Webcast transcript: Leading in the future

The following is the complete edited transcript of Modern Healthcare's Aug. 17, 2011, editorial webcast on the changing demands on healthcare leadership. The webcast was moderated by Modern Healthcare reporter Joe Carlson. The introduction and closing statement were read by Modern Healthcare features editor David May.

David May: Good morning. Thank you for joining Modern Healthcare's editorial webcast. Today, we'll listen to a discussion on healthcare leadership for the future. As the health reform law is implemented, the industry faces expansion of accountable care organizations and value-based purchasing. What will be required of the men and women of the C-suite?

Before we proceed, we have a few housekeeping items to address: Your phones will stay in listen-only mode during the entire webcast. However, listeners can send questions throughout the event. Our moderator will ask as many as possible before the hour is up. You can find the questions window on the right-hand side of your screen connected to the webcast dashboard that appeared when you first joined the call. A recording of today's discussion will be available on our website, ModernHealthcare.com/webcasts. Within a few days, all attendees will receive a follow-up email, including a link to that recording. Slides used during today's presentation will also be available online. And now, I'd like to turn the webcast over to Joe Carlson, a Modern Healthcare reporter and the moderator for today's webcast. He will introduce our panelists. Joe.

Joe Carlson: Great. Thanks, Dave. I appreciate the introduction. I want to thank everyone for joining us today. We have three great speakers, and we're going to have an interesting discussion here looking at leading in the future. With us today are Michael Connelly. He is president and CEO of Catholic Health Partners. CHP is a 31-hospital system, and they're based in Cincinnati. Next up in our speaker list will be Tom Dolan. He's president and CEO of the American College of Healthcare Executives. The ACHE is based in Chicago and has more than 40,000 members. And finally we will have Lydia Middleton. She is president and CEO of the Association of University Programs in Health Administration. The AUPHA is based in Arlington, Va., and it has more than 2,500 faculty as members. So we're going to start off with some brief comments from Michael Connelly. Michael, if you'd like to begin.

Michael Connelly: Thank you very much. Appreciate this opportunity. I guess the first thing I'd say is: There are going to be many skills and talents needed to lead in healthcare in the future. It's a wonderful career and a wonderful opportunity. I tend to think about leadership skills in sort of two categories: the first would be sort of in-depth functional knowledge. And then the second would be leadership behavior, so I'm going to break it up into those two parts. In terms of in-depth functional knowledge, I think in the future more than ever healthcare leaders are going to need an intimate knowledge of clinical quality. And by clinical quality I mean sort of a strong understanding of evidence-based medicine, what's needed to care for various illnesses. Quality is also going to be about systems, so just having clinical knowledge is insufficient unless you have systems to cause that clinical knowledge to be implemented effectively. I think a third dimension of clinical quality in the future will be engaging patients. I think we're going to be becoming increasingly responsible for helping patients engage in their own health. So that would be the first area.

The second, I think, is an intimate understanding of the economic consequences of your decisions and strategies. Oftentimes good ideas can have very negative economic consequences, so it's very important to have an understanding of the economic implications of the decisions that you're making, your ability to see trends in your organization and react quickly to those economic circumstances in healthcare that today change rapidly. And unless you're attuned to that and can adjust quickly, you'll have a great challenge.

The third would be emotional intelligence. I think understanding your team, what motivates them, what motivates you, self-awareness. And then finally, I would emphasize that a commitment to continuous learning to develop what I'd call a ‘balanced intuition.' That balanced intuition is going to be what drives a lot of your decisions. So it's helpful to have in-depth knowledge in a broad number of areas because if you're just strong in one area, I think that it's going to skew your intuitive decisions.

In terms of the behaviors that I think are critical for leaders, I would think that one of my favorites is that a leader needs to actively seek out solving the key problems in the organization. There's a tendency sometimes to avoid problems or excuse problems … but a very proactive stance is whatever challenge or barrier the organization is facing, the leader's responsibility is to identify that and see what they can do to respond to them.

I think secondly leadership is all about attitude. It requires a very positive attitude. The only thing we really control in our work environment is our attitude, and unless our attitude is positive and proactive, I think that that spreads through the organization. I think another critical behavior is a recognition that you can't do anything today without a team, so literally everybody in your organization is a leader. You're not a more important leader than they are, and unless you have the humility to understand that, that you need them more than they need you. And so I think learning how to work with others and understanding with their needs are is a critical leadership behavior.

