Wednesday, September 16, 2009

Too many VPs, or too few?

In the comment section of a post below, two doctors bemoaned the proliferation of vice presidents and other administrators in many hospitals. I replied that this was often the case, but that it was my impression, too, that very often the medical staff have little or no idea of the personnel needs of complicated places like hospitals. It is often easy to blame clinical or budgetary woes on "the overhead", especially when you have had no experience in administration.

I said, "I'll give you an example in a future post, and you can be the judge." Here it is. First, a thoughtful note from one of our most loyal, engaged, and best doctors, whom we'll call Sam, to our Chief Operating Officer:

Dear Eric,
In your August letter to the Board you wrote: "The key to making this operating margin for the year is expense control…" and yet immediately following you note that you are creating "a new senior leadership position to oversee all employee safety related issues and activities." You mention that you "...gathered all the leaders in various aspects of employee safety - from Occupational Health, Radiation Safety, Infection Control, Environmental Health and Safety, etc…" to discuss employee safety (I'm curious how many additional leaders there were in the etc category). There would appear to be plenty of existing senior leadership and expertise to oversee employee safety. Is it necessary and politically wise at this time when everyone else is being made to make personnel cuts (I understand more are coming) and not to replace open positions, to add this position?

Why can't this long list of leaders attend to issues of employee safety which I agree are important? Furthermore, why is a search consultant being employed which will cost an additional 20-30% of the individuals salary? Again, it seems like this is a luxury in this time of belt tightening that is hard to justify. I'm sure there are injuries to be prevented, money to be saved, and public relation points to score, but wouldn't it be better to hold this long list of present leaders in employee safety accountable for improving employee safety? I hope you will reconsider this decision or more adequately justify it to those who are questioning its need.


To which Eric replied:

Hi Sam,

Thanks for your thoughts, but I can’t agree with you on this one.

Even in times of constraint, we still have the run the institution, and that means setting priorities and spending and investing where necessary. This is one such area, in my opinion.

We have distributed responsibility for different aspects of this problem but no overall coordination and no clear responsibility. More importantly, we don’t have enough detailed subject-area expertise in this area. The issue has been turfed out to folks already burdened with other significant clinical and administrative responsibility. Our organizational structure and resources devoted to safety compares very poorly to any medium-sized manufacturing or construction company, and we have much higher rates of injuries. There’s a connection, I think. While most of them are not of the death-and-dismemberment type, many are serious or potentially serious, and I can’t justify 800 or 900 employee injuries a year. Despite ongoing efforts to improve, we’re not getting anywhere. We need a different approach.

I’m in the process of pulling together a more comprehensive analysis of the financial impact of the current situation, in medical treatment and medications, workers compensation costs, short-term and long-term disability costs, admin costs associated with comp and disability claims, return to work and wellness programs, and the staffing expense in the Occupational Health department associated with responding to injuries. I don’t know what that number is yet but it is many multiples of the cost of better leadership, and I fully expect that once we get an effective safety program in place, the result will be significantly lower overall cost. That’s been the case in most private sector industries, which probably explains in part why they are so far ahead of healthcare with respect to safety. A good record in protecting employee safety will more than pay for itself.

I don’t know what you are hearing about personnel cuts, but the budget that we will send to the Finance Committee later this week includes increases in positions over the staffing levels at which we are currently running. There will be a few areas where VPs have decided to lay off a current employee to make room for a critically needed hire. I expect there will be about a dozen or so such moves, in the context of a budget that includes funding more than 6100 FTEs.

Sam, I have never been someone who has added overhead for its own sake to any organization for which I’ve had substantial responsibility. By my count, I am net –1 in senior administrators reporting to me since coming to the Medical Center two years ago. The people I have brought in from the outside – Walter Armstrong for construction & capital facilities, and very recently Bob Cherry for food service, housekeeping and other support services – have both immediately generated very significant savings for the hospital. In FY ‘10, we will fund every single one of the highest priority projects for capital investment, in large part due to a very good process that Walter structured that significantly improved physician involvement in setting priorities. And last week Bob Cherry submitted a operating budget for his areas that was almost $2 million less than ‘09, without reducing service. In both cases: strong management, deep subject area expertise, strong partnership with physician leadership. I’m confident we can do the same in employee safety.

Best regards,


Anonymous said...

Here we go ... Eric sounds like an MBA. The problem is we have too many of them and too many are in the pipe line. To me, Sam like a real 'meat' and no 'fat' and Eric (with no offence) sounds like a typical bureaucrat who has never taken any risk with his personal money. My question to Eric, "will you really think so verbosely if your money at risk or take a leaner path?". Let's leave the rocket science for the ones trying to land on the Mars. For the rest, can we think simple? Please!

Joe said...

