Tag Archives: healthcare leadership

More examples of what not to do AKA how to stay in the frying pan and not fall into the fire.

This is the second article in the series about what not to do.  The person suggesting this article asked for examples of things that might help you save yourself from yourself.  Please send me your examples and stories of things not to do.  Your confidentiality will be protected unless you want credit for the idea.  Sharing this experience, especially with younger executives is one of the best ways to serve the industry.  I have an outline of a third article and depending upon response, I could probably keep this going for a while since like a consultant friend of mine used to say, “One idiot can keep three consultants busy forever.”

Project planning

Ben Franklin’s adage goes, “Failing to plan is planning to fail.”  I have found this profound simple statement to be true time and again.

After being appointed interim CFO in a hospital, I learned that there was a major construction project under way.  The project and the rate at which the hospital was burning money on the project did not make sense to me.  To make a long, complicated story short, no one could produce a feasibility study to support the project’s value proposition or pro-forma analysis to support the project’s underlying  financing.  When no one could produce a sources and uses of funds analysis, I spent a couple of weeks creating my own from scratch.  When I was finished, it was clear that the project was underfunded by over $20 million and the hospital did not have sufficient reserves to cover the shortfall.  When this information was provided to the Board, after they recovered from the shock and horror, they decided to stop the project that would have resulted in a problem with the bonds used to finance the project by drawing reserves below bond covenant minimum requirements triggering a technical default.  The entire organization was oblivious to this looming disaster.

Ole Abe said that, “You should spend twice as much time sharpening your axe as you spend cutting with it.”  The implication of this admonition is obvious to anyone that has ever cut wood with an axe.  Still and yet, executives let distractions and competition for their time lead them to allow ill-conceived initiatives to go forward then they are surprised when the projects blow up on them.  If you want to entertain yourself, pick any executive out at a cocktail party and ask them if they have ever seen a project go bad.  The war stories you will hear are spectacular. Better yet, ask the ‘expert’ if they have ever seen a peer do something stupid.  Apparently, they have not heard or have disregarded the advice of Einstein, “Doing the same thing and expecting a different outcome is the beginning of insanity.”

Project control

Oh boy!  The easy part of a project is the planing and approval.  The hard part is execution.  There are a lot of challenges with project execution.  One is that other unanticipated confounding priorities arise in the organization that bleed capacity from the organization’s leadership to remain focused on a critical project.  Another commonly seen problem with project execution is the loss of key leaders during the course of the project.  All too frequently, critical assumptions underlying the project’s rationalization are proven inaccurate or incomplete once execution begins.  Sometimes, a project’s success is largely dependent upon one person and if that person leaves or is incapacitated, the entire project goes into jeopardy.

To some degree, a project is analogous to a marriage.  In order for it to succeed, more than 100% commitment is required from all sides.  Every effort you make to manage your risk can be thwarted by uncontrollable changes in your business partner(s).  There is no guarantee that the people that sold a deal and made commitments on behalf of your business partner will be around to honor those commitments.  If they made commitments that were not in the contract, they may not be allowed to honor them.  More than once before a project was completed, I have found myself dealing with an entirely different cast of characters.  What about a business partner that gets acquired during implementation and none of the commitments made before the acquisition are honored?  A business failure or overcommitment by a business partner can move into your life like bad in-laws.  This is why business partner selection is so important.  Too often, a decision maker will chose a business partner based on cost alone and in the process buy himself a set of problems that turn out to be exponentially more expensive than the most expensive option that was under consideration at the time the decision was made.

A project does not have to fail to become a disaster.  Delays in a project can be as damaging.  I do not know of a delayed project that resulted in a better outcome.  Sometimes, delays cause cascading problems.  Take a construction project for example where the electrical contractor is contracted to start on a date certain and the project is not far along enough for them to begin work.  This kind of a delay can rapidly spread throughout an organization and create enough problems to overwhelm the ability of the leadership team to address them.  This is the reason you were required to study PERT in school.  How often do you see it applied in practice?