A couple of others that I would highlight would be transparency and vulnerability. And oftentimes that transparency leads to vulnerability. So as a leader you need to exhibit and be honest about what your weaknesses are. I think that creates credibility for you as a leader. I think ethics and courage are going to be increasingly important. I think that healthcare has no shortage of ethical challenges, whether they're moral, financial or social, and our profession is really looked to, I think, to take a strong stance on doing what's right. There is always going to be a herd mentality. I think that the right thing to do oftentimes will not be what the herd wants you to do or what you're going to please the audience, you're going to please the people you work with, and it will take a great deal of courage to deal with that. So those would be some of the key behaviors that I think are required to be successful.

Another aspect of the question was: Where are we going to find these leaders? From my perspective the key to that would be that you would grow them within your organization. Talent management is an organizational discipline. Unfortunately I think one of the challenges of talent management is that it is something that has a long-term payoff and short-term expense. And in a our world today, it's kind of difficult—so this would be an example of courage—where you'd be willing to make that investment in the short term realizing that the benefits may be beyond your career horizon or your relationship with it.

But talent management is a 10- to 15-year process with individuals, and it's really essential. So I think that there are many components to it that are really beyond the scale of this presentation, but I would just summarize that I think leaders best come from within the organization and then are developed through a sophisticated talent management program.

The last area we were asked to comment was the issue of: How do we get leaders to stay focused on the right priorities? And for me a critical issue is starting out by defining what success means for the mission of your organization. Oftentimes people like to keep the definition of success to the mission relatively vague. I've always had sort of an obsession to make it as precise as it can be because I think it becomes a unifying force for the organization. It's a way of aligning everybody on the team. They can better understand how to work together. So that means: How do we define and measure quality explicitly in our organization. That means how do we define and measure community benefits explicitly? How do we define engagement and high performance for our workforce? How do we define efficiency in our organization? How do we define financial success in our organization? So metrics in all of these areas, and I have personally found metrics to be a very powerful tool in focusing an organization.

My experience has been metrics are difficult to develop. Initially they are very inadequate measures. Initially they are very reductionistic, but the more you use them, the more sophisticated they become and the more useful they become to the organization. And so really an aggressive use of metrics to define success is a critical aspect of staying focused in the organization.

Then the final piece would really be the importance of an integrated evaluation that ties together that definition of success, ties together those metrics, and then is used in a disciplined way to evaluate everybody in the organization. And that evaluation process needs to then also go back to the leadership behaviors that we talked about. So we not only want to evaluate the outcome metrics of success but we want to evaluate the behavior. So we want to evaluate whether the leaders have walked the talk, we want to evaluate whether the leaders have supported team focus in the organization, whether they've been transparent and vulnerable, whether they've been ethical in their choices and so a really vigorous evaluation process throughout the organization that ties back to the defined mission of the organization, measures what that means and then evaluates that consistently, I this is the best way to keep the organization focused.

So I'll stop there and would be glad to either take a question or move on to the next speaker.

Carlson: OK, great. That's a very wide overview, Michael. I think you hit on a lot of points that we're going to be returning to. … Michael, I did have a follow-up question: You talked about good ideas can have negative economic implications. I know that we've got some folks from universities in the audience here, so I wonder what's the example—do you have an example of a good idea but it has negative economic implications that also need to be considered?

Connelly: A practical issue that we're all facing right now is how primary-care physicians use their time. Right now economically they're paid on a production model that requires them to have very short visits with their patients and not devote as much time to education, not devote as much time to care coordination, and so ideally you want to create a medical home and ideally you want a lot of time devoted to patient education and care coordination.

If you just converted your whole system to that, you'd go bankrupt. And so trying to figure out how you move to the next level of care yet understanding the economic consequences of the transition or some of the other things that need to change, like payer contracts, etc. So knowing how to change the status quo without having a very significant negative consequence requires planning, discipline and an understanding of the economic forces around you.

Carlson: In addition to the clinical knowledge.

Connelly: Precisely.

Carlson: Great. So next up we are going to hear from Tom Dolan. Tom?

Thomas Dolan: Joe, it's a pleasure to be with you and my colleagues. Actually, the comments I have are a lot of the things that I reflected on in your 35th anniversary issue where we talked about future leadership and healthcare reform. And what I'd like to do is kind of start off with assumptions.

First of all, I believe that the United States will have universal healthcare coverage within the next decade no matter what happens with the current legislation. We're the only developed country that doesn't. I think that's going to impact how we deliver care and how we lead.

Whether we fully implement the Patient Protection and Affordable Care Act, my second point will be that we'll have even greater government involved within the delivery of healthcare services. We've always had great government involvement, but now it's going to be involved by both the federal and state government.

I think third, the rate of growth of healthcare costs is unsustainable. I think we all know that. And really the only ways to control that in the future are one you could increase productivity or reduce the increase in real wages and the cost of supplies, and I think probably what is going to happen is what we don't control through increased productivity, we'll be doing it in the latter and we'll be really controlling wage increases and supply increases.

