The next step for physician executives? (Physician CEOs).

AS HEALTH SYSTEMS AND PHYSICIAN ORGANIZATIONS grow together to form working partnerships, the value of physicians serving in key leadership positions has become evident. Physician leaders can and have bridged the often considerable chasm between practicing physicians and health care managers and corporate governing boards. Clearly, physicians are increasingly becoming important members on the senior management teams of hospitals and health systems. In group practices of significant size, physicians are being elevated to senior management positions, as the issues facing these organizations become more complex and time consuming.

In each of these situations, the physician executives chosen for these positions are committed managers who meet the managerial experience and education prerequisites for selection. After a successful tenure in a variety of medical management roles, the next career step for physician executives is to assume a chief executive officer role, with the responsibility for all that occurs in an organization. Employing a physician as the CEO may also be the most logical step for boards of health care organizations who strive to build true partnerships with the practitioners with whom they work. A health system or hospital with a physician CEO sends a strong message to the physicians on its medical staff and to the community that the traditional "them versus us" approach will be replaced with one of cooperation.

As group practices increase in size and the variety of physician organizations (PO, PHO, networks, etc.) grow, the need to operate effectively and make decisions in a timely manner become important considerations for success. A physician serving as a group's chief executive, with a mandate to lead and manage, is a logical approach that is often embraced by practitioners in the group. Physician CEOs serving in a hospital or a group must, of course, be capable managers who are prepared for the challenge. They must bring a resume of leadership experiences and demonstrate an awareness of sound business practices. With the growth of the physician executive profession, it appears that the marketplace of the future will include many competent physician executives with the ability to lead health care delivery organizations.

In 1997, the Physician Executive Management Center conducted surveys of physicians serving in CEO roles in hospitals and group practices throughout the country. We compared the results with earlier surveys we had conducted since 1986. This article reports the significant findings of these surveys and includes our reactions to the results.

Employment contracts

An employment contract is a written agreement that describes a CEO's scope of authority and responsibilities, as well as how he or she will be remunerated, This document may or may not have had the hand of an attorney, but should at least include the term of the agreement, salary, incentives and benefits, and a termination agreement to protect the organization and the CEO.

* Seventy-five percent of group CEOs have a written agreement with their groups and 50 percent have a parachute arrangement or financial protection for termination. The average length of the parachute is 16 months of salary and benefits continuation upon termination.

* Sixty-three percent of hospital CEOs have a written agreement with their hospitals and 70 percent have a parachute arrangement. The average length of the parachute is 22 months of salary and benefits continuation upon termination.

* In both organizational types, the presence of a written contract has increased, although 25 to 35 percent still do not have an agreement. The length of the parachute time for these physician executives has also increased. For the considerable career and personal risks inherent in these positions, these percentages should increase in the future. While the number of parachutes has increased a bit, the average length of these protections is quite generous with more than one year of time for the CEO to find a new position once terminated.

Job duties

Job duties include a view of the responsibilities these physicians have on a regular basis. The responsibilities of these CEOs are similar in both group and hospital situations. They are responsible for a wide variety of activities and are expected to be accountable for everything in their organizations, as is common for a CEO in any industry.

* Internal leadership and planning and policy development were the common responses of both group and hospital CEOs when asked which duties they enjoy most. These physicians like the responsibility and the expectations of serving in the senior position. They appear to embrace the tasks that require leadership among their peers and a vision for growth of their organizations. CEOs of organizations in any industry would respond the same. A chief executive is a chief executive, regardless of industry. It was surprising, though, that developing external relationships did not rank higher for these CEOs.

Skills and talents

Skills and talents are the characteristics these leaders find to be critical for their success in their senior level position.

* The overwhelming response by group CEOs to an inquiry about which specific skill is most important to them and enables them to be successful was their interpersonal communication skills. Clearly, for physicians to be successful as senior managers in a group practice environment, their ability to communicate effectively with fellow physicians and with others in and outside of the group is critical.

* Similar to their colleagues in groups, hospital CEOs cite their communication skills as the most important factor that enables them to be successful physician executives. However, many in this survey group state that their management expertise and business training are additional key skills leading to success. Certainly, effective communication is important, but the ability to understand and manage the business of the hospital is almost as critical.