If a mistake is to be made in project management, it should be biased in favor of overcompensation for potential problems.  I am regularly criticized for being too conservative and too hard on pro-forma analysis assumptions. Never the less, time after time I see projected revenues and time lines being overstated and projected expenses understated.

Waiting too long to intervene

I have watched executives demur from engaging an issue in hopes that it would go away.  I have rarely seen this strategy work.  More often than not, a problem in an organization will get worse the longer intervention is delayed.  There are a lot of reasons that this occurs not the least of which is that addressing operational problems most often involves dealing with a personnel problem.  I do not know many executives that enjoy taking on a personnel problem.  Vince Lombardi said, “Hope is not a strategy.”  Failing or refusing to intervene can allow a problem to become exponentially more damaging until it reaches the point that the organization’s financial statements are impacted.  Time and again as an interim, I have been asked, why it was going to take so long and cost so much to address a problem?  I have seen ten or more interim executives committed to address what had been allowed to become a major business problem on more than one occasion.  My answer to this question is always the same.  Cutting costs after an organization finally decides to address a problem only prolongs the time and cost necessary for the mitigation.  All too frequently, organizations create a problem by under-resourcing an area or initiative.  When this leads to a melt-down, the leaders charged with the mitigation are frequently frustrated by the cost and time associated with fixing the resulting mess.  Sometimes, I have to tell them for their future reference that the cost associated with keeping a process or function under control is always a small fraction of the time and resources necessary to straighten it out after it goes catawaumpus.  Every executive I know can relate one or more horror stories to prove this point.  More often than not, the fiasco is related to an I/T implementation where the costs and operational consequences associated with a failed project can exceed the original budgeted cost of the project.

Fire fighters are known for over-commiting resources to a fire.  This strategy is designed to err on the side of having more resource than is needed to address the fire as opposed to running the risk that a growing fire will overwhelm the resources that are available on site.  Once, I asked an interim CEO how it was going relatively early into his engagement in a very troubled large hospital.  His answer that I have never forgotten was, “The platform is on fire.”  A platform is like a ship.  When it catches fire, getting off is rarely an option.  You must fight the fire where it is and failure is not an option.  Remember the USS Forestall?  Skimping on resources when dealing with a problem like this can lead to figurative death in the form of an unplanned career transition.  A business problem is analogous to a fire in the organization.  If you are going to make a mistake addressing a problem, your personal risk will be much lower if you respond aggressively to a problem and err on the side of over-commiting resources until the problem is resolved and the situation stabalized.  The alternative is a potential conflagration.

Non-evidence based decisions

The mantra of UAB’s Doctorate of Administration in Health Sciences program is, “Evidence based practice in Healthcare Administration.”  I have commented before on what appears to be a paradox in healthcare.  On the clinical side, most of what is done is based on evidence gained from objective, peer reviewed research.  The purpose of the research is to yield better outcomes and safer facilities for patient care.  In the administrative suites of too many healthcare organizations, decisions are routinely made based on seat-of-the-pants hunches, historical precedent, little or no analysis, ridiculous assumptions, no assumptions, flawed analysis, systematic ignorance or reckless disregard of applicable evidence and research.  More often than not, harried administrators do not even bother to see if any applicable research is available to help them make better decisions.  In other cases, decisions are made for political expediency or to appease Dr. Huff-and-Puff.  I got into trouble in a Catholic hospital for suggesting the leadership team’s decision making ranged from magic eight ball to Ouija board.  I now keep a magic eight ball on my desk as a reminder to not fall into this trap.  It is funny to have younger people ask me what the magic eight ball is.  They’re not old enough in some cases to have ever heard of the magic eight ball and they are fascinated to see how it works.  It is a wonder some organizations get along as well as they do.