As I read this, at first I was struck by the transparency. This is typically the kind of conversation that happens behind closed doors (if at all) and is then swept away. It seems a positive step to air it out. But as I read Eric's response, I found myself wondering if Dr. Sam was truly satisfied by the exchange, or if he felt he was simply being "sold" on Eric's point of view. Is this really a dialog or simply a top down decision with a personalized justification. I'm intrigued by the story, and wonder how it turns out in the end...

Anonymous said...

I think it is a good idea to question these kind of changes. It sounds like Eric made a good point and the physician probably didn't have this info to start. However I would like to make a blanket statement and because it is a blanket statement it should be taken with a grain of salt. In my dealings with physicians it seems like they frequently fall short in the understanding of how to run a business. They don't seem to understand interal equity and fair pay practices among other things. This can be difficult because they have a lot of power and can shoot off an email to Eric and the like and be heard.

Business sense can be learned of course, but usually as you move up in your career. Physicians seem to step into the higher ranks without the experience of history.

My 2 cents of the day.

Anonymous said...

Dear Anon 8:52,

Actually, Eric is not an MBA and has been involved businesses involving personal risks. "Verbosely" is an interesting term. It seems to me he was trying to give a full explanation and did so pretty directly.

In fact, Joe seems to think he was TOO direct.


This was not meant to be a dialogue that would result in a different decision. After all, it was Eric's decision and not the doctor's to make. It was a explanation.

There is not another chapter . . .

Anon 10:18,

Right. Physicians, as you note, are often promoted into administrative positions based on their skills as physicians. We often find a need for extra training on administrative matters.

By the way, that is true among other professionals, too, who receive opportunities for advancement based on their substantive skills but then find themselves relatively untrained in administrative skills.

Keith said...


It is probably a very good idea to have someone heading up this post, but what we in the trenches see is just what was initially questioned; the idea that everyone seems to get a VP position and a comensurate salary to match. The arguement is made time and again that this is what is needed to attract the right person with proper skill set. My guess is if you broaden your search a little to places abroad (after all, it is being done in all areas where we can import cheaper labor; why not mangement?) then you will probalbly find very good candidates at a fracion of the cost. In fact I think you can cut your administrative costs significantly with a little outsourcing and the right ads in the proper journals, say in Great Brittin and India where apparantly it is not as financially rewarding to do the difficult job of hospital administration.

Anonymous said...

Allow me to add another perspective. As a lay member of governance, I could not agree more with Eric. It is unacceptable for hospitals to continue to do business as usual when it comes to employee safety. Traditional occupational health with a dose of infectious disease control will not approach the full scale problem of complex health care processes that systemically expose workers to serious hazards. The distribution of responsibilities in a decentralized system (including department-specific cultures of safety) fails the very people who make the institution run successfully each day. We would not accept such rates of patient harm. In a comparison of hospitals across the country, I am curious: What are the rates of employee safety in those institutions where physicians are employees?

Anonymous said...

Sorry for the length; this is hard to do in writing.
Part 1: I am one of the 2 doctor bemoaners, so I will concentrate here on the central issue: Paul chose this example to show why physicians with no experience in administration wrongly blame clinical or budgetary woes on “the overhead”, since “the medical staff have little or no idea of the personnel needs of complicated places like hospitals.” Presumably this means that the letter-and-response demonstrate both Sam’s lack of understanding of why this position is needed, and Eric’s education of Sam on why it IS needed, as well as Eric’s expertise in achieving ROI and minimizing personnel costs. I will dismiss the last 2 paragraphs of Eric’s response as irrelevant to Sam’s question and concentrate on his justification for the position. (Caveat: I mean nothing personal to Eric or BIDMC here; this is a familiar example scenario in every hospital I’ve encountered.)
In my opinion, Eric is hiring this permanent management person (at what level; VP?) to solve a leadership/knowledge deficiency: Eric cannot design a program or get his various dept heads to work together in a standardized manner to reduce employee injuries, and no one possesses the proper subject-area expertise, because Eric, admirably, wants to do better than the average hospital in reducing injuries. So Eric will need to hire someone from outside the health care industry (since it has a very poor safety record compared to manufacturing, true) who has experience in system-level safety process management – a highly paid person, right? So this person installs such a system and gets it running and then – what does he do for the next 20 years of his employment?
This is precisely my complaint – a senior administrative person hired to solve a short-term problem who then is on the payroll until the next big crisis. So why can’t the organization hire a consultant with this expertise who will work on a contract basis to educate existing leaders, set up the system, and then leave Eric to establish accountability and oversight? Or make this a Performance Improvement Department project, to go outside and obtain the necessary information to design and implement such a system? Or any one of a hundred other ways to solve this short term structural/process problem instead of ( in Paul’s words) “hav(ing) a tendency to add people as workload grows, without figuring out what or who they could do without.” In my words, it amounts to; “This isn’t working; we need to create a new position to be in charge of this”, typical administrative thinking.
In our hospital system, BTW, employee and patient safety were combined and under the aegis of the Risk Management dept. For better or worse.

nonlocal MD

Anonymous said...

