What All Great Hospitals Do

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Great companies have a core belief in their product that pushes them to the top. Great sports teams are singularly focused on winning. Great universities have an unwavering dedication to learning and teaching and not much else.

But what do great hospitals do? What are the core ingredients that combine to make a hospital one that is remarkable, outstanding or exceptional? The modern American hospital is an impossibly complex matrix of skills and services, so often the thing that makes a great patient services rep and a great overnight lab tech have little to do with each other.

But there are traits that all great hospitals possess—tendons that hold together the movement of the larger organization. In an industry rightfully obsessed with measurement and outcomes, HealthLeaders pauses to look at the sometimes overlooked characteristics that lead to excellence.

All Great Hospitals Make Decisions Based on What’s Right

It sounds easy enough. When a hospital’s senior leaders have a difficult choice to make, they can rely on a basic decision-making formula: Study the facts, consider the ramifications, and do what’s right. Simple.

Except that doing what’s right is anything but simple. From scarce resources to daunting community needs to an outdated leadership culture, hospital executives face a multitude of obstacles and conflicting agendas as they try to set a virtuous strategic path for their organizations. In many cases, the tallest hurdle is one of fundamental understanding: What does “doing what’s right” really mean?

“In our case, seven years ago it had a lot more to do with what’s right for the community and quite a lot less with what was right for the hospital,” says Jerry D. Klein, president and chief executive officer of Bucyrus Community Hospital in northern Ohio. “Now they are synonymous.”

When Klein took over the leadership of the 25-licensed-bed hospital, both the medical staff and the board believed the facility was “taking care of everyone who needs to be taken care of,” Klein says. But Klein soon discovered that area residents felt the hospital’s staff and board members were disconnected from the community—so he sought some outside market research to study the gap in perceptions.

“The research found that tons of people were leaving town for basic medical care because we did not have enough physicians to meet that need,” he says. Bucyrus added “seven or eight” physicians to help keep patients in town—even though the hospital’s board was apprehensive about the financial risks. “They were concerned about whether it was actually going to meet the needs of the public, because if not, we would have invested a lot of money to do something that was wrong,” Klein says.

Money, of course, is a familiar obstacle for hospitals struggling to serve their patients and the community as a whole. “Sometimes there are things you would love to do, but you can’t afford to be wrong,” says Klein, who learned that lesson after business leaders asked his hospital to develop an occupational medicine clinic to keep local workers from seeking care at Bucyrus’ emergency room or at an out-of-town clinic. After considerable market research, Bucyrus answered the community’s call and opened the clinic—only to close it two and a half years later after losing $250,000 in operations along with the substantial initial costs. “Was it the right thing to do? It was. All the research and the contacts that were made said, ‘This is extremely important. This will keep business in town. It will be a way to meet occupational medicine needs,’” Klein says. “But it was not sustained by our industries.”

So how do some hospitals manage to do what’s right while still maintaining a healthy bottom line? For Clarian Health in Indianapolis, reconciling the two comes down to prioritizing, says Dan Evans, the three-hospital system’s president and CEO. Clarian is building an education, research and training center that will include costly simulation lab mannequins. The system was also planning a new multi-story parking lot for both staff members and visitors but couldn’t afford to build it while still keeping the simulation lab on schedule. “So for now, we’re building a gravel parking lot. Tough luck,” Evans says. The simulation lab, however, will open next year as planned.

Evans points to quality data reporting and a hospital’s internal culture as essential components of doing what’s best for patients and the community in the face of potential risks to the organization. “In some cases, a hospital’s culture doesn’t support the CEO when he takes risks. The boards are more concerned with the bottom line. It’s the CEO’s job to give the board data upon which the board can make judgments,” he says.

Another measure of how a hospital does what is right, Evans adds, is how it responds when something goes horribly wrong. After three newborn infants died of a drug overdose at Clarian’s Methodist Hospital in September 2006, the administering nurses did not face job action. The hospital did, however, make several drug administration procedural changes as part of a “just culture” in which the system has a responsibility to provide staff members with the tools to do their jobs, Evans says. “A just culture is not a blame-free culture, but a culture of shared responsibility.”

