Healthcare Industry Must Reinvent Itself Using Leadership Techniques from Business World

07/08/2014 11:30PM

Part 1 of this article dealt with the healthcare industry’s transition from cottage industry to big business over the past several decades. Because leadership did not keep pace with this evolution, they now find themselves lacking the required change management competencies to effectively lead and rapidly turn-around the reinvention of the current healthcare business model.

That was the consensus among the industry experts that I spoke with when I asked them for their views on the state of healthcare and its leadership today. Here, the discussion continues with some of the specific management styles and leadership techniques from the business world that the healthcare industry must adopt to course correct its current situation and move forward.

From a business perspective – whether we’re talking about hospitals operating in silos, the growing influence of the demographic shift, or any number of other issues – it’s going to require nothing less than change management. And if things don’t change fast, the situation is only going to escalate – especially in terms of who’s going to serve the fastest growing population in the U.S., the Hispanic community.

“Hispanics can and should play a very prominent role in the transformation of the healthcare industry,” says Marisa Salcines, Editor-in-Chief of “Whether as patient or healthcare worker, moving from the sidelines to the frontlines puts them in position to share their experience and culture, where they can help the industry become not only more Hispanic friendly – but more customer focused in general in order to deliver an overall better experience of care.”

Of course, change does not come easy, especially for an industry that must adapt to a whole new way of doing business. As Dr. Gene Lindsey, former President and CEO of Harvard Vanguard Medical Associates and Atrius Health, explained: “Adaptive change is difficult because it requires changing fundamental values, giving up previous advantages, and adopting a new learning curve. It’s easier to keep relying on old and familiar ways to solve issues, but then you never get to the root of the problem: what part of the problem are we?”

The answer to that question, he says:

“We’re using hospitals as revenue centers for their cost centers; we’re treating patients as objects rather than as customers; we’re designing systems to meet our needs instead of the needs of the communities that must use them; we’re forcing patients to access us in ways that we understand and that are convenient for us, but are counterintuitive to their lifestyles. Then we shift the blame to the customer instead of trying to understand them.”

According to Dr. Lindsey, part of the problem is getting past what he calls the APE syndrome: autonomous, protected, and entitled. Autonomous refers to doctors doing whatever they wanted to do in their individual practices – which led to the fragmentation in healthcare. Protected refers to their salaries; this is what they feel they deserve, even when the organization is losing money. Entitled refers to the fact that you can’t ask doctors to do anything that they didn’t sign up for.

“That’s why the focus has to shift from internal to external,” says Dr. Lindsey. “We have to recognize that we are a service industry, and that means being available to our customers when they need us and when they are able to see us; it means offering them reliable responses to their needs – all of the things that other industries learned a long time ago.”

So how is this shift changing the conversations taking place in the industry?

Dr. Lindsey says, “The conversation lately is all about lean process management. This is what saved the automotive industry – allowing them to create better cars and manage suppliers more efficiently and minimize waste. The healthcare industry can learn from these same techniques and thought processes.”

This quality movement is getting traction, he says.

“Of 900,000 doctors in this country, maybe 10% are onboard but the number is growing and it is from this group that the next generation of leadership will arise. We’re already seeing a change in tone with the conversations being had; people discussing how they’re going to deal with value-based purchasing and be more American Medical Group Association customer responsive.

“At (AMGA) events, we’re seeing more keynote speakers from the business world, such as Carly Fiorina (former CEO of Hewlett-Packard) talking about the necessity of transparency and customer service, and Tim Collins (American financier) talking about servant leadership. The concepts for the industrialization of healthcare are out there, and the messages are getting out there too if you look in the right place.”

Paul Dechant, CEO of Sutter Gould Medical Foundation, agrees that the lean management approach will be critical moving forward. He cites two key principles of this approach in particular:

“The first is the principle of continuous improvement,” he says. “That is, everyone working every day to improve the work that they do. Motivating continuous improvement is key, especially when you consider how to make things better with respect to the demographic shift. So many frontline workers now are Hispanic, so we have the opportunity and the knowledge within the organization, just not at the top.

“The second principle is respect for people. That is, acknowledging that people on the frontlines have a lot to offer about how to improve things. In traditional organizations, you don’t have the opportunity to use that knowledge to implement changes and make improvements.

“Lean recognizes that when you harness these two concepts together and build a management system and culture that allows them to work together effectively, amazing changes can happen. We not only can reduce waste and the cost of providing care, but more importantly we can improve quality and service and the patient experience – in fact, the experience of healthcare staff and providers too – as we adapt to the demographic shift. At the same time, all of us must also adapt to the great technological shift taking place, so that innovation doesn’t just happen in one corner of the organization, but is spread throughout it.”

So what would be the top three things today’s healthcare CEO needs to address these dynamics – to build a strategy, manage change, and create a workplace culture that serves the patient?