Indecisiveness
I was perusing novelty signs in a gift shop in Indiana when a sign captured my attention.  It said, “Decision making around here is like a squirrel crossing the road.”  Indecisiveness can be dangerous when it is practiced in the front office.  At its least, indecisiveness can lead to project and initiave delays.  At worst, it can wreck not only projects but the credibility of executives with their Boards.  There’s a one liner that says, “The road to failure is littered with run over squirrels.”  In an earlier article I said, “If you are a decision maker, make a decision.”  Not making a decision is making a decision.
As before, I would like to thank Dr. Christy Lemak Professor and Chair of the UAB Department of Health Services Administration for the inspiration or should I say assignment that resulted in this article. I am looking forward to seeing my grade.
Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.
The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link that usually appears as a bubble near the bottom this web page.
There is a comment section at the bottom of each blog page.  Please provide input and feedback that will help me to improve the quality of this work.
This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission.  I note and provide links to supporting documentation for non-original material.
If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.
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Should I pursue professional credentialing?

I need to start this article with a disclaimer.  I am HIGHLY BIASED in favor of professional credentialing.  If this is offensive to you, stop reading this now.  I am fairly well credentialed.  I have a Masters of Business Administration degree and a Doctorate of Science in Healthcare Administration.  I hold Fellowship certifications from both the Healthcare Financial Management Association (HFMA) and the American College of Healthcare Executives (ACHE).  I hold HFMA certifications in Managed Care and Patient Financial Services (PFS).  I am in the first class to be certified by HFMA in managed care and I was the national co-valedictorian in my HFMA PFS exam class.  I served a sentence on HFMA’s Board of Examiners (BOE) including a year as Chairman of the BOE.  The BOE is responsible for HFMA’s professional certification program.  Other than this, I have not done much to improve myself professionally or promote professional certification.

Lest this come across as self aggrandizing, you should know that I had a rough time in high school but ended up being the first in my family to earn a bachelor’s degree and that undergraduate degree was bestowed by The University of Virginia’s McIntire School of Commerce.  One of the highlights of my service to the healthcare profession is my service on HFMA’s BOE.  A number of changes to the HFMA certification process occurred during my service on the Board and as the Chairman of the BOE that I am very proud of.  Changes that were focused on making the certification process more objective and making the preparation process more efficient.

You’re damn right I think credentialing is important.

More than anything else, I think a professional credential makes a statement about you.  I discuss this in my article about getting ahead.  Holding professional credentials makes a statement  that you have shown willingness to go beyond the minimum required by a job to be recognized by your peers in your discipline as being one of the best among them and an example for others seeking career advancement and improvement.

Professional certifications usually require a combination of education, experience and ability to demonstrate mastery of a discipline.  The effort required to obtain a credential is useful in that in the process of achieving the recognition, it is impossible to not learn something or possibly a lot.  This knowledge is helpful in career development and can differentiate you from your peers in a competitive job or search situation.  Among your peers, those with professional certifications are typically held in higher esteem.

For some credentials and some disciplines, certifications are minimum requirements for certain roles.  There was a time when holding an ACHE Fellowship was practically a minimum requirement for becoming a hospital CEO.  That is not as true today because of the shortage of FACHEs and the effects of some head-hunters focused on making their own jobs easier by convincing Boards of Directors that requiring professional certification will unnecessarily restrict the pool of candidates.  My question of a Board making a decision like this is why would they want to expand their net to catch applicants that did not feel that getting certification in their discipline was important?  Ironically in hospitals, these Boards preside over medical staffs that increasingly require Board Certification of their members.  My question is if they support requiring Board Certification of their physicians, why would they intentionally establish a lower threshold for the executives operating the organization?  If the demand was higher for certified leaders, it could result in an remuneration differential and lead to more executives seeking certification.  If I was advising a Board or a hiring executive, I would and have required headhunters to build a very strong case for recommending consideration of a non-certified executive when certified executives are available.

If you are an executive that is interested in career advancement, my advice is that credentialing is one of the first things you should consider.  The type of credentialing you pursue can vary depending upon your current or desired role.  In nursing for example,  a wide variety of credentials are available.  Many nurses carry several credentials.

