Putting Finance Executives in Charge of Health Care? - What Could Possibly Go Wrong?

A US News and World Report article affirms what we have previously written, that those charged with the stewardship of US hospitals are even more inclined now to hire top managers with little or no health care experience or credentials. 

Putting Finance Managers in Charge

They particularly seem to favor executives drawn from the world of finance.

Just to make it really clear, the exposition started with the article title,

Wanted: Hospital CEOs Without Health Care Experience 

The article drew on some of the figures about executive hiring which we discussed in December, 2013,

It’s expected that two-thirds of hospital CEOs hired this year will have little to no health care experience, according to Black Book Rankings, which last year conducted a poll of 1,404 human resource officers and board members of health care organizations

However, the new article profiled some examples,

.When Carlos Migoya was hired in May 2011 to run Jackson Health System, Miami-Dade County’s safety net hospital system, he had no health care experience. A career banker, Migoya took over.....

Also,

Mike Keating, CEO of Christ Hospital in Cincinnati, previously was an investment banker.;Robert Meyer, president and CEO of Phoenix Children's Hospital, came from the consulting world;...

The article stressed that hospital boards think a background in finance is particularly valuable.

Hospital board and HR directors are looking for non-industry productivity, business development and financial management experts with heavy technological expertise. 

Also,

[executive vice president and managing principle at Cejka Executive Search. Paul]  Esselman  notes that boards increasingly 'are looking at leaders from managed care, the payer side or from finance or banking.'

Why Hospital Boards Favor Finance Executives

banking, like health care, is heavily regulated and that two decades ago banking went through significant consolidation, which hospitals today face.

So,

[ managing partner of Black Book Rankings Doug] Brown says leaders that come from productivity-focused fields and sectors that have endured consolidation are particularly suited for running hospitals today. Those in financial services may prove useful in today’s climate, as 'there are a lot of troubled hospitals,' he says.

As we noted before, the article suggested that those who hire hospital executives think their most important challenges s included  -

'Communication is now more important than ever,; says Paul Esselman

the opportunities come in delivering its service or business lines to ever-expanding distribution channels.

says [former investment banker Mike] Keating. 'The key in health care is how you go about executing and executing well.'

[former banker Carlos] Migoya put in place operational reforms, including bringing in 'a lot of people with for-profit experience' to maintain expense controls, monitor operations, collect payments more quickly and pay its own bills sooner to gain prompt-payment discounts. Then, 'we realigned procurement,' he says, adding 'we motivate our procurement department with incentives,' which 'dramatically improved' Jackson Health’s process, time and costs. Meanwhile, the system outsourced pharmaceutical management, saving $15 million a year....

Note that these examples are all about management process and financial outcomes, NOT about clinical processes, quality of care, or patient outcomes.  (The only mention of anything close to clinical management was a plan to outsource same.)

Left unsaid is that the boards charged with the stewardship of hospitals are now mainly composed of business executives, often heavily weighted with those in finance. 

Summary - What Could Go Wrong?

Of course, former bankers, and others from the world of finance may not really know much about clinical work, quality of care, or patient outcomes.  They may not have been picked because they care about such issues, nor socialized with the "patient first" mantra which health professionals are supposed to support. 

Worse, it seems that those who choose hospital executives may not be thinking about the recent history of finance.  True, it shares with health care the presence of regulation and increasing consolidation.  However, as we all started to realize in 2008, the leaders of finance helped bring on the worst financial crisis since the great depression.  More than five years since the beginning of this new great recession, US median income is dropping adjusted for inflation, while income inequality has tremendously increased.  Finance executives have been prime proponents of financialization, the theory that increasing shareholder value, which really seems to translate into increasing organizational short term income and increasing executive compensation are more important than any other outcomes.  Thus seems to correspond to the discussion above about financial and management objectives sans any notion of what is good for patients.

Even more disturbing is all the anecdotal evidence that business management, particularly in finance, has been gripped by overarching greed.  Pope Francis called it the "idolatry of money."  (look here).

In his graphic memoir of his days as a successful Wall Street trader, Sam Polk called it wealth addiction, . 

I noticed the vitriol that traders directed at the government for limiting bonuses after the crash. I heard the fury in their voices at the mention of higher taxes. These traders despised anything or anyone that threatened their bonuses. Ever see what a drug addict is like when he’s used up his junk? He’ll do anything — walk 20 miles in the snow, rob a grandma — to get a fix. Wall Street was like that. In the months before bonuses were handed out, the trading floor started to feel like a neighborhood in 'The Wire' when the heroin runs out.

He was not the first to describe wealth addiction:

 Wealth addiction was described by the late sociologist and playwright Philip Slater in a 1980 book, but addiction researchers have paid the concept little attention. Like alcoholics driving drunk, wealth addiction imperils everyone. Wealth addicts are, more than anybody, specifically responsible for the ever widening rift that is tearing apart our once great country. Wealth addicts are responsible for the vast and toxic disparity between the rich and the poor and the annihilation of the middle class. Only a wealth addict would feel justified in receiving $14 million in compensation — including an $8.5 million bonus — as the McDonald’s C.E.O., Don Thompson, did in 2012, while his company then published a brochure for its work force on how to survive on their low wages. Only a wealth addict would earn hundreds of millions as a hedge-fund manager, and then lobby to maintain a tax loophole that gave him a lower tax rate than his secretary.

Physicians swear oaths to put patient care ahead of all else.  While we may be far from perfect in our adherence to these oaths, I would like to think that when health care organizations were lead by health professionals, many tried to put patient care first  Yet professional managers, not health care professionals now lead health care.

.In 1988, Alain Enthoven advocated in Theory and Practice of Managed Competition in Health Care Finance, a book published in the Netherlands, that to decrease health care costs it would be necessary to break up the "physicians' guild" and replace leadership by clinicians with leadership by managers (see 2006 post here). Thus from 1983 to 2000, the number of managers working in the US health care system grew 726%, while the number of physicians grew 39%, so the manager/physician ratio went from roughly one to six to one to one (see 2005 post here). As we noted here, the growth continued, so there are now 10 managers for every US physician.

The managers who first took over health care may have had some health care background.  Now it seems that health care managers are decreasingly likely to have any health care background, and increasingly likely to be from the world of finance.  Can anyone seriously believe that finance managers taught to put short-term revenue first, and who may often be wealth addicts who practice the idolatry of money in charge of health care is going to improve anything other than those same managers' wealth?

As I have said before,  true health care reform would put in place leadership that understands the health care context, upholds health care professionals' values, and puts patients' and the public's health ahead of extraneous, particularly short-term financial concerns. We need health care governance that holds health care leaders accountable, and ensures their transparency, integrity and honesty.

But this sort of reform would challenge the interests of managers who are getting very rich off the current system.  So I am afraid the US may end up going far down this final common pathway before enough people manifest enough strength to make real changes.