And finally we're going to find that integrated health systems are the optimum way to improve quality and control costs in the future. So I start off with kind of those four assumptions. I can probably end there and just say ‘amen' to everything Mike said. He did a spectacular job, but let me reinforce … maybe present a little twist to some of the things he said.

I think the first skill is mastery of change management and change leadership. And it's the type of thing we're going to need in the future. And how do I differentiate those two? Change management is really the technical component of any change strategy. That is, what are the technical things you do to improve quality? What are the technical things that you do to lower cost? And for the C-suite, the real important thing for individuals to do is make sure that managers at the front line know how to do that and know how to work with staff within the organization. What is uniquely the responsibility of the board and the chief executive officer and her or his direct reports is change leadership. And that really creating the human and cultural component that makes change management possible.

We know that in those organizations where the board and CEO are fully behind change within the organization—they're the most successful. And clearly with the four assumptions I talked about, the name of the game is certainly going to be change, how we react to all the different forces that take place in the next few years. The second skill—one that Mike touched upon is putting quality and patient safety first. Again, we know from—Premier did a major study that showed where the board and CEO were fully behind quality and safety initiatives, there was significant improvement within their organizations.

Now to do that obviously both the board and the C-suite needs to familiar with quality tools, and we've got a lot that can help us. We've got IHI and many other organizations that really make great contributions in this area. But again we have to continue to do that because the American people know that there are quality issues in healthcare delivery, and they expect us as healthcare leaders to respond to those. So I say that is the second field that really is going to become hugely important in the future.

Third is what I touched upon and that is we have to control costs. We have to find a way to increase productivity. We're behind many other industries in that area, and healthcare reform is going to demand that. And again we have a lot of tools available to us: Lean, Six Sigma and others because, again, you have no quality of care if you can't make it accessible because of high costs, and that's one of the reasons why the American College of Healthcare Executives is fully behind the Baldrige performance excellence program.

Twelve organizations have won that in the healthcare field, and, interestingly enough, a majority of the applications now to the Baldrige Awards nationally come from healthcare organizations. I think there's ample evidence to show those individuals that apply the Baldrige criteria not only improve their quality but also control their costs. And, again, it's one of the reasons why we're very supportive of that and getting our members involved in that area.

The fourth area is public policy, and at one time it was enough to run your organization well and make sure that quality was high, that quality cost was low as possible. Well now as I said earlier, as the government gets more and more involved, healthcare executives are not only going to have to be excellent internal leaders and managers, they're also going to have to be public policy leaders. They're going to have to make sure that they can advocate effectively for their organizations and their communities.

And, again, I know that's something that's been stressed more in the graduate programs, and hopefully Lydia will touch on that, but healthcare executives have to be familiar with the key issues, they must make sure that they're effectively representing their organization, their community, the legislators at the local, state and national levels. Probably even more important is that they have to effectively organize their boards, medical staff, employees, community leaders to make sure that they're making an effective case to legislators at the federal and state level. And I'll give you some examples of that with the—you know making sure that your board chair is testifying at state legislative hearings, things of that nature.

Going to the fifth skill—and it's one that, again, Mike did a superb job of describing—and that's the importance of interpersonal skills. This has always been a relationship business and it will continue to be so … again, making sure individuals have strong interpersonal skills. When I taught graduate students, I used to say that success in our field was 20% technical skills, which you had to have, and 80% interpersonal skills. I think on 40 years of reflection of now, I realize it's 10% technical skills that you have to have, but 90% interpersonal skills. And especially in these challenging times we have to have individuals that can work together. Healthcare leaders have to work with—clinicians, nonclinicians, the community and so, again, whatever we can do to develop those. It's one of the reasons I'm a big advocate of 360-degree evaluation procedures is so executives can find out where their weak spots are and improve those.

And then finally I would conclude with communication skills and how important those are. Both oral and written communication, we know how important that is in management. It's going to become even more important in areas like public policy leadership and both face-to-face and virtual communication. We're all familiar with face-to-face but now social media is becoming extremely important. We have to make sure that we're conversing with that in our organizations to effectively use that. So, those are kind of the six skills that I think are going to be increasingly important in the future.

Touchingly briefly on where will leaders come from in the future, there's a few comments on that: Hopefully many of them will come from within our organizations. Again, Mike was right on when he said we have to develop talent within our organizations. One of my concerns is we do not have enough promotion from within at the CEO level. I think we've got to address that, especially with 16% turnover rates. We've got to make sure that we develop leaders within our organizations. I think also what we're going to see is—while I personally believe the majority of CEOs will continue to be nonclinicians—we'll see an increasing number of clinicians in those roles, and we have to make sure we prepare them for those kinds of roles.