For Bucyrus Community Hospital, which is building a $19 million addition to its facility to modernize the hospital’s ER, ICU and surgery unit, deciding which path to follow ultimately means answering one question, says Klein: Is the hospital asking the community what it wants or telling it what it needs?

“Is the goal to be very good at things that are important to the community, or is it to have the newest technology that may or may not have a great deal of ramifications for your community?” he says. “We’re doing better with that as an industry, but there’s still a long way to go.”

—Jay Moore

All Great Hospitals Innovate

Problems can’t be solved using the same thinking that created them, Albert Einstein said. These words ring true in healthcare, where varied patient populations, emerging diseases and limited resources constantly defy tried-and-true practices.

“Innovation is the best way to solve the problems that all of us have today. Whether they are safety problems, quality problems, service problems, delivery problems—whatever they could be—innovation is the best route,” says Phil Newbold, president and chief executive officer of Memorial Hospital & Health System in South Bend, IN.

A dozen years ago, Memorial undertook an innovation overhaul spurred by a national focus on imaginative thinking. Newbold and his leadership team visited companies nationwide, including Nike, Microsoft and Whirlpool, and created a team of more than 20 entrepreneurs who were passionate about innovation. Although not part of the healthcare industry, this group of novel thinkers helps guide Memorial’s innovation agenda using experience from their respective fields.

Today, innovation is a requirement at Memorial thanks to a board-approved policy that shifts innovation from merely a nice idea to an organizational must-have, Newbold says. To ensure policy compliance, the board expects regular reports and metrics on innovation within the hospital.

“Innovation propulsion leaders” meet every other week to make sure this happens. This group includes Newbold, his chief operations officer, a physician, the vice president of marketing and innovation, a Six Sigma black belt, and the head of human resources. The group’s role is to train staff and, Newbold says, “make sure there’s enough experimentation and prototyping going on.” The innovation policy also makes it easy for staff members to implement small improvements without excessive red tape.

Deviating from the norm may seem risky, especially in an industry where best practices are increasingly evidence-based. But that risk can be mitigated, Newbold says. Memorial uses a low-risk testing method called rapid prototyping in which new processes are tested on a small scale before they are rolled out systemwide. In 2003, Memorial’s senior executives used rapid prototyping to build a new $40 million heart and vascular center at its 400-staffed-bed hospital. This was not your average pilot test.

“We built the hospital room of the future out of cardboard, foam core, duct tape, towels and sheets, right down to the computer terminals and bathrooms,” Newbold says. “Then we actually built a room and used that for a while, and, again, our nursing staff, frontline people, patients, visitors—all kinds of people—had a chance to look at that and experiment with it.” Created by IDEO, a design and innovation consultant, this same methodology was used for nursing stations and waiting areas before they were constructed.

While this type of testing takes time, it ultimately saves resources, Newbold says. And once people start thinking innovatively, over time, they do it quicker and more often.

—Molly Rowe

All Great Hospitals Set High Goals and Care That They Meet Them

Stories about high-profile chief executive officers hired to resurrect dying brands have become commonplace in American folklore. In a culture that compares politics to horse racing and business to warfare, we love tales about coming back against the odds.

But those great turnaround stories do not always end up being about great organizations.

“I see leaders who go from place to place and never are truly tested,” says Nancy M. Schlichting, president and CEO of Henry Ford Health System in Detroit. “They may do a great turnaround, have a banner year, but then fall down. Those are not organizations that I would call great.”

Whatever individual goal a hospital may achieve will not elevate it to greatness. To rank among the elite requires staying power. It doesn’t mean just hitting one target; it means hitting all of your targets—consistently.

At a recent conference of nonprofit investors in New York, this notion resonated with Chris Van Gorder, president and CEO of Scripps Health in San Diego. He says bond buyers there asked numerous questions about the financial reliability of healthcare organizations. “They’re buying these bonds for 30 years. They don’t care if you have a good quarter or a bad quarter,” he says. “They want to know you’re going to have good performance—year in, year out.”

But great hospitals don’t just set lofty goals. They develop methods to measure success and then communicate challenges effectively throughout the organization. By clearly explaining the metrics that define organizational success, great hospitals create a culture of mutual accountability.