Advantages of having a physician CEO

* The common response of both hospital and group CEOs to the query regarding the advantages organizations have for employing physicians as their CEOs is their knowledge of the health care environment combined with their knowledge of medicine. It is interesting that business training or experiences of these physician CEOs is not cited as the top advantage. As we have suspected for years, the most important credential physician executives bring to a senior position is credibility with their colleagues.

* When asked about what they would advise a colleague about preparing to become a physician CEO, they responded in a similar manner. Gaining experience in a variety of management positions is considered most important. Interestingly, this was cited more often than returning to school to obtain a management degree.

Remuneration

* Average compensation for group CEOs, including salary and incentives, is $295,867 with a range of $240,000 (at the 25th percentile) to $320,000 (at the 75th percentile). Two-thirds of these physicians receive incentive or bonus compensation. Even though the group of CEOs receiving an incentive payment is larger than previous years, more CEOs should have compensation tied to the financial and other successes of these groups.

* Average compensation for hospital CEOs, including salary and incentives, is $266,220 with a range of $225,000 (at the 25th percentile) to $313,200 (at the 75th percentile). Less than half of these physicians receive incentive or bonus compensation. Similar to groups, the incidence of hospital CEO incentive or bonus arrangements is improving but does not yet reflect what other executives in the marketplace receive.

Other findings about both CEO groups

* The average age of the group CEOs is 53 years; it is 55 years for hospital CEOs. Almost all the respondents in both organization types are men.

* Two-thirds of each group are primary care physicians and 100 percent are board certified by American Board of Medical Specialties clinical boards.

* One-third of each group has an advanced management degree and only one respondent in each group is currently working on such a degree. This percentage has not changed significantly over the years, despite the increased availability of such programs throughout the country.

* Less than one-third of group practice CEOs have clinical duties and 25 percent of hospital CEOs still practice. The number of senior physician executives with significant clinical duties has decreased in recent years and will continue to do so in the future. This must occur given the complexity of a CEO's job.

Conclusion

The next step for career growth for many physician executives will be the top leadership role in a health care organization. The availability of such positions for physicians has been limited in the past but could very well open in the future. As physicians, administrators, and boards begin to trust each other more and form meaningful partnerships, the potential for physician CEOs increases.

FIGURE 1

MANAGEMENT RESPONSIBILITIES--PHYSICIAN CHIEF EXECUTIVE OFFICERS IN GROUP
PRACTICE

                                   % With    Average  Perceived  Enjoyed
Responsibilities                  This Duty   % Time    Value     Most

Internal Leadership, Management      97%       28.3%      1         1
Board Interaction                    97%        7.7%      4
Physician Relations                  97%       15.7%      3         3
Planning, Policy Development         93%       15.1%      2         2
Financial Affairs                    73%        7.8%
Community and External Relations     73%        5.9%                4
Negotiaiton of Contracts             60%        4.4%
Legal Matters                        57%        3.1%
CQI/Quality Management               53%        3.2%
Teaching, Research, Patient Care     40%        3.4%
Fund Raising                         23%        3.7%

Physician Executive Management Center

FIGURE 2

MANAGEMENT RESPONSIBILITIES--PHYSICIAN CHIEF EXECUTIVE OFFICERS IN
HOSPITALS

Responsibilities                  % With    Average  Perceived  Enjoyed
                                 This Duty  % Time     Value     Most

Internaal Leadership/Management    100%       26%        1         1
Planning/Policy Development        100%       20%        1         2
Community/External Relations        93%        8%        3         3
Board Interaction                   87%        9%        4
Financial Affairs                   87%        8%
Legal Matters                       80%        4%
Physician Relations                 80%       10%        2         4
CQI/Quality Management              60%        3%        4
Fund Raising                        53%        4%
Teaching/Research/Patient Care      47%        8%

Physician Executive Management Center

David Kirschman is a Principal at the Physician Executive Management Center in Tampa, Florida. He can be reached by calling 813/963-1800, via fax at 813/264-2207, or via email at [e-mail].