And then finally, what kind of incentives will keep the individuals focused? Again, Mike did a superb job talking about how we have to have clear goals and hold individuals accountable for those. That measurement is difficult but it's something we have to do if we're going to be successful in this arena. So those are my thoughts, Joe. I'd be happy to answer any questions.

Carlson: Great … One question that I had, Tom, you mentioned the importance of lobbying and representation. You didn't use the word ‘lobbying,' but: Do you think is that a requirement in today's world that hospital CEOs are expected to go to Washington or expected to go to the state capital and represent their hospital's interests? Or has that always been the case?

Dolan: I personally think it's always been the case, but I think it's going to be an absolute requirement in the future. And rather than using ‘lobbying,' let's say ‘advocacy.' I'm not talking about going and supporting a particular candidate for office, but really advocating for their organization, their community. Going back to my example with the Baldrige quality program, when I was asked to be chair of the board of overseers, I thought I'd be chairing a few meetings and that would be about the extent of my involvement. Well now in the last month the House Appropriations Committee has totally zeroed out funding for the Baldrige program in fiscal year 2012 given the deficit crisis. And my personal belief is that the $10 million we spend on the Baldrige program, the rewards far exceed that $10 million. So now I find myself in an educational advocacy effort with selected senators to retain that funding.

And so, again, I think that kind of behavior, that kind of leadership is going to become absolutely necessary in healthcare and a requirement for every senior executive.

Carlson: So that's not something that you just as a CEO says, ‘Oh, you know it would be nice to go and talk about Baldrige funding or whatnot'? That's a required part of the job or at least it should be?

Dolan: Absolutely. And it's something you can't delegate. Nobody wants to hear from a junior staff member on a legislative committee. They want to hear from the chief executive officer, the board chair, the president of the medical staff. So it's not only doing it yourself, but helping other leaders within the organization do it, also.

Carlson: Great. … Next up we're going to hear from Lydia. Lydia?

Lydia Middleton: Hi. Thank you, Joe. Thank you everybody. I'm delighted to be here with you today. I'm going to take a bit of a step back from what Mike and Tom have spoken about. Their experience, of course, is much more with the leaders of today, the people that are already in leadership roles or are growing into them. And I want to talk a little bit about how we're developing the entry-level folks who are coming into your organizations and will be, hopefully, the future leaders of your organizations.

I want to give a little bit of background quickly so you have context from my remarks for those of you that aren't as familiar with AUPHA. We have been around for about 63 years. We represent the best of the best programs in healthcare management in the United States and Canada, at the grad and the undergraduate level. We have about two-thirds of our members in master's programs and a third of them in bachelor's programs. And that represents about 2,500 faculty throughout the country and Canada.

The first program was founded at the University of Chicago many, many years ago, and here we are today with in excess of 400 graduate and undergraduate programs in healthcare management. And that number grows on pretty much a daily basis. One hundred ninety-two of the programs are members of the AUPHA, and of that group 72 are accredited by the Commission on Accreditation of Healthcare Management Education.

Just a little bit about who our graduates are, so you can have a sense of how this field is changing and how it's growing. We have graduate enrollment in 2010 of in excess of 8,000 students, and that is a 30% increase over the previous year, which is just exponential growth. Forty-nine percent of those students are ethnic minorities, which is remarkable. One of the things that we are thinking about is how we grow opportunities for minorities within the practice skills once they get out of our program because we really are facing a lot of minority students. And 58% are female at the graduate level. The numbers are even bigger on the undergraduate level with almost 12,000 students currently enrolled—almost 50% growth over last year with 44% of minorities, 69% female. So the demographics of this field are changing rapidly.

In terms of how we have developed over time in our thinking of how we grow leaders: In the early days of the field, and really with the field of hospital management at the time or hospital administration, all of the programs as they developed had approximately a one-year academic time and a one-year practice component. And so all of our students were getting on-the-ground experience in order to build their competencies.

Today, we have five programs that require a residency. Another 40% of the graduates will pursue graduate fellowships. So that leaves a lot of students who are doing a two-ear didactic and enrolling in the practice field. The practice community is expecting our students to be able to hit the ground running and be highly competent. So we are struggling on a daily basis figuring out how it is we can prepare students to be competent the day they leave our program at a level that the practice community expects. One of the challenges in this particular field is that there is continuing debate as to which are the right competencies we need to be focusing on and how we're going to get our students there. But in the context for the remarks for today's webinar, I'm focused on a few that I think are critical to the field.