To drive home his message of consistency, Van Gorder tells his direct reports that they can miss their targets once, but they won’t be around to miss them twice. With the volatility of healthcare, outside factors can often influence a hospital’s performance. Far too frequently, Van Gorder says, healthcare executives use external variables as an excuse. “You have to project and anticipate the potential changes and develop appropriate contingencies,” he says. “You have to develop metric-driven targets so you can measure your performance and find ways to achieve your financial, safety and quality goals.”

Scripps’ financial rebound of $100 million in operating margin since 2000 is one example of the power of developing and sharing metric-driven targets, says Van Gorder. More recently, the system has seen progress on its workplace survey. Improving its standing as a great place to work is a top goal that affects its ability to attract scarce healthcare workers in the region and enhance patient relations. In 2002, Scripps’ score on the survey was 50 out of 100, but last year it attained a score of 82.

“If we hadn’t focused on it and driven the metrics all the way down to the frontline supervisor, this score would have been impossible to achieve,” says Van Gorder.

—Rick Johnson

All Great Hospitals Embrace the Potential of Technology Wisely

During the past five years, Allentown, PA-based Lehigh Valley Hospital and Health Network has invested more than $50 million in information technology. The system is running a number of applications across its three hospitals, including computerized physician order entry, electronic health records in both the inpatient and emergency department settings, and a wireless, barcode-based prescription administration system.

But Lehigh Valley does not merely invest in technology for technology’s sake. “We’re successful using technology here because we understand that it’s all about the patients,” says Harry Lukens, senior vice president and chief information officer. “We stay away from shiny things; we try to invest time and money where it counts.”

Lukens turns to a cross-departmental group called the “Wild Idea Team” to suggest ways technology can enhance hospital operations. But Lukens is not the only technology leader reaching out across the hospital to help decide which technology is really needed and which technology isn’t. Seventy percent of the respondents to the 2007 HealthLeaders CIO Survey have a formalized IT steering committee with top-level executive participation, and among hospitals with a C-suite committee, more than half include their chief executive officer, the survey reports. By including leaders from nursing, finance and medicine, these hospitals are mitigating the risk that their technology decisions will backfire—and turning the convention of “IT ownership” on its head.

This strategy can be found at hospitals both large and small. During the May TEPR Conference in Dallas, Mike Bartman, the director of information technology at 36-staffed-bed Sauk Prairie Memorial Hospital & Clinics, described how his facility gives project ownership to department heads who actually use the technology. Based in Prairie du Sac, WI, the rural hospital has an IT steering committee that includes C-level executives and department managers, Bartman said. Sometimes there is resistance from staff members who may feel more comfortable with IT staff leading the charge. But the staff ownership helps sustain the adoption of technology once the roll-out phase is complete, Bartman noted.

And sometimes technology itself can be used to make wise decisions. At Lehigh Valley, Lukens uses an anonymous voting system during twice-yearly strategic planning sessions of senior management. Confidential electronic voting on proposals leads to, Lukens says, “a more honest response.”

—Gary Baldwin

All Great Hospitals Have a Culture of Professionalism

Professionalism in healthcare means more than a dedication to the welfare of patients—it means a steadfast commitment to working as a team member in an often chaotic environment.

Outstanding hospitals find a way to create a collective understanding of each staff member’s contribution to the organization’s success. Arlington-based Texas Health Resources, one of the largest faith-based, nonprofit healthcare delivery systems in the United States, ensures that each of its hospitals exhibits such professionalism with a “brand promise,” says Steve Hanson, senior executive vice president. “We instituted the idea of individuals caring for individuals together. We take care of our nurses and doctors, so they are free to take care of our patients. Everyone is a vital part of one team,” he says.

Rick Wade, senior vice president for strategic communications at the American Hospital Association, agrees. A staff that acknowledges that each of its members is vital to the institution’s prosperity, he says, ensures that the hospital’s patients view the facility as a respected, professional environment.

“You can define what it is to be professional by the perspective from which you are looking at it. From a patient and family perspective, the idea of professionalism means those patients and those families see a hospital staff who are confident in what they are doing and who take care of them in a compassionate, empathetic manner,” Wade says. “You can’t just expect professionalism to start at the executive level and trickle down. We need to have leaders break down the barriers and recognize that everybody, no matter where they are in the hospital, is part of one cohesive unit.”

