An Inadequate Supply of Qualified People Will Slow the Pace of Health System Change

Originally published by the Center for Studying Health System Change (HSC). HSC was a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.

An Inadequate Supply of Qualified People Will Slow the Pace of Health System Change

Issue Brief No. 07 | March 1997 | Linda T. Kohn

Executive recruiters occupy a unique vantage point on changes in the health system. Because they understand the hiring needs of health care organizations, they can see how those organizations are reacting to changes that have already occurred and how their staffing strategies point toward future trends. This Issue Brief reports on a roundtable discussion, sponsored by the Center for Studying Health System Change, during which a group of executive recruiters examined how health system changes were reflected in recruitment priorities and what the shifting demands for talent indicated about the future direction and pace of change.

Shifts in Leadership and Skill Needs

The makeup of leadership teams in health care organizations, and the skill sets those leaders needed, was undergoing a dramatic shift. Organizations were placing heavy emphasis on senior management and clinical leaders with expertise in finance and information technology. These hiring patterns offered a window into several dimensions of ongoing health system change.

First and most significantly, the pool of qualified people with the breadth and depth of skills the changing health system demanded was simply too small. The system needed people who could both manage costs and manage care, and there were not enough of them. As a consequence, the health system would continue to experience considerable turmoil, and real changes in health care delivery were expected to proceed slowly. Much of the activity at the time was focused on market positioning rather than on re-engineering the processes of care to cut costs and improve outcomes.

Second, it was extremely difficult to bring innovation into health care. Health care organizations had limited ability to recruit people from other industries because health care was so fundamentally different from most other fields. This constraint also prevented organizations from importing expertise in areas where other industries were further ahead, such as information technology. Because recruiting happened primarily among competitors, strategies ended up being replicated from one organization to the next.

Managing Costs and Managing Care

Change was pervasive across every sector of the U.S. health care system. One of the most consequential shifts was the general movement away from a fragmented fee-for-service model toward one that integrated financing and delivery. Both public and private purchasers were aggressively demanding price concessions, soliciting competitive bids, and working with insurers to restructure coverage options to reduce costs. All of this placed growing pressure on price and cost management.

Managed care, in all its variations, was expanding nationally and influencing every aspect of the health system. In many parts of the country, a growing number of providers were being paid through capitation, which required them to manage both the cost and quality of care and to accept accountability for outcomes.

As health care organizations took on risk for enrolled populations, the need to manage costs and care simultaneously became urgent. Organizations were seeking leaders fluent in both the business and clinical sides of health care. As one recruiter put it, the need for people who can balance cost and quality may sound trite, but it is true.

One visible consequence was the intense pursuit of physicians for administrative positions across a wide range of organizations, including health plans, insurers, hospitals, physician organizations, disease management companies, and large employers offering health benefits. The ideal physician executive combined clinical and analytic skills for evaluating and guiding changes in practice patterns, medical outcomes, and quality of care with management abilities that could improve the organization's financial performance.

The executive recruiters reported a shortage of physicians who possessed all these skills and were willing to take on administrative leadership roles. The candidate pool for many open positions was small. One reason for the shortage was a general ambivalence among physicians about moving into administration, with many viewing it as a betrayal of their field.

Turnover among physician leaders was also relatively high, attributed in part to organizations not knowing how to effectively deploy physician executives once they were hired. A hospital or health plan might recruit a physician executive to be deeply involved in strategic decisions and system-wide care management, only to end up assigning them to review stacks of charts. The limited supply of physician executives, combined with organizations that did not know how to use them well, did not bode well for developing more advanced aspects of care management, such as programs capable of changing practice patterns and linking them to outcomes for enrolled populations.

Other emerging managed care initiatives also risked being shortchanged by the lack of qualified people. Disease management programs, for example, were typically data-driven, relying on continuous data collection, evaluation, and strong information systems to track costs and care. But there was a severe shortage of people with the clinical, management, and analytic skills needed for this work. The recruiters warned that the thin pipeline of qualified personnel for disease management was likely to slow these programs' ability to affect the delivery and cost of care.

Information Technology: An Agent for Change

Information technology was another area where health system changes had created new job requirements. Analyzing financial and quality outcomes required sophisticated information systems and staff who could interpret the data and work with physicians and other caregivers to apply the results to improving care processes.

A management information system (MIS) represented a major organizational investment, not only in expensive hardware but also in hiring staff with the necessary technical expertise. The hardware alone would not get the job done; an organization could spend millions on systems and still fail to use them effectively without the right people trained or recruited to operate them.

The recruiters identified a shortage of people with sufficient MIS experience and skills in health care to support the changes organizations wanted to implement. Managing costs, care, and risk all depended on strong information systems; the MIS was seen as the glue binding together the many different and sometimes geographically dispersed parties in the health system.

While other industries also faced the need for large MIS investments -- even those far more advanced in their use of information technology -- health care organizations were at an additional disadvantage. Because of the clinical applications and specialization unique to health care, much of the technology and talent had to be developed within the health system itself, limiting the industry's ability to benefit from advances elsewhere.

