By Mark Claster, Partner, Carl Marks Advisors
The waves of change that are rolling onto the shores in healthcare are both constant and unpredictable. When coupled with the magnifying glass put over the industry – because it so greatly impacts every individual — the work of healthcare businesses and their leadership is constantly on stage.
While many industries can rely on the entrepreneur icon leadership model that has propelled companies like Apple, Tesla, and Facebook, the multidisciplinary nature of healthcare requires a team approach to effectively navigate the risks and opportunities.
I had the privilege of serving as chair of the Board of Trustees of Northwell, New York’s largest health system, over five years of great progress and transition under the leadership of Michael Dowling. . Over that time, I saw firsthand the impact team-focused leadership can have on successfully executing a complex, ambitious strategy in a hyper-competitive industry. The building blocks of this ethos aren’t rocket science, but they are critical for success in today’s fast-evolving healthcare ecosystem.
Seek and Utilize Board Expertise
A key reason why singular leadership doesn’t work is that running and growing a quality-focused healthcare services business requires such a vast set of knowledge that there’s no way one leader can amass the required expertise. Regulation, technology, and patient care are just the tip of the iceberg of knowledge needed to craft and execute strategy. Quality leadership requires the humility to know where you need support. To fill these gaps, I have learned first-hand the benefits of a Board of Trustees that bring real expertise to the table.
For many healthcare organizations, real estate is a vital consideration and meaningful cost center, and yet notably outside the deep knowledge base of the administration. At Northwell, we were able to use several experts on our Board as we made real estate expansion and utilization decisions. Thanks to this capability – as well as an enterprising staff – Northwell has opened a variety of market-leading facilities, including New York state’s first freestanding emergency room. Unquestionably, the Board’s knowledge and experience improved our effectiveness.
However, members of the Board, like an administrator, can fall victim to being overwhelmed by too much information. Too often, Board members are reviewing reams of data involved in oversight. On one hand, this seems logical – after all, they are both personally and professional liable. However, attempting to take in this amount of information – much outside their area of expertise – isn’t productive.
In a series run by Advisory Board earlier this year, research showed that most of those in healthcare systems think their Board could deliver more value and expertise – but were too busy reviewing mountains of other information. A better approach can be to divide the tasks among Board members based on expertise. When the team can rely on one another to review information in their lanes of expertise, rather than all members attempting to take in all information, each person can focus and therefore contribute more.
Take Calculated Risks
Industry knowledge only gets you so far – today’s healthcare leaders must take risks to expand revenue in the face of declining margins and reimbursement rates. Many hospital systems have opened ambulatory surgery centers, imaging facilities, and other forms of outpatient care, but there are far more revenue options than ancillary care facilities.
The leadership and Board of health services organizations should consider what services they perform well are valued highly by the industry – the overlap is ripe for commercialization. For example, today a quarter of hospital system spending goes to administrative costs, so healthcare leaders at facilities of all sizes are looking for ways to make that spend more efficient. Consider if your system has a strength in back office administration or revenue cycle management, both processes smaller hospitals are often more than willing to outsource to larger systems with greater resources.
Failure is, undoubtedly, part of taking risk, but it doesn’t necessarily reflect poorly on leadership. When a risk isn’t performing well, preemptive communication with staff, investors and the Board is one of the single most important things a healthcare leader can do. While these can be difficult conversations, ultimately, early discussion and transparency allows for the most options and the greatest room to pivot. And pivoting, more than anything, is the key to success and leadership in an industry that is, itself, constantly changing.
Still, leaders must balance the potential reward with the risk. In the scramble for market share, we’ve seen healthcare businesses overreach. This creates a problem because investments can sometimes take years to come to fruition. In the time they wait for these to produce value, they fall down on other fronts, negating progress.
Visionary leadership is about not just pursuing the bright idea, but figuring out how to do so within your means.
Whether its utilizing expertise or figuring out which risks to take, healthcare leadership requires close collaboration with many people. Administrators and Boards can be each other’s greatest allies or fiercest foes, and often the difference is the humility to understand how best to communicate and play to each other’s strengths.
Mark Claster is a Managing Partner at Carl Marks Advisors, a middle market investment bank and restructuring firm. Claster has over three decades of experience in restructuring, reorganization, and interim executive management.