—Kathryn Mackenzie

All Great Hospitals Share, Even When It Hurts

Hospitals spend plenty of time and money looking for ways to improve healthcare quality in their communities. But to achieve that goal, many senior leaders have discovered they have to do what was once unthinkable: share resources with the competition.

PeaceHealth learned the importance of sharing more than a decade ago when the six-hospital system based in Bellevue, WA, developed a community health record. “We realized that in order to provide high-quality, safe and effective care across the continuum—up to and including the patient’s home—providers and patients had to have all of the necessary information wherever care was delivered,” says John Haughom, PeaceHealth’s senior vice president of clinical quality and patient safety.

The system also decided the information needed to be available to all providers—even its competitors. “We put a principle in place in 1994 that we would never use the community health record as a competitive club,” says Haughom. Now in place for roughly 12 years, the community health record has at least 1.8 million patient records in its database and approximately 23,000 clinical users—only about 7,000 of whom are PeaceHealth employees.

That is not to say PeaceHealth’s resolve has never been tested, Haughom concedes. “Just like all health systems, we’ve had independent surgery centers set up and things like that, but we have stuck to our guns and we do share the information with anyone, regardless of their competitive stance with us.”

—Carrie Vaughan

All Great Hospitals Have Balanced Leadership Chemistry

Structurally, most hospitals are built on a strange organizational chart that is not quite a pyramid and not quite a matrix. With a strong chief executive officer, the members of the senior leadership team must function as team leaders on their own—and as team players for the organization.

Great leadership teams don’t mess up the mix. They find those rare individuals who can either act on their own or follow direction—and not really care which one they are doing. It doesn’t help that in many large hospitals, the team has as many as nine to a dozen members who must mix strength and harmony.

Thomas Royer, MD, president and chief executive officer of Irving, TX-based CHRISTUS Health, says his job description for senior team members has three pillars. “They have to have clear technical knowledge of their primary area of responsibility, the ability to function as a total team when we are making strategic directions, and enough confidence to make a leadership decision in isolation if that is what is required.”

The result must be a team chemistry that follows the sound principles of transparency, measurement and accountability, but also allows for what Royer calls “professional back-talk.” Every member of his team must be able to tell him what he needs to hear, not what he wants to hear, he insists. This leadership philosophy helped CHRISTUS land the award as the HealthLeaders Media Top Leadership Team in Healthcare 2007 for a large hospital or health system.

“It is not a chemistry of loyalty to a fault. It is not a chemistry that will prevent us from being direct and confrontational in a professional way. It is a chemistry that at the end of the day gives us the ability to leave the room and say, ‘tough discussion, but a discussion that we needed and that we have learned from.’”

—Jim Molpus

All Great Hospitals Make Money

Here’s a fun little trick: Say the headline above to a seasoned nonprofit hospital executive, and watch how fast he runs the other way. Perhaps it’s because such hospitals get tax breaks for their nonprofit status. Perhaps it’s because of the wicked irony between their “nonprofit” designation and the reality of operating a business that can be as competitive as any.

But as much as many nonprofit hospital leaders like to dance around this subject, they’ll admit, off the record sometimes, that one of their key imperatives—perhaps their most important duty—is to make sure the hospital is profitable.

There’s no shame in that, and there’s no reason to apologize for it.

All great hospital leaders, says Bradley N. King, chief financial officer at Oregon Health & Science University, “understand that to continue to provide high-quality healthcare…they need to make ongoing investments in new services, plant and equipment. That means they have to be able to generate both operating capital and fixed capital, and the primary source of that capital is through their bottom line.”

Ah, there it is. The bottom line. It goes by other names: net income, margin or, to use a dirty six-letter word, profit. But smart hospital CEOs and CFOs aren’t afraid to talk about it because they realize that making a margin doesn’t mean the hospital skimps on patient care or dumps all services that are unprofitable on a line-item basis. The fact remains that without consistent overall profitability ranging somewhere between 4 percent and 6 percent each year, in the long run, a hospital is going to lose out on talent, patient care and its ability to invest in the future.