A bit about how we got to where we are in thinking about competencies in healthcare management: In 1998, we were put on this path by a faculty member at the University of Michigan named John Griffith, who advocated for—that we need to be able to tell the practice community what it was our graduates could do the day they left our program, how they were going to be able to impact an organization through their degree. We held a summit to explore in partnership with academe and the field of practice: What are these issues? Out of that came something called the National Center for Healthcare Leadership. I'm sure many of you are familiar with that, and the NCHL did a great deal of work in defining competency models and looking at how one could apply that model across the spectrum of professional life from entry-level through senior career.

In 2008, the accrediting commission decided to amend its standards to require that all programs have a competency model to which they are modeling their curriculum and preparing their students. This is a tremendously huge shift for the field, which had up until now, up until 2008, been focusing really on specific content areas in the curriculum but not really looking at that outcome and output that we are now much more focused on. So in 2008 we made this initial switch, and in 2011 the accrediting commission has really thoroughly stepped away from requiring prescriptive content in the curriculum and instead at the program are focusing on what the competency they want the students to graduate with in order to be adequately prepared to lead in the future.

As many of you are probably familiar, there are a number of different models for competencies that we are engaging with in the field of healthcare management education: there is the NCHL model, the Healthcare Leadership Alliance has produced another model, and many of our programs have developed models of their own. And by 2013 all of the programs in healthcare management that are accredited by the AHME will have been site-visited under a competency model expectations. So what we're expecting to see now is that students will be graduating among other things much more familiar with their own competency in the field of healthcare management and how they get to develop their leadership skills once they get into the practice setting.

What has happened in accreditation is that the programs are now much more allowed to focus on their own mission, their own setting for where their graduates are going in order to align their curriculum with that context. So we're seeing programs that are starting to specialize. What Mike said about needing to have a broad array of knowledge throughout the field certainly continues to apply with our program. However, we're additionally seeing more specialization in such areas as medical group practice or quality improvement or finance and so forth. So that is something that is changing in the graduates that you're going to be seeing coming out of our field—for the better I believe.

Among the wide array of directions that a program can go, there are five core areas that a program needs to focus on. Those include appropriate depth and breadth of knowledge of the healthcare system and healthcare management. And, of course, with the program commission and where the students are going, so the curriculum again can be built around the appropriate needs of the practitioner community which program is serving.

Echoing both Mike and Tom, the issue of both communications and interpersonal effectiveness is critical. We hear this repeatedly from the preceptors and employers of our graduates that we have to make sure that our students can communicate in writing, in person. They can be persuasive, they can be telling.

Critical thinking, analysis and problem solving. Again, we've heard this a couple of times already today, but these are critical skills that our students are going to need, and we do a very good job, I think, in our program of teaching this in terms of really developing their ability to address difficult issues, think through the implications, think through, as Mike suggested, what's the long-term impact of this decision I'm making both economically and in terms of my own organization. Management leadership, of course, and then as others have mentioned, professionalism and ethics.

We also—AUPHA and our faculty—did a survey of a large group of practitioners—about 1,500 practitioners—and asked them what they thought was the most critical to be seen from our graduates, and perhaps what aren't we doing a good job of preparing them to do and where we need to focus more? But this is really an area we're focusing on a great deal in our curriculum.

A lot of it goes to this issue of talent management and personnel and whether or not our students have the on-the-ground skills they're going to need day-to-day to get into an organization. And as you can see, leading and managing others, engaging with employees, teamwork, talent management, all of these—most of which are not necessarily specific to healthcare—these are things that we need to make sure that we're doing a good job of teaching in our programs so that entry-level practitioners can really be effective in their very first role and then develop throughout their careers. Quality and patient safety and working with physicians are really just the only two that were specific to healthcare management.

So I'm often asked as both employers: Why should I be hiring somebody with a degree in healthcare management? Or the student: Why should I be getting a degree in healthcare management when I could get an MBA and then go into the healthcare field? My answer is always is that it's about the context. And what we need to be doing for preparing individuals, preparing students to work in the context of healthcare because it is a unique context and unlike any other. … But as you can see, there are very different contexts when you look at healthcare than there are in other business entities or enterprises that don't require the same kinds of skills and abilities that we are preparing students with in our programs.

So my final comment is if AUPHA as an organization and our programs as our members are really focusing on this vision, which is developing leaders that have both values and critical competencies in order to drive improvement through the health system. And we have an array of students that are going into different roles. Some of them are going into consulting and biotech and pharma, but they're all part of this larger system. So what we're trying to do is give them that sense of system and that sense that they are sufficient to impact throughout.

The other thing we're trying to do is build … to change leaders. Clearly, they need to be change managers. That's something we can teach in the programs, but developing change leaders that are going to a system that's not working optimally and figuring out how to make work out optimally, that's what we're trying to build. So I want to echo what Mike said and what Tom said about how critical it is that the new leaders of healthcare come out of the organization. We're building the foundation for that with our students in our program and we're leading people into the healthcare settings that have these initial skills and competencies. But we need to count on that community to develop them once they get there. There's only so far we can take them in a two-year program, and we want to see that grown beyond through the talent management that happens in the practice community. That concludes my remarks. Thank you.