As for physicians having no experience of business, I have 2 replies: a) many docs are getting MBA's now because they recognize their competitive disadvantage in this arena and b) our real lack of experience is in "business as usual". Instead of demeaning us, perhaps listening to an outsider's perspective can be helpful in thinking outside the box, just as Paul brought an outsider's perspective from the water system to health care.
This is why I am in favor of bundling payments between all players. Put everyone in the same lifeboat and make them work together to get it to shore, or else all sink together. You would see some rapidly changed attitudes on all sides.
Lastly, my husband, a surgeon with a flair for numbers, calculated that the cost of funding the $2.2 million salary of our area Children's hospital CEO, in his 283 bed hospital, was an additional $21+ per bed per day, assuming 100% occupancy 365 days/year. And this does not include benefits. Is this a high number? I don't know, but it's an interesting way to look at it.


Eric said...

I was glad to get Sam’s note - much healthier for the institution than behind-the-back grumbling. I got a very nice note in response to mine; whether I convinced him is for him to say. Like most clinical leaders, he needs the hospital’s support and cooperation to make his program successful, so challenging me on this could be seen as risky, I guess. I appreciate his leadership.

As Paul said, it’s my decision, but after getting Sam's note, I’m making more of an effort to explain the logic to the community. One of the things I’ve said is that this is an experiment: I know that what we are doing now is not working; I haven’t been successful in improving safety over the past year, despite a fair amount of effort expended, so I’m trying this.

If it works, great. If it doesn’t, we won’t have this VP around for the next 20 years, that’s for sure. If I end up adding a lot of overhead that doesn’t improve hospital performance, I ought to be held accountable. Sam’s note is part of that process. I think it's perfectly healthy for the docs and administration to argue about appropriate levels of overhead. It all has to be paid for out of clinical revenue.

Doug Hanto said...

Paul, you and I both know that there are many physicians who do have an appreciation of the complexities of running a hospital and its personnel needs and these are usually the physicians questioning the leadership on a variety of issues. We all sit on multiple hospital committees, interact regularly with the hospital administration, and have every right and in fact I would argue responsibility to question the addition of administrative support in the same way you question us every time we want to add additional patient care staff. This is what I like to call “mutual accountability” which must be based on mutual respect. I could argue that many administrators have “little or no idea of the patient care needs of complicated hospitals ... especially when you have had no experience taking care of patients” (I have quoted you but substituted my words in italics and underline for yours). Although there are many that would strongly support this statement and there is some element of truth, I do think the administration at BIDMC tries very hard to appreciate and understand what we as physicians, nurses, and other staff do to care for patients and the challenges we face in this time of resource constraint, in the same way we physicians try to appreciate the administrative challenges. We need to be partners not adversaries. In the patient care arena we are being asked to do more with less and I think it is reasonable to ask the same of the administration. Eric’s reply was thoughtful and persuasive, but the proof will be in the pudding as to whether this position will save money in the long run. There is no argument that employee safety is important. We just have different ideas on how to get there. As someone who donated to the Physicians Support BIDMC Fund I want to be sure my $ went to preserve a job (the original intent) and not to add a new administrative one.

To Anonymous 10:18: I think physicians understand the business of medicine more than you think and we bring the unique perspective of knowing the impact business decisions have on patient care. Don’t sell physicians short. One of the reasons we are in the fix we’re in is that physicians have abrogated many leadership positions in healthcare and need to be more involved in the future. But they also need to be sure they are not representing their own selfish interests, but the interests of the patients we serve, as well as educating themselves in administrative matters.

Finally, I am happy to identify myself. I’m Doug Hanto and I’m the Chief of the Division of Transplantation at BIDMC.

Bob1 said...

As an avid reader of Paul's Blog from out of state, and someone who has been in group practice administration for 35 years; I love the engagement and transparency here. I have used the terms: joint/mutual accountability for years due to the leadership and teamwork needed to sustain the somewhat delicate and fragile human relationships within health care organizations.

Anonymous said...

Over at Health Care Renewal the argument is that all managers MUST have domain (clinical) training and experience to be any good at management. I disagree arguing that management training + health care experience can be just as appropriate as clinical training + management experience. I would even say that sometimes management training and experience outside of health care is useful to bring in fresh perspectives in certain areas/functions or with certain people or situations.

Other opinions?

Anonymous said...

Anon 2:17:

Can you provide the link to the Health Care Renewal post? I do not see such a discussion there (unless it's the 'cadre of science' post which is only tangentially related?)