“You shouldn’t apologize for making money,” says Dionne Viator, CFO at Baton Rouge General Medical Center, who adds that without a margin, the hospital can’t reinvest in its community and in its long-term staying power. “To me financial success is the outcome. It’s the external validation that you’re doing all the right core things.”

It can be an ugly downward spiral when hospital leaders forget the importance of making money. In some ways, nonprofit hospital CFOs have one of the world’s toughest jobs. Lose money, and you could get fired. If you don’t get fired, and the hospital loses too much money over time, it may fail or face an embarrassing turnaround without you. Make too much money, and you might be cast as something just this side of Lex Luthor the next time the local newspaper reacts to an interest group that complains about your billing policies toward the uninsured. And good luck finding the bright line on how much is too much. It’s just not there.

John Winfrey makes no apologies for making a margin at his two hospitals, knowing that it’s up to him and his team to make sure the hospital has the financial wherewithal to provide quality care for its community.

“We are continuously monitoring the revenue cycle and pay very close attention to coding and documentation data to ensure that we are taking every opportunity to be paid appropriately for what we do,” says Winfrey, CFO of DCH Health System in Tuscaloosa, AL.

It’s rare, but nonprofit hospitals that forget this duty do go bankrupt, and that’s a nasty mess that no one wants to have to clean up.

—Philip Betbeze

All Great Hospitals Want to Be Great Hospitals

Excellence is the easiest of all aspirations. Knowing the difference between the aspiration and the commitment it requires describes the self-awareness gulf separating mediocre or even good hospitals from the great.

Thomas Royer, MD, president and chief executive officer of CHRISTUS Health learned about excellence in his first days as a surgeon. “In the emergency department, I would see a six-year-old boy that I was sure had an acute abdomen and probably a ruptured appendix. I could look at parents and convince them in five minutes that I—an unknown individual—could take their child to the operating room, and that they could entrust that life to me. It is very basic for me. Excellence is not a luxury, it is a necessity, because every day people come in through our doors and turn their most precious gift over to us: their lives.”

Royer says that for CHRISTUS, planning for excellence meant more than just verbalizing. The first step was setting a clear direction. The second was to create a system of measurement for excellence in clinical quality, service quality, business literacy and community value. The third was to hold people accountable. The fourth step was the hardest.

“You have to recognize that there are a group of people who don’t want to work hard enough to commit to excellence,” Royer says. “Therefore you need to be very comfortable that you have strong mentoring and organizational development programs in place that can teach the journey to excellence. But we also have to ultimately say, ‘You may not be the right person on the train.’”

Quint Studer, president of the healthcare performance improvement firm the Studer Group, says great hospitals just don’t know any other way. “There is a real relentlessness to outcomes,” Studer says. “You almost have to convince these hospitals that it is OK to be good sometimes. Great leadership teams tend to have dissatisfaction with achievement, and I don’t think that is a bad thing.”

—Jim Molpus

And a Few More …

Leadership, innovation and financial stability may be hallmarks of excellence, but little things also help separate outstanding organizations from the pack. Great hospitals:

Communicate with the public with one voice. Your organization’s board, medical staff and hospital staff may have their share of spirited debates behind the scenes, but when it comes to public forums, a united front is crucial.

Take pride in the physical plant. A fresh smell and clean bathrooms say a lot about your facility. “The surroundings of a hospital attest to its commitment to quality,” says Kean Spellman, CEO of Holy Cross Hospital in Taos, NM.

Don’t take themselves too seriously. “Healthcare is a serious calling, and without the ability to admit our mistakes, take stock of our failings and learn from them, we will fail,” says Brian Shockney, president and CEO of Memorial Hospital in Logansport, IN.

Promote from within. When a quality employee believes in your organization’s mission, investing in training to help that person advance pays off in the long run.

Serve a decent cup of coffee. From the beverages in the waiting room to free parking that’s easy to find, great hospitals mind the details of customer service.

Never say, “that isn’t my job.” “Everything is everyone’s job from top to bottom,” says Casey Meza, CEO of Clearwater Valley Hospitals and Clinics/St. Mary’s Hospital and Clinics in Orofino and Cottonwood, ID.




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