Ask the coach: physician executive experts answer your medical leadership and management questions.

Moral Dilemma

How do you deal with a moral conflict with your boss? I'm the president of a large hospital-owned medical group. Our single biggest client is a national company located in this area. They hire us to take care of thousands of employees and families on a capitated basis. Each year we negotiate a global contract based on our costs and their benefit preferences. They've been a wonderful client for many years, sometimes increasing our capitation mid-year when we were in trouble and once even directly funding a new health center.

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This year the national slowdown wreaked havoc on the client's financial picture. They've told us they need to take $7 million out of their health care costs, much of it from us. I've reviewed the situation and identified several areas (mainly non cash items like IBNR, liability and accruals) that could significantly bring down their short-term costs without really affecting our own long-term finances.

When I presented this at a recent executive committee meeting, my boss, the system CEO, just went ballistic. He pointed out that financial viability in American health care requires cross-subsidies. "We need to make money from people who can afford it in order to take care of people who can't. A multibillion dollar national company can surely afford it versus a number of folks in our community who can't."

I'm really uncomfortable with this logic. It seems wrong to me. We've booked a lot of profit from this client for a long time and we should be willing to help them out occasionally when they need it. This obviously amounts to a moral conflict with my boss.

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What can I do?

In a Moral Quandary

Dear MQ,

Interesting question. The short answer is that I suspect you cannot resolve this on moral grounds. Your boss has his views and you have yours. No one's "right." The question is what action your organization should take.

On that subject, I'm with you. This client sounds way too important to just write off as a casualty of the health care industry's inefficiencies. They've been responsible customers when you needed them and you need to be responsible suppliers when they need you.

Start by doing some homework behind the scenes. Is the marketing VP on your side on this one? (Probably, they usually hate putting big accounts at risk.) What about the VP for community relations? Does the client have any people on your board? Do you know what they think?

Next, sit down with your finance person. Identify some specific non-cash reductions within your own division amounting to a reasonable portion of your customer's request (e.g. $3-$4 million). Make sure these items, while requiring a reduction in current year budgets, do not have a significant impact on our organization's long-term finances. You've already described several items of this kind.

Having lined up your ducks, go back to your CEO in private, not at an executive committee meeting. Change your pitch. Forget the moral tone completely. Just point out the customer relations problem and the opportunity to further cement this valuable client's loyalty at a time of their clearly expressed need.

Call it an "investment in customer loyalty and retention." Be sure to point out the minimal impact on long-term finances and the high likelihood that, given such a response by your organization, this client will continue to be most responsive to your own needs in the future.

I'm betting that a good CEO will see the wisdom of your approach. You've got excellent instincts, MQ. Just back off the moralizing and let me know how it goes.

I'm not a physician but I could use your help. I was recently hired to evaluate the physician leadership education in our large health system. One of the assignments is to benchmark us against similar organizations. After a few cold calls, I spoke with a bright young physician leader who told me that one way to ensure success is to develop a vision of physician leadership that is bigger than the organization's mission.

I was very inspired by this concept of a "higher calling" and spent some time reviewing the physician executive literature looking for trends and philosophies. I would also like to hear from some of the experts, so I'm starting with you.

What is the role of physician leadership? What inspires a physician to go down that road? I know that physician leaders are somewhat different from other leaders in health care, but can you help me articulate how?

A Northern Neighbor

Hi Neighbor,

Well, you may not be a doc, but you've got good questions that lots of docs are asking these days. I suppose physicians enter leadership roles for a variety of reasons, probably not all that different than other professionals who do organizational work as a second career.

Typical reasons include wanting to make a difference beyond the care of individual patients, dissatisfaction with things in their organization or with health care in general, the exciting prospect of learning new things, a desire for more influence or money, professional boredom, sometimes even just a simple desire for change.

Most of the differences between successful physician leaders and other successful health care leaders stem from the physician's unique potential to be a true integrator of the complex values imbedded in our industry.

