The size of the C-suite overseeing hospitals and health systems across the country is expanding. Long gone are the days when a CEO, CFO and CMO could successfully lead an institution. Expanding regulations, responsibilities and evolving business models have created the need for additional high-level leadership in top organizations. Today, many leading healthcare systems include a COO, CIO, CMIO and Chief Experience Officer. In the years ahead, we expect to see yet another role: the Chief Population Health Officer.
A recent survey by the American Hospital Association supports the trend of expanding C-Suites: 60 percent of survey respondents said the senior-management team of their organization is larger today than it was three years ago.
The larger leadership teams reflect and come in response to two key trends. The first is the importance of new skill sets, like population health and medical information management, to the ongoing success of healthcare provider organizations. The second is the expanding responsibilities of these organizations. In the past, hospitals treated the sick and provided ancillary services. Now, they much manage risk, keep patients healthy and coordinate care across a continuum. This leads to a greater "performance burden" for leaders, which has led to significant challenges.
CEO turnover is at an all-time high, and top leaders are struggling more than ever to meet benchmark performance measures. Additionally, a soon-to-be released study on hospital leadership found that the need to split roles is also increasing — either because the responsibilities are too great for one person, or because job candidates lack the comprehensive set of skills needed to fulfill the demands of the role.
Cause for concern?
A larger leadership suite means more senior leader-level salaries at a time when reimbursements are under strict pressure.
As population health, care coordination and IT/data analytics grow in importance, bringing on leaders to head up these capabilities will mean additional six-figure salaries. And that of course, doesn't include the mid-level and front-line salaries for care coordinators, IT talent, community health workers, etc., etc., etc.
The idea behind the new business model, of course, is that under risk-based and capitated contracts, health networks will be able to reduce costs significantly enough that it leads to higher margins, even though overall reimbursement will grow only slightly year-over-year or stabilize.
Those higher margins will allow systems to absorb any additional labor costs and still make money — perhaps even more than they do today.
A few caveats
There are a few caveats to concerns around the costs of expanding C-suites and growing organizational responsiblities. The first is that continued industry consolidation will mean fewer organizations, and fewer C-suites. The second, which relates to expanding organizational responsibilities, is that we expect those who provide patient care within organizations to be more effectively utilized. Team-based care will mean fewer doctors will be required to care for the same number of patients they do today.
I don't have a predictive model to analyze the cost of employing more top leaders, adjusting for expected consolidation, so I don't know how the financials will net out. I do know, though, that the costs are worth examining. So frequently here at Becker's we cover news of a recently appointed leader to a "newly created position;" I sometimes wonder how seriously health systems factored the perceived need for the position with the ongoing costs of employing someone in that position, in an era where proven leaders have an upper-hand (and ability for greater salary demands) in the job market.
Stepping back though, the evolving and expanding role of hospitals in improving the health of our nation's citizens is one that we should welcome, and leaders to oversee new organizational capabilities are necessary. For organizations that want to remain competitive and prosper, they have little choice but to bring in leaders with these skillsets. After all, nothing leads more quickly to failure than inadequate leadership. And the more we move toward value-based care, the clearer it becomes that failure to develop these expanded organizational capabilities will lead to an organization's faltering in an ever-more-complex environment.