Leading Beyond the Bottom Line: The Questions It Has Raised.

The Leading Beyond the Bottom Line article series has received an overwhelming response from ACPE members, mostly in enthusiastic support of this new leadership concept. Some of the important questions raised by members are presented with answers from the authors. This article also explores the moral challenge of leadership and why health care is more than a business. In recent years, there's been confusion about the role of the health care enterprise, its leadership and its management. We have lost our way about the "moral" thing, the "right" thing, because we have no philosophy to guide us. To manage or lead in this "business" of health care, a philosophy is required that recognizes the multiple elements to which the leader has responsibility and obligations: the customers, community, employees, and, certainly, the financial assets.

KEY CONCEPTS

* Leading Beyond the Bottom Line

* Health Care versus Traditional Businesses

* Why Health Care is more than a Business

* Intrinsic and Instrumental Goods

* Creating a Greater Good

* The Bottom Line is not the Finish Line

THE RESPONSE TO THE FIRST three articles on "Leading Beyond the Bottom Line" (LBBL) has been gratifying. ACPE members' reactions have covered the spectrum from enthusiastic support to "what are you talking about?" Fortunately, more than 90 percent are in the first category. But members raised many important questions.

Q: In our academic health center we have fundamental goals in education and research. Where would they fit in "Leading Beyond the Bottom Line?"

A: Early in our thinking about LBBL, we fell into the same trap. We didn't distinguish between measures (e.g., profits), means (e.g., investments), outcomes, (e.g., financial health), and goals (what people in organizations strive for). Every organization has the right to set its own goals. How well it does that will influence its effectiveness. LBBL is indifferent to any specific set of goals. It suggests the most effective way we know of reaching a particular set of goals. If you have goals in education and research or patient care, LBBL will help to identify the necessary assets, optimize or leverage them in relation to each other, and collectively help you reach those goals.

Q: You seem to take issue with the often-heard statement "no margin, no mission." Isn't it a true statement?

A: It is true, but in the same way as "no water, no plant." It's true and insufficient. "No water, no plant" is true, but so is "no light, no plant." The unfortunate result of the "no margin, no mission" statement is not so much that it is insufficient, but that it leads many organizations to being "bottom line-driven," usually at the expense of all the other things it takes to even create a "bottom line."

Q: As I've been reading your articles, I've been trying to imagine saying to the pack of wolves I have to deal with, "It's not what's on the balance sheet that matters but the well-being of our patients and the satisfaction of our employees." They would tear me to bits!

A: Right you are! And so are they. If there is one thing you should take away from LBBL, it is that "one-trick ponies" have no place in the executive leadership suite. Profits matter. Patient well-being Employee satisfaction matters. Community support matters. And they are all connected. Physicians, nurses, and other clinicians should be primarily concerned with patient care. CFOs should be primarily concerned with profits and financial health. And HR executives with human resources. But the leaders of the organization, and especially physician executives, must lead and manage with an understanding of "interdependence"--how each asset or activity affects another.

Q: I agree wholeheartedly with the ideas in "Leading Beyond the Bottom Line," but it seems to be a difficult concept to express in simple terms for everyone in the organization to understand. Have you thought about ways to sell this concept?

A: It is a difficult concept, but we're not sure that you need to sell it to everyone, or even most people, in the organization. LBBL is a philosophy of organizational leadership. The leadership needs to understand it, but the oncologist or the ER nurse is not likely to find it relevant. Each of us who manage go around with a philosophy of management, consciously or unconsciously. Our behaviors identify, for the people around us, the essence of our philosophy. Some of us become known as a "bottom line-driven manager", others a "participative manager," still others a "ruthless manager." We don't know what labels will be used to identify an LBBL manager, but "effective" comes to mind.

Selling LBBL on a broader scale is part of the work of ACPE. LBBL is a concept that emerged from the work of physician executives. Fortunately, leaders from Arthur Andersen support these principles and are joining forces with ACPE to promote LBBL nationally. Researchers at Arthur Andersen have studied businesses throughout the world to discover what makes certain enterprises rise above their competition. Their findings, published in Cracking the Value Code, will become part of jointly sponsored educational programs on LBBL. [1]

Q: In diagrams depicting LBBL, you show "Leadership and Management" in the center circle surrounded by "tangible assets," "customers," "community," and "employees." But couldn't "customers" or "employees" or "community" be in the center?

A: Each of us has our sense of priorities and none is either right or wrong. They simply have consequences. Any one of these suggestions can be placed at the center of or surrounding the diagrams we have shown. In doing so, it reflects a priority, which, as you have read in our articles, is the result of a linear analysis of assets and goals. Is, for example, patient care more important than the financial health of the organization? Some might answer yes. But if you do, simply understand the consequences of that statement.

These questions have led us to the following thoughts about "Leading Beyond the Bottom Line" and its role in health care.

The challenge of moral leadership in health care

Is health care a business? Sure. But it's also more than a business. Like all businesses, a transaction is involved and monies are exchanged either by a patient, employer, insurance company, or government agency with a health care provider. Yet, the "business" of health care is often held to a higher standard. Patients and communities expect those who provide health care to do the "right" thing, the "moral" thing.

But what is the "right" thing? Is it to do the best we can for every patient, regardless of the economic cost or likelihood of success of the intervention? Is it to create sufficient financial surpluses in the provision of care so we can continue to do the best for every patient? Is it to assure the well-being of those we employ so they can do the best for every patient? And what about the communities that provide the land, water, schools, and food we live by? What responsibilities should a health care provider or organization have to this broader community, which does not necessarily engage in any economic transaction?