We have all heard the adage that if something was simple or easy, everyone would have it. This principle certainly applies to credentialing.  Credentialing can be expensive, time consuming and difficult.  Credentials require a combination of minimum education, in-role experience, examinations, service under the tutelage of another certified leader and the like.  Each discipline has a process for determining the requirements for one of their members to be recognized as the best among them.  Some are more rigorous than others.  An argument can be made that the more onerous the process, the higher the value of the credential and the greater the degree to which a credentialed executive is set off from his peers.  In the case of HFMA, the credential is a Fellowship and it is earned by less than 10% of the members.  If you are a HFMA member, start paying attention to the certified status of your peers and look at their career advancement success compared to the 90%+ of uncertified members.  It should not surprise you to discover that the type of people that pursue professional certification are the same type of people that tend to advance their careers faster than others.  Is it the credential?  To a degree, I would argue that the answer is yes.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.
The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link that usually appears as a bubble near the bottom this web page.
There is a comment section at the bottom of each blog page.  Please provide input and feedback that will help me to improve the quality of this work.
This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission and attribution.  I note and  provide links to supporting documentation for non-original material.
If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

What is a blind reference?

Some people naively think that the only reference checking that is done is with the references given by a candidate or to a head hunter.   Executives recruiting for talent will peruse your CV looking for places where you and they might have common acquaintances.  They will also look for places that some of their friends and professional contacts might have insights.  When these links are found which is most of the time for an experienced recruiter or hiring executive, you are about to become the victim of a blind reference.

A ‘blind reference’ is an investigation into your past by a hiring executive that you know nothing about.

I do not put a lot of faith in  references provided by a candidate although I have had candidates give me references that were not very complimentary of them.  If you are going to give a reference, at least have an idea about what they are likely to say about you.  No one that has any sense is going to intentionally give a bad reference on a candidate to a stranger.  I also disregard reference letters.  No one is going to write a letter that states the candidate is bad.  On occasion, I will write a reference letter for someone as a personal favor but I aways counsel them that reference letters in my opinion are a total waste of time.  The only time I pay any attention to a reference letter is if I know the author.

Because of political correctness and the cold legal realities associated with references these days, the best you are going to get from formal references in most cases is that the candidate was hired on one date and departed on another date.  The most you are likely to learn is that the candidate actually did work for the firm you are contacting for the stated period of time.  They will rarely tell you anything more because references are subjective by nature in most cases.  Subjective references that cause a candidate to be ruled out of a search can become a liability for the person that gave the reference.  This is one of the reasons that blind reference checking has grown in my opinion.

If I get a reference call on a candidate being evaluated by someone I do not know, I refer the call to HR where I know what they are going to be told.  Even if the reference call comes from a friend,  I know the candidate and I know them to be bad, usually instead of giving a bad reference, I will usually refer my friend to HR where they will get the standard, canned response.  The hiring manager gets the message.  If a friend encounters me refusing to give a reference, they get the message.

The more frequent call that I get is from a decision maker that is checking references that are not on the candidate’s list.  These are the calls that are dangerous for candidates because they are blind to the candidate; hence a blind reference call.  The candidate will never know in most cases they were vetted through a blind source.  This is one of the many reasons why it is so important to keep up your networking and to not burn bridges unnecessarily.  If you left a place under questionable circumstances, you need to have a good explanatory story and you need to be forthcoming and transparent.  Of course a blind reference is not necessarily a bad thing.  Under the right conditions, it can propel you to the front of the line.  I received a blind reference call on a candidate I happened to be considering at the same time.  I told the blind reference caller that they could dispense with their questions because my reference will be very simple, “If you do not hire her, I will.”  I had worked with this candidate before and she is outstanding.  She was going to end up with a gig regardless of how the reference checking worked out in this case.

When I get a blind call from someone I know and trust, they are going to learn the whole story.  The reason is that I know I can call them to have the favor returned at some point in the future.  If the candidate departed under less than ideal circumstances or told a story that I know to not be true, I will give the reference to HR as stated above.  This usually surprises the decision maker that hoped to get something from me.  The fact that I refuse to provide a reference for someone that the decision maker knows I know well usually tells them enough, especially when I put off multiple requests for help.   About the third time I refuse to provide any information, the recruiting executive gets the message.  If you are going to engage in this activity, you have to be absolutely certain that your confidence will be protected.  This is the main reason that I resist giving references to head hunters unless I know them personally because it is hard to be certain your confidentiality will be protected.

