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Drive Innovation October 18, 2016

When the CEO’s Resume Doesn’t Include Healthcare: Critical Actions for New Leaders

Senior Vice President, Health Care Value, BCBSM
Partner, Health and Life Sciences, Oliver Wyman
Key Takeaway
New #healthcare CEOs need to understand, respect the org’s context, but be creative in envisioning the future.

Healthcare is undergoing an unprecedented level of transformation: The growing forces of value-based care and consumerism are driving organizations to think about their customers differently, approach partnerships in new ways, and develop new capabilities, particularly around technology and data analytics. Insights from other industries that went through similarly intensive periods of change highlight that CEOs that thrived under the old industry model may struggle to manage in the new. As a result, more organizations are recruiting CEOs from outside the healthcare sector. A survey by Black Book Rankings estimates that nearly two-thirds of healthcare CEOs in the future will come from non-healthcare industries.

Here, Oliver Wyman’s Fritz Heese and Todd Van Tol offer insight into how these new leaders can succeed.

Over the past several years, the healthcare landscape has been defined by disruption, creating a new set of challenges – challenges that many healthcare leaders do not have experience navigating. This has led to significant instability in organizational leadership. According to the American College of Healthcare Executives, the CEO turnover rate in healthcare in 2015 was 18 percent.

As organizations seek leaders with the skillset needed for this new environment, many are extending their search outside of healthcare. For example, the CEO of Jackson Health System in Florida has a banking background, but no healthcare experience. The CEO of Cincinnati Children’s Hospital formerly led a manufacturing firm. Other healthcare organizations are bringing leaders in from the retail and technology sectors, reflecting new priorities.

For new healthcare CEOs, there is not just one steep learning curve, but many.

These new leaders may be better positioned than legacy executives to think broadly about the changing healthcare industry, but they face a steep learning curve. Successful new CEOs will need to rapidly establish their new strategies, position their organizations to implement them successfully, and set the foundation for future adaptability. This will require four key actions:

1. Use mission as a springboard, not shackles

Healthcare organizations often have deeply rooted missions and cultures. At their best, they hold organizations to a high standard of service; at their worst, they can stifle innovation and organizational evolution. New CEOs need to acknowledge the influence of mission, but use it as a foundation for new strategies rather than as restraints.

For example, mission-focused health systems often remain tied to in inpatient-heavy models focused on complex acute care because they believe they are necessary to fulfil their mission of providing comprehensive care for their communities. New CEOs must demonstrate a broader vision while staying faithful to the mission by, for example, deemphasizing the inpatient setting while opening up new channels for access, including ambulatory, retail, and digital solutions.

On the health plan side, leaders should take a broad view of their capabilities and see possibilities in non-traditional markets. For example, a CEO of a health plan that has historically operated in the group commercial space may face resistance if they switch focus to try to capture some of the Medicaid managed care population; but there are avenues for growth beyond their limited, historical path. CEOs need to both understand and respect the organization’s context and be creative in envisioning the future.

2. Pick the play

Once they understand the range of strategic options that their organization can plausibly pursue, CEOs need to choose the specific play that, in the context of the internal organization and the external environment, presents the best opportunity for future growth.

Providence Health and Services is an example of a mission-focused provider that has shifted focus from inpatient care to new channels while still serving its communities. It has rapidly expanded its retail presence through a partnership with Walgreens, and it is providing digital access points with its Health eXpress app.

The hypothetical health plan that manages low-income patients also has real-world counterparts: U.S. Managed Medicaid focused payers such as Molina and Centene have expanded to successfully serve the new public exchange populations.

These organizations embarked on successful strategies to ride the changing healthcare wave without ignoring the capabilities and cultures of their organizations.

3. To garner “all-in” support, engage stakeholders early and often

Determining a strategic direction is one thing; actually moving a large and complicated healthcare organization is another. Administrative managers may be wed to their current metrics, clinical staff may balk at changing responsibilities, and the IT shop may paint a hopeless picture of the challenges of building necessary infrastructure. If this weren’t enough, many healthcare companies need to bring along external stakeholders as well, particularly independent members of the medical staff for health systems, allied physicians for medical groups, and network clinicians for health insurance companies.

Successful CEOs will walk a fine line between inviting stakeholders to help develop the plan and describing the plan to them as a fait accompli. A presentation of a high-level, buzzword-heavy vision with little underlying detail will be met with skepticism; but a fully finished strategy developed without stakeholder input will be met with indignation. In one example, a health system hospitalist group unionized and threatened to use its unified power to block changes in response to what it perceived as unfair new responsibilities and restrictions being placed on them.

By contrast, healthcare providers that successfully transitioned to population health, for example Healthcare Partners, are known for deeply involving clinicians in strategic decision making.

New CEOs will need to bring concrete hypotheses for a roadmap, new organizational structure, and even incentive plans, but then convene a team of leaders across administrative and clinical departments in multiple working sessions to confirm and fill in the details. They will also need to open a conversation with all employees about the new direction of the organization, using tools not always found in the traditional employee engagement toolbox, such as using social media sites, writing blogs, developing and internal- and external-facing apps.

4. Look afield and afar for strategic inspiration

In a world where Google is developing contact lenses that can measure glucose levels, individuals can get physicals in the backs of grocery stores, and smart phone apps can measure blood oxygenation, healthcare CEOs need to forge partnerships with organizations beyond the traditional healthcare boundaries. These partnerships are often the triggers that healthcare organizations need to accelerate their transformation. This is too important to leave this to chance; CEOs should create formal departments and processes dedicated to exploring cross-industry partnerships.

CEOs with a legacy healthcare background will need to educate themselves about high-tech, retail, and other industries. This may mean making a point to hiring a significant portion of their leadership team from non-healthcare industries, and setting up a series of interviews or even workshops with a range of industry leaders. For new healthcare CEOs, there is not just one steep learning curve, but many.

The future of healthcare will be radically different than it is today. No matter where leaders gain their experience, following these four principles will help healthcare CEOs face whatever comes next.

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