EDUCATIONAL AND ADVERTORIAL SUPPLEMENT …

1 Kenneth KaufmanManaging PartnerKaufman, Hall & AssociatesLisa GoldsteinSenior Vice President/Team LeaderNot-for-Profit Healthcare RatingsMoody s Investors ServiceINTRODUCTIOND uring the past decades, a significant body of literature hasbeen published on the subject of leadership and organizationalperformance. Most authors infer a positive correlation betweenexcellence in leadership and organizational results. Asexpressed by best-seller authors,1transforming leaders movetheir organizations from good to great and sustain such performance in continuous search for excellence. Top-notch leadership appears to correlate tightly with above-average organizational performance in many peoples attributes and activities that engender high-performance organizations have been the subject of consider-able research, but an exploration of causality is often elusive oraltogether absent.

2 In this instance, causality is the relationshipbetween a leadership activity, such as building a strong team,and another experience that is a direct consequence or result ofthe team building, such as improved competitive explores why and how having a strong team reallymatters to competitive body of literature specific to hospital/health system leadershipis developing rapidly as healthcare assumes center stage onthe nation s agenda. Increasing costs and competition andsafety and quality imperatives challenge healthcare executivesto identify and apply successful leadership approaches commonin other industries. Best practices in hospitals that use suchapproaches are increasingly available from associations andorganizations serving the field.

3 This white paper aims to advance this process by identifyingfive leadership activities that consistently occur in financiallysuccessful not-for-profit healthcare organizations. We definesuccessful organizations as those that achieve strong financialresults year-in and year-out. How do the leaders of these organ-izations achieve such results? Like other works before it, thewhite paper assumes a positive correlation between actionsand results, and as much as possible explores the linkages orcausality between these. To identify the management activities that really matter inhealthcare, we turned to some of the best and brightest executivesin the industry.

4 Chief executive officers and chief financial officersof ten not-for-profit hospitals and health systems granted usinterviews, which occurred in July and August of 2008. Threesenior executives of the credit rating agencies, who evaluatemanagement and organizational performance on a regularbasis, also participated in this project in order to provide a capitalmarkets perspective (see sidebar on next page for full list).The healthcare executives lead organizations that vary in typeand size, ranging from small regional systems, to urban academic medical centers, to large multi-state health organization experiences healthcare s current challenges,including increasing competition, reimbursement constraints,and significant capital requirements.

5 Some of the organizationsare in healthy markets with a good payer mix and patientdemographics; some are not. Most experience competitionfrom other hospitals in the region and from physicians andother for-profit players. Independent of similarities or differences, the executives provided remarkably consistent input regarding what theyconsider the most important aspects of their jobs and, withinferred causality, the key factors contributing to organizationalsuccess. The activities were as follows:1. Visioning in partnership with the board2. Building and sustaining a strong and accountable executive team 3. Developing a high-quality, integrated plan4.

6 Skillfully executing the plan and managing the fundamentals 5. Building and maintaining credibility We organized the white paper around these five activities and how these activities contribute to financial possible, the paper s key points are made in theexecutives words. Leadership and Successful Financial Performance in HealthcareEDUCATIONAL AND ADVERTORIAL SUPPLEMENT TO MODERN HEALTHCAREB ulletin of the National Center for Healthcare Leadership81. VISIONING IN PARTNERSHIP WITH THE BOARDThe development of an organization s mission and vision is theresponsibility of its governing board, while the CEO and seniorleaders are responsible for assuring that the organization livesthe mission and vision.

7 There is broad agreement that high-quality boards provide effective management oversight andthat exceptional leaders understand how to get thousands oreven tens of thousands of people moving in the same direction,with the same vision and goals, and a shared sense of purpose. Collaboration Plus AccountabilityWe believe that board governance and the relationshipbetween the board and the executive team are primary issuesthat frame organizational success in the current healthcareenvironment. Financially successful organizations have leaderswho can envision, engage, and execute. They also have boardsthat govern around explicit expectations and metrics, guidedby an attitude that senior management will deliver expectedresults on a consistent partnership and accountability are required.

8 We look atour boards as partners, but the board s role is also to hold manage-ment accountable, says Robert Stanek. Whether conductedlocally at an individual hospital level or on a system level, thegovernance approach at Catholic Health East focuses on strategicdirection and on oversight of performance, as measuredagainst the mission, values, and goals. Specific performanceindicators, with metrics, targets, and measurement tools areidentified, implemented, and monitored. Distinct Perspectives and RolesThe board s ability to question senior management and not to rubber stamp whatever the CEO wants to do is critical. Thesuccessful organizations profiled here have populated theirboards with financial and industry experts who are using theirexpertise from their own professions to question manage-ment s strategies.

9 The board members educate themselves onthe challenges in the industry and establish appropriatebenchmarks to measure key financial and quality rating agencies look closely at board education, wanting tosee a robust process, whether in the form of regular trainingsessions or executive presentations on some aspect of hospitaloperations. Target setting, such as days cash on hand or patient satisfaction scores, should occur jointly with the boardand executive team, with stretch goals reflecting what can be achieved given the organization s past track record andfuture challenges. Hospitals/Health Systems Joel T. AllisonPresident and CEO Baylor Health Care SystemDallas, TexasKenneth L.

10 Davis, MDPresident and CEOM ount Sinai Medical CenterNew York, New YorkPeter L. DeAngelis, Vice President and CFOC atholic Health East Newtown Square, PennsylvaniaDavid KirshnerCFOC hildren s Hospital BostonBoston, MassachusettsAlfred B. Knight, MDCEOS cott & WhiteTempleton, TexasJames Mandell, MDCEOC hildren s Hospital BostonBoston, MassachusettsPeter J. McCannaExecutive Vice President Administration and CFON orthwestern MemorialHealthCareChicago, IllinoisEdward Murphy, MDPresident and CEO Carilion ClinicRoanoke, VirginiaRalph W. MullerCEOU niversity of Pennsylvania Health SystemPhiladelphia, PennsylvaniaWilliam H. NelsonPresident and CEOI ntermountain HealthcareSalt Lake City, UtahCharles W.