I think Paul is a walking example of management training + NO health care experience can = successful outcome. Except I think in his case the equation is more
leadership + no health care experience = successful outcome. Not all management-trained people are leaders.


Anonymous said...

Look at the Friday September 11th post on a CIO interview, and the associated links at the top of the interview.

Anonymous said...

Reading Eric's comment and Dr. Hanto's comment in juxtaposition (is he "Sam"?) makes one thing clear to me: Eric has the power and Dr. Hantos doesn't. In fact, in some organizations, Eric's statement:
Like most clinical leaders, he needs the hospital’s support and cooperation to make his program successful, so challenging me on this could be seen as risky, I guess. I appreciate his leadership."

might correctly be interpreted as a veiled threat! I know that is not so at BIDMC from prior experience, but it makes clear exactly who is in charge.
Dr. Hanto is correct: this situation evolved because our physician predecessors abrogated our leadership responsibilities long ago and, in a vacuum, hospitals came to be run by management people. There are pluses and minuses to this situation - but do not mistake it for power-sharing. Only one side has the gold, and therefore makes the rules. Again, another argument for bundled payment......

nonlocal MD

Anonymous said...

In reply to anon 2:17,I believe that, ideally, the C level executives in a hospital should have clinical training, or at least there should be equal power sharing between clinically trained and management-trained C suite executives. (Present company excepted – but we agree that Paul is not a “normal” management person.) However, most currently practicing physicians are, to quote a friend, trained in yesterday’s mode of medical practice – a cottage industry in which sole source providers work alone, with little ability to deal with SYSTEM problems. There is a crying need for management/collaborative teamwork/formal quality improvement training in the medical school curriculum, so that EVERY new physician shares this body of knowledge. I call upon my colleagues to agitate for such training as alumni of their medical schools – it is the only hope for physicians to regain control of health care.

nonlocal MD

Albert Maruggi said...

As an outsider reading this, I'm impressed beyond description of the logic and civility of this debate.

You are a light to other organizations of how to respectfully lead, learn, and grow.

The best of life to you all.


Albert Maruggi

Anonymous said...

"Successful sensemaking can't leave anyone out. Health care's disintegration is not yet every man for himself, but it is every discipline for itself, every guild for itself. As a result, we tend to assume that one guild's solution cannot be another's. We assume that we either we will preserve quality or cut costs; that patients will get what they ask for or that science will prevail; that managers will run the show or that doctors will be in control....This won't work. Whatever escape fire we create has to make sense in the world of science and professionalism, in the world of the patient and family, in the world of the business and finance of health care, and in the world of the good, kind, people who do the work of caring."

Anonymous said...

To which, I would add:

"The fourth condition is procedural: to achieve sense, we have to talk to each other, and listen. Sensemaking is fundamentally an enterprise of interdependency, and the currency of interdependency is conversation. In the noise and smoke of the fire, just at the time when our interdependency becomes most crucial, it becomes most difficult to communicate. This will not do. Civil, open dialogue is a precondition for success."

Both quotes from "Escape Fire"; Donald Berwick, M.D.

Is that not what we are doing here?


Anonymous said...

This quote " is the only hope for physicians to regain control of health care..." certainly made me wonder. Certainly among some comments here and elsewhere (Health Care Renewal, in particular lately), there seems a strong theme of "get rid of the suits", rather than one of "let's talk and listen"

Doug Hanto said...

My apologies. I meant to indicate in my earlier posting that I was "Sam" to whom Paul referred and wrote the original email to Eric. To Anon 9.18 7:55 am - you are correct that Eric (and Paul and Steve Fischer the CFO) have the final say so in many affairs at BIDMC and I and others wish they agreed with us us more, but in fact as you and others have commented we do have an environment of transparency that doesn't exist everywhere. In reality I suspect we all wish that those in positions of authority above us agreed with us more; but if we can at least express our honest opinion without fear of reprisal (I interpreted Eric's comment as a compliment not a threat - I believe he does want input whether contrary or in agreement to his position), then we have an obligation to do so - we are at fault if we don't argue our opinion in this setting.

Anonymous said...

You all at BIDMC are lucky to have an enlightened administration. I can tell you this is not the case in many hospitals; thus my somewhat radicalized (and probably unfairly skewed) views. I do not feel that clinicians with a valid need for clinical personnel should have to beg permission for such personnel from the administration, while the administration gets to unilaterally decide they should add a management person, with only collegial questioning allowed from the medical staff. I think there should be at least an equal say.
My comment presupposes, however, that future physicians will be pre-trained in systems thinking as advocated above. Feel free to shoot me down on this view.

As for the terminology "regain control", I regretted it as too strong once I read anon 5:33's comment. It truly should be an interdependency; only right now it's not even that - the administration gets to decide.
I wonder how the Mayo and InterMountain, etc. make such decisions?