When you are looking for a job, who will the hiring decision maker call?  What will they be told by people you used to work around?  Time after time, I have received blind reference calls.  Often, these calls are about someone that has done little if anything to endear themselves to me or to even keep in touch.  People like this generally do not return calls, ask of an acquaintance while offering nothing of value i.e., they do not engage in networking, they do not accept meetings or referrals, they do not attend or participate in industry related networking or continuing education activities such as ACHE or HFMA.  I wonder what these people expect I am going to say about them?  And of course, all of this is above and beyond anything I might know about their acumen, experience or capabilities.   I would rather not receive these calls in the first place but I do not control who calls me.

I do not know what it is about some people.  In one case, I reached out to an executive that I thought might benefit from my insight about handling executive turnover in his organization.  He humored me then never called me back in spite of the fact that I specifically requested a call regarding a wealth of information that I volunteered.  I never heard from him and I do not expect to hear from him because his failure to take my advice was at least partially responsible for his own firing a couple of months later.  A few weeks ago, I got a blind reference call.  The guy was seeking employment with a consulting firm and I knew the hiring executive very well.  What do you think happened?

This kind of thing does not have to happen to you.  If you are smart, you will get serious about networking and building as many positive relationships as you can.  Many of these relationships come from active participation in associations, alliances and industry peer groups.  You should volunteer your time to give yourself exposure to people that you might need for a job some day and in the process help them develop a positive impression of  you.

There is a saying that there are three kinds of people;  Those that make things happen, those that watch things happen and those that wonder what happened.  You never know when someone is going to make a call to someone that you might not even know; about you – a blind reference.  When that occurs, what will the results of that call be?  If you or someone you know is having difficulty getting a job and their qualifications appear competitive, they may be the victim of blind reference checking which puts them in the category of wondering what happened.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.

The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link that usually appears as a bubble near the bottom this web page.

There is a comment section at the bottom of each blog page.  Please provide input and feedback that will help me to improve the quality of this work.

This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission.  I note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

There is nothing that I can do for you.

 

Responding to my blog article entitled, “Why do CEO’s get fired . . . ” Bill Eikost, a long time aquaintance of mine in a comment raised the following question:

“In one facility, the hospital had contracted with a large consulting practice to come in and do an assessment of the organization.  As I understand it, when they made their presentation, which included some tough decisions be made, the board objected to it not being in the best interest of the organization or the community.  Why have them come in in the first place then?  The CEO supported the idea of the change but was met with resistance from his board. In almost all cases, I would bet the board wins.  As a result, many of the senior leadership left and they brought in or promoted new leadership to continue the course. ”

I have been mocked for having epiphanies.  People tell me they are tired of hearing some of the stories I use to make a point or illustrate a concept.

Recently, I have been dealing with some vexing problems related to matters beyond my control and entrenched, recalcitrant culture.  It was during a personal low point of frustration, depression and demoralization about these matters that I had yet another of my epiphanies.

Heart surgeons regularly carry out miraculous interventions that result in people that would otherwise be dead walking from the hospital under their own power healing of their afflictions.  One of the more difficult aspects of being a cardiovascular surgeon is case selection.  CV surgeons and their practices are continuously evaluated by all sorts of local and national statistics.  One of these statistics is mortality.  What percentage of patients treated by this physician ended up dying?  Talk about a Hobson’s choice!  On one hand, the physician is motivated to do everything within his power to give the patient the best possible chance of survival.  On the other hand, there are times when the probability of a surgical intervention being successful is nominal.  A surgeon that is too aggressive taking high risk cases will have an above average mortality rate and be branded a bad doctor.  Can you imagine what it must be like to look another human being in the eye and tell them, “There is nothing I can do for you.”  The surgeon knows that putting the patient through a procedure would be unlikely to be successful but he also knows that he is in many cases effectively issuing that patient a death sentence.  I could not do this and I have respect for these surgeons that I cannot articulate.  I do not think I could do this and live with myself.  The next time you see one of them, thank them for their service.