Carlson: Great, thanks, Lydia. You know, Lydia, I wondered with remarks about hit the ground running and developing core competencies, I wondered: Is there such a thing as a CEO residency or a senior leader residency?

Middleton: Not that I'm familiar with. We, the residencies that we put our students into are, we hope, usually precepted by a CEO or precepted by a senior leader. Is that what you're referring to?

Carlson: Right.

Middleton: Right. So our students going into residencies and the fellowship programs frequently have the opportunity to shadow either a CEO or a senior leader. Those are the richest experiences and the one that mentorship relationships develop and where you really are positioning individuals for great success. Often if you ask today's leaders of the health systems that have gone through one of our academic programs and asked what is the key to your success, they'll usually say, ‘It was my residency or my fellowship and the relationship I developed with the CEO I was working.' So, that is absolutely critical. We're hoping through good work through the ACHE and others to develop more and more of these opportunities because it is, I think, makes such a difference in that transition between academe and practice, and makes it possible for someone to hit the ground running after that third year.

Carlson: OK. Great. Actually our first audience question keys off of that point pretty well. It's a question for Mike. Mike, this is Leslie from Columbus. I agree that growing talent within the organization is very important today, but how do we balance that with the fresh blood that sometimes is required?

Connelly: Well, I think the polarity that I'm looking at, something that Tom mentioned, is most of the leaders tend to come in to an organization from the outside. And so if you want to look at it as the mixture if you were able to get 75% of your talent internally and 25% externally, measuring that is a good way of looking at it. But the problem is that a lot of times particularly for your senior positions you're probably getting 75% from the outside and 25% from the inside.

So what talent management is trying to do is reverse those numbers. I think that an interesting company that I admire in this area is Procter & Gamble. They never use a search firm for a senior executive position. Everybody in that organization is homegrown, and so they have kind of perfected it. There's a kind of a 100% model. And I'm not sure I'd go that far, but I do think getting close to them is beneficial. Because if you have a culture in an organization you want perpetuate, if you have a strong mission that just walking in from the outside and trying to have that picked up by a leader I think is a concern. So that's why I do have a bias towards the internal promotion.

Carlson: Tom, do you—does ACHE do anything to encourage this change that Mike's talking about? And do you find a similar sort of balance where maybe there's not as much or too much, you know, recruitment from within vs. outside?

Dolan: I agree with Mike. I think if you could make me guess I would say that probably 75% of CEOs are coming from outside the organization. And this is very different than in successful Fortune 500 companies where typically they are now promoted from within. And I think we need to do both. I think the ideal, as far as I'm concerned, is organizations that are producing so many leaders that they can't possibly use them all and they can export them to other organizations.

And I think like Mike does that where a lot of people that are trained in the system and are very successful in other organizations. But again, the reasoning, and again there's ample data on the for-profit side that CEOs or individuals that are appointed CEOs from within are more successful because they know the culture of the company. They know the staff, and they're intimately familiar with the challenges. And that is one of the things that ACHE is trying to do is deal within the organization.

My editorial in the current issue of the magazine, talks about what I consider to be the CEO turnover crisis and management succession crisis. Sixteen percent turnover, the median tenure for a hospital CEO right now is four years; 58% of all hospitals CEOs are in the jobs less than five years. And this is in comparison to the fact that we know from the management literature: It takes five years for a leader to make permanent changes in the organization. She can go in there, make dramatic changes, but if she leaves in four years oftentimes the organization will revert back to the way it was in the past. So my goal and the goal of ACHE is to see longer tenure for leaders within healthcare organizations so they can create positive permanent change.

Carlson: Lydia, is that something that students are taught about—both the question of whether you should work your way up within an organization vs. trying to join from the outside?

Middleton: I don't think we speak about it a great deal. We're more often than not students are in their mid-20s and they are just starting out their career in healthcare management. And if you're reasonably familiar with that demographic, these are people that tend to like to move around and like to have different experiences. So I don't think our expectation is necessarily that they're going to go into one organization and stay there their whole career. But we certainly do talk to them about the fact that every decision that they make and every action that they state is part of their permanent record at that organization and that there are many opportunities to move, with this degree, to move within an organization and actually move up the ladder.

Not surprisingly, a great many of our students come in wanting a job in the C-suite within the first two years of employment and we do a lot of reality check with them around that. But we do try to make them understand that this is a world where your record will go with you and it's a small world, it's a small community. So they have to understand that they may be able to make it a career organization, they may need to move around that. But whatever they do, they need to make the right decisions at every turn so that their record speaks for itself.