New Partnerships in Health Care

Integrated systems of care required health care organizations to provide or arrange for a continuum of services. This demanded leaders with the skills and ability to forge and maintain new partnerships, alliances, and other arrangements with many similar and dissimilar organizations. These arrangements could be large and complex, with a single organization involved in multiple partnerships simultaneously at local, regional, and national levels. Greater outreach into the community might involve working with churches, schools, and community agencies that could help an organization assess needs, manage risk, and improve health.

The pace at which new and more encompassing health care organizations could develop was tied directly to the available leadership. Chief executive officers needed negotiating skills to bring former competitors together and community organizing skills to build local buy-in. These alternative arrangements could also require sharing power and joint decision-making.

High turnover among the leadership of health care organizations was one major stumbling block to building lasting relationships. The instability that came with frequent leadership changes could undermine an organization's ability to build trust among its partners, define and pursue a strategic plan, and develop long-term relationships that benefited the community.

The recruiters were particularly concerned about turnover in academic medical centers (AMCs). These institutions had to satisfy missions related to patient care, teaching, and research, and this three-pronged mandate made it difficult to define clear strategies in a competitive marketplace. One recruiter described a silo effect -- strong individual pockets of knowledge, but with the multiple parties and interests not always communicating with each other. There was also a built-in conflict in the demand for physician leaders to maintain a long C.V. with lots of publishing while still doing patient care, leaving little time for the demands of the marketplace and managed care. Some candidates had turned down CEO positions at AMCs because they were concerned about working in institutions where priorities and leadership remained unsettled.

Personal Risk in a Changing World

As health care organizations assumed more risk for enrolled populations, their leaders were being asked to take on greater personal risk as well. Compensation packages increasingly included incentive-based components. As one recruiter noted, the average incentive award had risen substantially -- salary had moved up some, but what was at risk had moved up a lot. This increased personal risk might attract leaders more willing to drive change rather than maintain the status quo, but it also increased the possibility of failure. Nonprofit organizations, especially public hospitals, faced constraints in their ability to incorporate incentives into compensation and were likely to have difficulty competing against for-profit firms on these terms.

There was additional evidence of personal risk in how frequently certain skills became obsolete. Too many traditional line administrators, particularly in hospitals, and in any function that could be outsourced at lower cost -- such as human resources administration -- were seen as lacking the skills needed in modern health care organizations because they did not have sufficient understanding of managed care, capitation, other risk-sharing arrangements, and information technology.

Implications for Health System Change

The pace of health system change and the response of health care organizations varied from community to community. But regardless of the pace, it was clear that health care organizations were taking the changes seriously. From the perspective of executive recruiters, however, few organizations had developed coherent strategies to deal with change. Most appeared to be pursuing multiple avenues simultaneously to hedge their bets.

In general, efforts to manage costs were moving faster than efforts to manage care, for several reasons. The mechanisms and systems that could effectively change how care was delivered were still under development. There was a lag between implementing a change and seeing its effects. And there simply were not enough people with the experience and skill to implement such changes broadly. As one recruiter said, there is reorganization, but nothing is really changing -- very few companies have made a radical shift and redefined themselves.

Despite shortages in certain skill areas, there was little openness to recruiting people from outside the health care field and, in some cases, even from outside the local market. Health care was viewed as highly specialized. Hospitals tended to look for talent from insurance companies and managed care organizations; health plans were more likely to hire from their competitors. The result was that many organizations within a given market ended up with very similar services, products, and care processes.

The often-heard claim that executives with California experience were in demand throughout the country was not confirmed by the recruiters. Because health care markets differed by community, California experience might not even be the most relevant. This further illustrated how difficult it was to introduce innovation into the system.

The evolving direction of change, the pursuit of multiple concurrent strategies, and the mismatch between available and needed skills all pointed toward slow progress in making the kinds of changes that would ultimately alter the delivery and cost of care. It was not clear which of the many strategies being pursued would have lasting impact. Staff reductions, for instance, could immediately affect an organization's bottom line but would not fundamentally change how care was delivered. Some strategies might have to be revised along the way, partly because the people needed to carry them out were not readily available. And as long as organizational strategies were still evolving, the ultimate outcome remained uncertain.

Roundtable Participants

John Lloyd, Witt/Kieffer, Ford, Hadelman and Lloyd, Chicago; Abby Mayes, Lee Calhoon & Co., Philadelphia; John Pufahl, Avalon Health Group, Inc., New York City; Barbara Runyen, Right/Jannotta Bray, Chicago; Anne Zenzer, Witt/Kieffer, Ford, Hadelman and Lloyd, Chicago. Moderators: Paul B. Ginsburg and Linda T. Kohn, Center for Studying Health System Change.

Sources and Further Reading

Center for Studying Health System Change, Issue Brief No. 07, March 1997.