Dechant believes that, “First is a deep belief that the most important person is the patient – that the most important thing we do is provide healing interactions between caregivers and patients. This requires a vision that supports all caregivers and everyone that the patient encounters – not just the physician – because each has an opportunity to be a healing interaction.

“Second is lean thinking, the two principles I talked about earlier but also a standard of work. Teams must develop standards for delivering care and adhere to those standards, so that when we make improvements to those standards we know that they add value.

“The third is being an advocate – a relentless cheerleader – for the organizational vision and direction you are taking. Though you put yourself at risk whenever change is involved, if you don’t have the courage to lead change and take risk, then you are not going to be successful at driving lean management into the culture – which is what you need to have the most effective healing interactions with patients.”

If the lean approach is so vital to healthcare’s most important mission, why is it just on the industry’s radar now?

According to Marc Hafer, CEO of Simpler, a consulting firm to the healthcare industry, “Healthcare has been stuck in the age of guilds and craftsmen. It never went through the industrial revolution changes of the manufacturing industry, where lean concepts have been around for years. Healthcare chose not to go down that path because it had a highly skilled and educated workforce trained to make independent decisions.

“So ideas around productivity and teamwork, etc. that are taken for granted in other industries never took root in healthcare. Physicians and clinicians have always been the focal point for all decisions and they are not trained to work in teams. But those adopting the lean management approach and learning to work in teams are reaping huge benefits at lower costs. Lean transformation is that positive over-arching approach to improving quality, increasing efficiency, and innovating new care models.”

Because healthcare evolved over time to be incredibly specialized, this caused fragmentation which you didn’t see in say, the manufacturing environment; so becoming more lean would seem to be a particular challenge for the healthcare industry.

“True,” says Hafer. “When you combine specialists with the failure to work on teams, you create barriers – what we call the baton pass from one provider to the next. It’s in those baton “pass zones” where waste creeps in and mistakes are made; health errors occur because of all the handoffs that result from the silo mentality. We talk about being patient-centered, but functioning in silos causes each department to think of themselves as the center, instead of the patient and their journey.”

According to Hafer, there are two ways of looking at this.

“The vertical look is where you simply pass a patient from silo to silo. The more patient-centric way is where you follow them horizontally across the organization and navigate the different silos with them. In the future, this needs to be the true care pathway for the patient – not just passing them from one specialist or department to the next.

“When we do this, we start to see things through the eyes of the patient; we see the waste and the inefficiency that patients and their families experience all the time. The organizations that truly want to become patient-centric will drop the pretense that they already are, ditch the silos and reorganize around the true care patient pathway. Not only will they improve service, quality, access and the patient experience – but it’s a lower cost model as well.”

Dr. Michael Soman, President/Chief Medical Executive of Group Health Physicians, agrees that healthcare must take a page from other industries and use a single improvement process, such as Lean, “so that everyone is speaking the same language, seeing through the same lens, using resources better, and not reinventing the wheel all the time.”

The same is true of leadership styles, he says.

“If the top leader isn’t espousing a specific leadership style, then you will have all of the leaders under them practicing different leadership styles. That’s a problem that leads to confusion, waste, and the inability to get to where you need to go.

“It has to be authentic though and when I studied leadership styles I found the one that was most compatible with healthcare is adaptive leadership. I created a curriculum around it and now it is the leadership model taught to all of our 1,200 physicians and other leaders. As we learned from Jack Welch (former chairman and CEO of General Electric) and his GE Leadership Institute, leadership is not something you hand off, but something you actively participate in.”

But why is adaptive leadership better than other forms of leadership?

“What makes adaptive leadership appealing,” says Dr. Soman, “is that it’s almost the antithesis of the “follow the leader” approach, which tends to lead to failure and cynicism. This is where the leader is thought to be the smartest one and therefore has all of the answers, so you should always just believe and do what they say.

“This has been the typical style of leadership in American industry, including healthcare. It works fine for problems that have technical/mechanical solutions, but other types of problems require more creative solutions and that means solving problems on the fly; bringing the right people together and working together to find a solution; giving up things that don’t work anymore and embracing new ideas while holding onto your values, etc. Adaptive leadership encapsulates all of that. The leader doesn’t have all of the answers but knows where we want to go.”

And where is it that healthcare needs to go?

Dr. Soman says, “We need to remove affordability as a barrier so that we can care for the greatest number of people in our communities. For that to happen, we have to take an honest look at ourselves so that we can stop doing the things that are holding us back and that won’t serve us well in the next era. But just as importantly, we need to hold onto the things that will endure – our values. Collectively, we can do it together with distributed leadership that brings out the leadership in others. The more people you have working on a problem, the more likely you will find the solution.”

He concludes: “The journey we’re on in healthcare is not insignificant, and it will be slower with the adaptive process because you’ve got to include others in the decisions and there will be resistance and fear; but in the long run we’ll go farther and with a form of leadership that is ethically grounded and engages everyone – physicians and other leaders – to create the future together by asking, how can we be part of the solution?”

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