This article appears in the May 2014 issue of HealthLeaders magazine.
It may not be obvious to the casual observer, but the responsibilities and roles of many local hospital leaders are changing drastically. That's at least partly because many hospital systems are acquiring formerly independent hospitals and, rather than allowing them to operate largely independently in a holding company model, the controlling systems are moving toward an operating company model. And this goes even for leaders of organizations that have been part of the holding company for years. That means some roles, such as marketing or revenue cycle management, are now being done at the corporate level, away from the local leader's exclusive authority.
That trend can be viewed positively or negatively, but local leaders have to make a choice: Retire, move to another organization, or accept new, and possibly diminished, roles within the operating company. As a result, the local leader's role is transitioning—even bifurcating. In some cases the CEO title may be retained locally for the acquired entity, but increasingly such individuals are being transitioned to president titles. Some look at this transition as an opportunity to lead differently, while others see it as a loss of stature and power.
At a macro level, many say the trend is past due and is a logical transition to a team-based approach to healthcare that is already well underway clinically at organizations that seek to thrive in a future where success will be determined by the level of value a healthcare organization can bring across populations.
Silo vs. system
The hospital, for a variety of reasons, is increasingly viewed as a cost center by many healthcare organizations. That is, in managing the health of populations, the object is to keep patients out of that most expensive site of care, if possible. Certainly achieving that goal is marked with fits and starts, and health systems can't do it without support from reimbursement mechanisms that have to change.
One outgrowth of a requirement to manage the health of populations is the importance of scale, which has brought rapid consolidation. And consolidation these days means not only shared governance at the corporate level, but also a reshuffling of management talent and responsibilities that accompany a transition from a holding company to an operating company organizational model.
The result: Individual hospital CEOs have to make the transition from having ultimate authority to being part of a team. Not only is this transition reducing the number of chiefs, but it also reflects what's going on clinically as these organizations try to better coordinate care across a multitude of sites.
David Brooks was once a hospital CEO with Providence Regional Medical Center, which was part of Providence Health & Services. Now, 18 months after moving voluntarily from the Seattle area to his hometown of Detroit, he leads a larger organization as president, not CEO. Brooks leads St. John Hospital & Medical Center, which is part of Warren, Mich.–based St. John Providence Health System, a six-hospital system owned by St. Louis–based nonprofit giant Ascension Health. It's a transition that doesn't mean much to him from an ego standpoint, but it's easy to see how it could for others.
"When you take that broader perspective, you think less as a silo and more as a system," he says.
But Brooks insists that now he's doing the work that he feels is most suited to building a better system of coordinating, organizing, and providing quality care—not just running a financially successful hospital.
"In moving toward a more population health–driven focus, the pressure comes from our systems and cultures not being set up for that," he says. "Good leaders know we need to think as broadly as we can. If we're going to be accountable for a population's care and their costs, we have to think of things as a system."
Like many other systems that are national or regional in scope, Ascension has been working on moving away from a holding company structure. Given the growing importance of being competent in maintaining and improving the health of populations, the operating company model holds a lot of appeal, Brooks says.
"The holding company model hasn't worked because it's clear that the performance hasn't been where we need it to be," he says.
While the holding company model may have improved standardization between hospital units, it didn't eliminate a lot of cost redundancies, it didn't create regional alignment, and it didn't create systemwide care protocols.