharted territory.
Mentoring needed. Recruiters and some industry leaders, meanwhile, say provider organizations need to take it upon themselves to make a greater investment in professional development internally, like Fortune 500 companies do. There's a perception that mentoring and internal development is taking a back seat as organizations grapple with financial and operational issues.
Many professional organizations report that attendance at on-site educational programs has been flat, for example.
Thomas Dolan, president and CEO of the ACHE, says he's particularly disturbed that healthcare systems are dropping the ball when it comes to mentoring and continuing education for midcareerists. Enrollment in ACHE programs has been increasing, but only for satellite, telephone and Internet programs, he says.
"I think there is a consensus that the healthcare field doesn't spend the time in training and development that the for-profit business world does," he says.
Others say not-for-profit systems should emulate giant investor-owned corporations, which have internal programs to identify and groom high-potential employees.
Initially, the HRDI considered starting a leadership academy for its 35 members, says President and CEO
Diane Appleyard, but a grant application for the project was rejected by the Robert Wood Johnson Foundation. Appleyard said the foundation wanted a program that would reach a broad range of provider organizations and include the academic community.
Corporations nurture promising recruits by rotating them among different service areas, exposing them to all operations. But that isn't the tradition in healthcare, where organizational constraints have blocked the movement of administrators among hospitals, physician organizations and health plans.
"The question is asked, `If you haven't been there, done that, how can you manage it?"' says Gordon Sprenger, CEO of Allina Health System in Minneapolis, who admits that his own organization hasn't done a good job of moving people around.
Earlier this year, the Allina board rejected a national search to replace Sprenger, who plans to retire in July 2001 at age 64, after it was told by a recruiter that pickings would be slim, Sprenger says. Instead the Allina board named David Strand, chief executive of its Medica HMO, but insisted on a 14-month transition, during which Strand is learning about Allina's other operations, which include 19 hospitals and a 423-physician clinic.
In an attempt to help its executives cope with fiscal and operational pressures, Allina recently put eight executives, including Sprenger, through a yearlong "executive coaching" program at a cost of more than $100,000. Sprenger says the investment has paid off by helping participants "come to grips around their own aspirations and ambitions."
A few systems are ahead of the curve. For example, Henry Ford Health System in Detroit, with five hospitals, a 900-physician group and an HMO, offers executives a chance to try their hands in multiple service areas, says President and CEO Gail Warden. He led a leadership committee for the HRDI and is co-writing a paper funded by the Robert Wood Johnson Foundation grant to define the skills needed at each stage of a healthcare management career.
Henry Ford has also instituted signing and retention bonuses and relaxed its dress code to attract promising candidates, Warden says, and has strengthened its employee evaluations. Warden also advocates mentoring, having guided an estimated 240 administrators during his 40-year career, including Northwestern's Mecklenburg and Cleve Killingsworth, president and CEO of Henry Ford's HMO, Health Alliance Plan.
Mecklenburg has carried on the mentoring tradition at Northwestern, which guides 10 students in health services management programs each year through post-graduate fellowships and internships.
Warden, 62, says Henry Ford has been grooming three or four people with the potential to replace him when he decides to retire. Although he says he doesn't know who his successor will be, Warden says, "If I've done my job, he or she will come from the inside."
Alternative paths. Meanwhile, boards are working harder and shelling out more money to recruit new leaders.
Jordan Hadelman, CEO of Witt/Kieffer, an Oak Brook, Ill.-based search firm, says adversity in the form of operating losses and cutbacks creates internal chaos that lengthens the search process at many organizations. At the same time, he says, candidates become more cautious about changing jobs in an uncertain economic climate.
From 1998 to 2000, Witt/Kieffer's average length for a CEO search grew from just less than six months to more than seven. The firm took in $13.1 million from healthcare executive searches in its last fiscal year, up 29% from two years earlier.
Chief financial officers, chief information officers and medical executives are all in high demand, but toughest to fill are CEO slots, Hadelman says.
In some cases, systems are tapping career tracks other than the traditional COO and hospital administrator functions. Hadelman believes more systems will promote CFOs, chief medical officers and strategic planners to CEO spots.
There is also a concerted effort to groom nurses, whose patient-care experience gives them instant credibility with physicians, employees and boards.
The Center for the Health Professions, housed at the University of California-San Francisco, recently received a second round of funding from the Robert Wood Johnson Foundation for its Executive Nurse Fellows Program, started in 1997 to train registered nurses in leadership development. In all, 45 nurses have been enrolled in the three-year program, says George Sweazy, a consultant on the project who is a principal at the Executive Development Group in Greensboro, N.C.
Some boards are working harder to fill top roles, articulating their priorities and convincing candidates that their organizations have strong futures despite operating deficits.
Long search in small pool. At Rochester's ViaHealth, part of the challenge, says board Chairwoman Beth Ela Wilkens, was finding someone who could make difficult decisions and had the background to lead a complex system, which includes employed physicians, nursing homes, assisted-living facilities and a 100,000-member health plan.
ViaHealth board members spent hours setting their priorities and explaining to candidates why they believe the system has a strong future despite running recent operating deficits. They also insisted on making a site visit to the candidate's workplace before completing a contract.
The toil paid off, Wilkens believes. After its first offer was rejected, ViaHealth finally found a match in Tom Litz, who was president and CEO of CentraState Healthcare System in Freehold, N.J.
Litz, 54, says the board "did a particularly good job" of demonstrating a commitment to the system's future and to local healthcare, which was a key factor in his decision to accept, along with a competitive compensation package and Rochester's high quality of life.
Wilkens says the board is satisfied with the outcome, but adds: "There probably is a narrower list of candidates than you would have had a few years ago. It's not a situation where you can sit back in an easy chair and consider a long list."