In recent years, there's been confusion about the role of the health care enterprise, its leadership and its management. We have lost our way about the "moral" thing, the "right" thing, because we have no philosophy to guide us.

In the late 1970s, we began to accept the proposition that health care was a business like any other. We adopted the latest principles and practices of business management. Principles of accounting, finance, strategic planning, marketing, and quality improvement were considered the underpinnings of success in an increasingly difficult operational climate. We adopted the latest "business models." In Search of Excellence, Management by Objectives, Quality Circles, Team Management, Total Quality Management, and Continuous Quality Improvement were seen as possible paths out of the dilemma facing health care organizations. These principles and "models" have helped us manage health care organizations more efficiently and perhaps more effectively.

Is health care a business like any other?

Creating wealth to improve health

Ask any senior manager, "what is the ultimate objective of your business?" You'll probably hear, "to increase the wealth of the stockholders (or owners)." So isn't the business or the ultimate objective in health care to increase the wealth of the provider or the provider's institution? The moral (and ethical) response must be no. Wealth must be the means by which we do our best for every patient. In business, wealth is the goal. In health care, wealth must be one means for improving the health of the patient and of the community.

Without wealth, we can't do our best for every patient. So aren't profits a primary concern for every provider of health care? Yes. Well then, which is more important, profits or doing the best for every patient? Doing the best for every patient means doing everything your wealth allows. Without profits, your best won't be very much. Greater wealth allows a bigger "best." But the goal is to increase wealth in order to increase the best you can do for the patient. Every patient.

The patient-physician special transaction

The fundamental transaction between the patient and the health care organization is also profoundly different. In no other business can we find the societal and legal covenants that exist between the physician and patient. This fundamental transaction is built on an understanding of a patient's vulnerability in disclosing information and submitting to diagnostic and therapeutic procedures that can be intrusive, invasive, or even life threatening.

Any government policy, business model, or philosophy that seeks to guide health care must embrace the special relationship between a doctor and her patient. But the unique relationship cannot begin and end with the physician and the patient. All those who extend the ability of the physician to provide care are an integral part of every patient's experience. We don't disclose personal information just to a physician. Therapies are administered by a whole host of people. All of these clinical and administrative professionals, collectively, comprise the unique transaction that occurs between those who seek health care and those who provide it. The patient enters into an economic transaction at one point, but it is the personal, emotional, and interdependent relationship with the providers and supporting people that is the overriding transaction.

Expectations that health care providers will serve the community

The relationship between the health care organization and its geographic community also distinguishes it from other businesses. In most communities, bookstores don't exist to make the community smarter. Car dealerships don't exist to move the community faster, or make it safer. But hospitals and physicians are expected to serve the community's need to be healthier.

If a bookstore closes, some people will be inconvenienced for a while. But what happens when a hospital closes its emergency room or its obstetrics department, or stops its immunization or breast cancer screening programs? The community, clearly, has different expectations of its health care providers than it does for other businesses. And the community has a dependence on the health care organization that is less easily transportable to another entity should the health care provider cease to exist.

Creating a greater good

These differences do not mean that health care is not a business--it is more than a business in terms of its ultimate objective. The basic transaction between buyer and seller and health care's accountability to its communities distinguishes it from traditional businesses. The business of health care is only the means by which providers help create a greater good. This "greater good" makes health care unique.

Health is one of the few "goods" that is both an intrinsic good, i.e., in itself it is highly valued, and an instrumental good, i.e., it is necessary to realize other values. Mayonnaise, shoes, cars, and money are just instrumental goods. In and of themselves they are nothing. But society recognizes that those who provide health care offer both the means and the end.

And, ultimately, these differences underlie the leadership dilemma faced in health care. After almost three decades of following "business" principles and practices, there are still problems in the fundamental integrity of the health care enterprise. Does this mean that business practices should not be studied and applied in health care? Of course they should--and even more vigorously than in any other industry. Health care is a business with a unique set of covenants, relationships, and expectations, making it more complex in the application of business practices.

The philosophy that has guided health care has become less clear, less sure, and less focused on the ultimate purpose of what distinguishes it from other economic enterprises. To manage or lead in this "business" of health care, a philosophy is required that recognizes the multiple elements to which the leader has responsibility and obligations: the customers, community, employees, and, certainly, the financial assets. To manage only one or focus on achieving the ideal in one element is not a level of simplicity that health care leaders have. Health care is more than a "bottom line" business. For health care, the "bottom line" is not the finish line.

Roger Schenke is Executive Vice President of the American College of Physician Executives in Tampa, Florida.

Eric Berkowitz, PhD, is a Professor and Director of MBA programs in the Department of Marketing at the University of Massachusetts' School of Management in Amherst. A frequent speaker for medical staff meetings and retreats, he also serves as a core faculty member for the American College of Physician Executives.

John M. Ludden, MD, FACPE, CPE, is Director of the MD/MBA Program at Tufts University Medical School in Boston. He serves on the hoard of the National Committee for Quality Assurance and is past President of the American College of Physician Executives.

J. Richard Gaintner, MD, FACPE is CEO of Shands HealthCare in Gainesville, Florida.

Martin E. Hickey, MD, MS, FACPE, is President and CEO of Lovelace Health Systems in Albuquerque New Mexico 

Robert H. Hodge Jr., MD, CPE, FACPE, is Clinical Professor at the University of Missouri Health Sciences in Columbia.

Major General Leonard M. Randolph, Jr., MD, MS, FACS, CPE, FACPE, is Deputy Surgeon General at Bolling Air Force Base in Washington, D.C.

Reference

(1.) Boulton, R., Libert, B., Sameka, S. Cracking the Value Code: How Successful Businesses are Creating Wealth in the New Economy. New York: HarperBusiness, 2000.