Such values include the quality of medical outcomes, the quality of patient service, the benefits to a whole community, the satisfaction of health care professionals themselves and the financial outcomes to various stakeholders. Topnotch physician leaders typically demonstrate the special ability to actually incorporate and lead these complex value equations.

Roger Schenke, my friend and executive vice president of ACPE, offered some interesting views when I asked him about your question:

"I'm afraid that some health care leaders have fallen into the trap of making the bottom line an end rather than a means. Profits are indispensable in health care but they're the result of creating value for employees, patients and community. By attending first to the well-being of patients, the welfare of physicians and staff and the best interests of the whole community everyone benefits and financial health follows.

"This philosophy transcends any kind of organization and any mission. In essence it says, focus on who and what produce financial health rather than the profits themselves. Physician leaders know these things in their souls but until recently haven't had the clear business logic and the facts to support it."

You should consider reading the article Roger and some like-minded physician leaders published on this exact subject, "Leading Beyond the Bottom Line" in the July-August 2000 issue of The Physician Executive.

I'm a big city OB/GYN due to complete my EMBA in two weeks. I've had nearly 20 years of experience in various medical staff and practice leadership roles but no formal experience as a physician executive. I've recently been offered the full-time hospital medical director position at a 70 bed/70 physician rural county hospital.

The salary and benefits for this position seem competitive but I'd like to have a better idea about the "industry standard" for severance. Specifically, should I ask for a severance package given that this hospital is fairly remote and that this is a brand new position? P.S. I like the hospital and the community a lot.

A Country-Boy-to-Be

Dear Big City Boy,

Sounds like an interesting opportunity for you but one whose outcome is not entirely predictable. The failure rate for such new positions is pretty high and your own comfort with both a full time management position and a rural environment are, at best, unknowns. Assuming you've given adequate thought to these subjects, I'll stick to your question on severance.

The most recent data, from a just-published survey by the Physician Executive Management Center, suggests that 54 percent of hospital chief medical officers (roughly comparable to your new position) have some kind of "parachute" or severance clause in their contracts.

The average duration is 12 months. The frequency of such clauses rises for larger systems and falls for various kinds of Medical Directors. More complete information is available from the PEMC at www.physicianexecutive.com.

Besides national benchmarks, consider several other factors before taking your next step:

1. New positions rarely come with parachutes, although they probably should.

2. It's unlikely that the small county hospital you described has much experience with these things.

3. They may not even have much experience with contracts.

4. Despite such limitations they probably view you as a very good catch and will likely be willing to do something to help reduce your risk.

Start by explaining your very appropriate concerns to your new boss. Ask if the hospital has employment contracts for its other senior executives and if they include some kind of severance. If so, the two of you can just tweak the existing model to match your personal circumstance.

If no contracts exist for other executives or if there's no precedent for a severance clause, you'll need to get a little more creative. The trick is to establish a reasonable level of protection, but not appear overly squirmy and risk losing either the job or your boss's confidence.

Give your new boss the PEMC survey. Consider also giving him/her one of several recent articles describing the inherent risk in these kinds of positions. A good boss-to-be will certainly understand your problem and work with you to resolve it.

In this situation, a letter of agreement between the two of you, committing the hospital to assist you in the event of a "not for cause" termination or a mutual agreement to separate seems quite appropriate. Given the situation I'd say anything between six and 12 months of income protection plus some transition support would be an excellent outcome.

Thanks again for the question and good luck with the chicken fried steak.

By Howard Kirz, MD, MBA, FACPE 

Howard Kirz, MD, MBA, FACPE, is a retired physician executive and past president of ACPE who provides executive coaching to health care boards and to a number of successful senior physician and health care executives. Questions for his future columns are encouraged and should be sent directly to [e-mail]

Ask the Coach is a practical advice column to answer your questions about medical leadership issues and physician executive concerns. ACPE faculty member Howard Kirz writes the column with help from experts both inside and outside the College. Questions for future columns are strongly encouraged and should be sent directly to Kirz at [e-mail].

All questions will be considered strictly confidential.