Carlson: And is there teaching about whether four years in an organization is too short of time to accomplish your goals?

Middleton: You know, I'm not sure what method each of our individual programs is sending on that context. I think that we are—we're more about lifelong learning and continuing to grow and expand your horizons. So, I think, as we've all said, it's a dynamic world. It's a dynamic profession. Opportunities come and go on a pretty quick basis, so I don't think our programs are really specifically talking about that in particular so much as continuing to grow and develop new opportunities.

Dolan: Let me jump in here.

Carlson: Sure.

Dolan: Again, what I'm talking about is chief executive officers being from within. I think the early careers, they should probably stay in a position three to five years. Early careers being the first 10 years of their career. Now they may be able to be promoted within their organization or they may go someplace else. And I think there's something to be said about a variety of experiences in early career and midcareer. It's really when we get the senior career that we need a little longer tenure. So again, for early careers, it's very appropriate them to go to a new position or even a new organization after being in a position three to five years.

Carlson: OK. And by the way, that's great if anyone else wants to jump in answers or add things or other points. We encourage that. So the next question is also for—we'll start out with Lydia. It's about clinical knowledge. And the question: how much clinical knowledge does a CEO really need to perform up to standard and how do you get that knowledge maybe not knowing exactly what's going to happen in the next 10 years as far as healthcare delivery?

Middleton: I'm going to defer to some extent to my colleagues because we frequently say we are not preparing CEOs. We're preparing people we hope will grow into CEOs.

It's very hard in a two-year master's and certainly a two-year bachelor's program to grow a CEO and certainly very difficult to give a whole lot of clinical knowledge when there's so much content around leading and managing organizations. So we rely very much on the practice community to start to embed future leaders with that more clinical knowledge and expose them to more opportunities to learn that.

Our programs will do rotations through hospitals, and we'll have shadowing with physicians and so forth, but, again, there's just so much time in that two-year curriculum. So we pass a lot of that responsibility, frankly, onto the person's second jobs that these entry-level individuals are going to have because, really, in the clinical setting it is much easier for a student to learn this or a graduate to learn this than to teach it in the context—the appropriate context within a classroom.

Carlson: What do you think, Mike?

Connelly: Joe, I'd add to that and suggest that really learning the major illnesses that your organization is treating is sort of critical for us as a CEO. And there can be developed learning. You need to understand the basic elements of congestive heart failure or COPD or diabetes or hypertension or oncology or heart surgery. If those are the services you're delivering, if you don't understand sort of the core elements of the clinical aspects of those illnesses, and that's something that can be self-taught. There's lots of ways to check of that knowledge, but I think it is important to be facile in those domains.

Carlson: I suppose particularly if you're going to be launching a new medical home model, for example, or something along those lines.

Connelly: Correct.

Carlson: The question we have next is … I think we should go to Tom for this one first. Tom, what's the trend of physicians holding C-suite-level positions in healthcare organizations? And are there particular competencies that you think physician-leaders need to be successful?

Dolan: Well, I think it's certainly a growing trend. It really began with chief medical officer. I think approximately 60% of all hospitals now have chief medical officers in the C-suite. They tend to be responsible for quality within the organization. On the other hand, there's still only about 300 physicians that serve as chief executive officers in this country. I expect that number to grow over time, but we will never be in the position of other countries where the majority of CEOs are physicians.

I think the reality is most people who go into medicine want to practice medicine. Some even relatively quickly or over time decide they can make a greater contribution at the administrative level, but like all of us that may need specific training in that. While a clinical background—whether it be medicine or nursing or some allied health profession—is a great foundation for healthcare leadership, there are specific skills that one needs as a healthcare leader, typically focusing on some of the techno skills or the business skills and also the interpersonal skills.

Where clinicians tend to work with individuals on a one-to-one basis, healthcare executives tend to work with groups and the total organization. So I think as clinicians go into these roles, and some are very successful, it's because they either have formal training in these areas or are some of those rare individuals that just naturally have that ability. So I think we'll see more clinicians in leadership roles, but I think it's important that they get the necessary training to be successful.

Carlson: Mike, you have 31 hospitals in CHP, are you seeing any change in the numbers of physician-leaders and physician-CEOs?

Connelly: We're seeing the need for a substantial increase in physician-leaders, but it's really more in the domain of organizing physician practices and in the domain of advancing quality. So we have some hospitals that are led by a physician, but I think that looking at healthcare today not just as being hospital-centric but being as a delivery system of large physician practices, home health services, long-term care, all these other dimensions. So the future is really about the leadership of integrated care delivery, not so much the individual components. And those leaders could well-be physicians, but I pretty much agree with Tom in terms of those percentages.

Carlson: The next question is about incentive pay. It asks: Does incentive pay—and I think I would ask this maybe of Mike just because by virtue of the number of CEOs under your watch—so incentive pay. Does incentive pay get the right results, and what might have to change with incentive pay in the future?

Connelly: Well, the key to the right results is having a score card. [Laughs.] So, in our case our score cards are about 45% quality and safety, they're about 20% organizational effectiveness in terms of developing associates. They are probably about 20% financial, and then the balance would be on efficiency. So having a score card that's balanced like that that covers the key areas, I do find that adding a material financial reward for achieving your objectives works. (Laughs.) And so I think that another tricky thing in that is balancing the team result vs. the individual results, and so when you create those incentives, you don't want incentives that reward individual behavior. You want incentives that reward team behavior. And so that's another aspect of it, but I do find it an important tool. I think that people first rate the quality of their work-life and work experience, and I think finances are important, but I think they're secondary to that work environment. So it's a complementary pool.

Carlson: That doesn't sound like you're seeing a lot of these sort of futuristic goals built into incentive pay—let's establish an accountable care organization or let's set up—let's expand our medical home model or let's—

Connelly: Well, actually we do—we have outcome goals. We have process goals. And we have individual goals. And in our process goals, that's where we do the innovative things like implement a leadership academy and talent management program. That's where we develop the medical home. Those are the places we put those.

Carlson: The next question we have, I think we should start off with Lydia. The question is: How do you see the role of nurse-executives changing with regard to hospital leadership. And I think I would add to that: Lydia, you mentioned in your remarks, initially, an explosive growth in the number of—you graduate an inordinate numbers. Are any of those—how much of that is in the area of nurse-executives or back to our initial question of a few minutes ago of physician-executives?

Middleton: We do have a fair number of clinicians across the board in our program. I would mention also that there are growing number of specifically nurse-executive programs that are typically growing out of the nursing schools more than out of our program, but we're seeing increasing numbers of clinicians—physicians, nurses and right through the allied health professions—that are recognizing that there are huge opportunities for them to step into as Mike said, not the CEO role but in significant leadership roles.

And, so again what they need more than perhaps that clinical foundation or the context piece that I spoke of is really the leadership and the team-building and the interpersonal skills that allow one to be effective and to really hold people accountable, which is not something that's often part of the culture but is increasingly becoming so.

It's not as much a part of the culture within medicine or nursing as we want it to be. So, we're certainly seeing an explosion in those areas as well as growth of programs that are uniquely designed for that particular audience, that particular student body.

Carlson: And then the actual question was: How do you see the role of nurse-executives changing? Are nurse-executives moving beyond that CNO role, or do you find that the CNO role is becoming more common?

Middleton: I'm going to roll that one over to Mike.

Carlson: (Laughs) Mike, do you have any thoughts?

Connelly: Well, I think that's going to one of the key functional knowledge areas of quality and safety, nurses become a natural for leadership roles because they are more knowledgeable in those areas. So, I think nursing is a wonderful baseline background for leadership in healthcare.

Carlson: Tom, any thoughts?

Dolan: Yeah. I would agree with what both Lydia and Mike said. I think we're seeing more and more chief nursing officers becoming chief operating officers, and I would expect in the future a growing number of nurses will become chief executive officers. Ten percent of our membership has a nursing background. So, again, it has an excellent background, and clearly they are poised to be in more senior roles.

Carlson: Well, I think we're going to finish up with a question for Mike, and it plays off of something you mentioned in your opening remarks: You talked about emotional intelligence. And the question is: What is emotional intelligence, and why is it important?

Connelly: Well, I think that it has many dimensions to it, but there's a difference between intellect and understanding the people you're working with. And so I think emotional intelligence at the basic level is awareness of the individuals you're working with, how they react to what they're seeing, knowing what issues may trigger you. It may be that, would you have a negative reaction to personally, maybe, something that's important for you to be aware of so there's a lot of literature on emotional intelligence, and it's just another way of being aware of the people you're working with and how you are understanding the people you are working with.

Carlson: Great. Well, I'd like to thank our three speakers today. You've heard from Michael Connelly, president and CEO of Catholic Health Partners; you've heard from Tom Dolan, president and CEO of the American College of Healthcare Executives; and Lydia Middleton, president and CEO of the Association of University Programs in Health Administration. I'm Joe Carlson with Modern Healthcare, and you've been listening to our webcast on Leading in the Future. Thank you very much.

May: This concludes today's discussion on healthcare leadership for the future. For those who want to view this webcast again, all attendees will receive a follow-up e-mail with a link to the recording of the webcast available on modernhealthcare.com/webcasts. All slides presented during this webcast are also available at that address. Thank you.