Getting back to my epiphany, some of the things needed to ease the stress on the organization were going to require some community leaders and Board members to step up to challenges and take on controversy they did not sign up for.  Sometimes the easiest thing to do is nothing and if this were to occur, I was finished.  I had reached the point where if this was to be the case, there was nothing more I could do for my organization (patient).  In the middle of the night I awoke in a cold sweat when this realization dawned upon me.  Suddenly, I had insight into what it must feel like for a surgeon to tell a patient they cannot be helped.  If the resolve in the organization and the Board to take on the hard work was not there, I was done.  It would make no sense to continue to play along burning up time and resources on a hopeless cause.

All of us have heard the admonition, “Do not go to the doctor unless you intend to do what he tells you to do.”  Compliance in medicine is a huge problem.  If I was at this point, I could easily log some more time but effectively it was over.

I have seen this phenomena before but I did not see it in this light.  I have seen several organizations go through this process.  In one case, an organization that had never had what I would describe as a professional materials manager expressed resolve to recruit one.  An outstanding incumbent was recruited following a long, arduous retained search.  And of course, less than six months into his run as he would say, “the defecation hit the rotary oscillator.”  Seemingly over night, the organization that said it wanted a materials manager changed its mind when the realization of what actually having a materials manager really meant starting dawning.  Sadly, the new executive’s tenure ended up being very short, his career and his family were disrupted and the organization went back to doing things as they had before.  This was the first but certainly not the only time I have seen this happen.

Time for another digression.  About the materials manager referenced above.  His case is fairly typical.  Sometimes the fit is not right but that does not mean the person is bad.  While no one would recommend anyone going though a situation like the one described, the manager emerged from this trauma a better person for the experience, stronger, wiser and with a clearer vision about evaluating opportunities.  He has gone on to have a distinguished career and currently holds one of the largest material management jobs in the entire healthcare industry and thank heavens, the two of us are still on speaking terms.

A lot of people say they want a lot of things until they fully realize what is involved or what the ‘desired’ change implies.  For example, I described what it takes to obtain an advanced role in an organization in a previous blog article.  A lot of people say they want the lifestyle and income that comes with higher level jobs until they find out how long and hard the road is to get there.  Unfortunately, I do not know of any way to assess in advance the point at which resistance will be encountered or how it will be addressed.

In my recent personal case, I have seen support I would not have believed possible come to bear in an effort to achieve the favorable change for the hospital and the community that is there for the taking.  You never know what people are going to do until the chips are down and the hard questions are on the table.

Kevin Rutherford, a trucker, radio commentator, author and producer of a trucking website ends his shows with the admonition to, “Do the hard work and master the journey.”  I like to say that you will never find the walls unless you are willing to push the limits.

Success is not measured by how long you last in an organization.  It is not measured by how  good you are at ‘staying off the radar’ when the organization is seeking to improve itself.  It is not measured in how adept you are at keeping your job.  Success in my opinion is defined by the degree to which you demonstrate selfless leadership to take your area of responsibility to the next level.  I have posed the pertinent questions before.  Are you and your area an example of the best of their type in the industry?  Are you an example of what others should aspire to become?  Are you and your area an example of best practice?  Is your expertise sought out by peers striving to improve themselves?  Do you know what data is used to make these determinations?  Do you compare favorably with all of the statistics available to evaluate your leadership?  Are you taking initiative or are you waiting for someone to come along and tell you what to do?

An honest self-assessment is very difficult but in my experience, no one that was ‘left behind’ should not have seen it coming.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.
The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link in the menu bar at the top of this web page.
This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission.  I note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

 

 

An old epiphany AKA my Barbara Mandrell story

A few years ago, my wife and I had the opportunity to spend the better part of a week in Nashville, TN.  While there, we decided to check out the Fontanel Mansion.  Fontanel was Barbara Mandrell’s ‘cabin in the woods.’  As of this writing, Fontanel is number 4 of 209 things to do in Nashville according to Tripadvisor.  Barbara named Fontanel after her youngest child.  I will leave it to you to look up the meaning of the word and to see if you can see the inspiration.

I highly recommend visiting Fontanel if you are in the area.  It will leave a lasting impression.  Barbara’s ‘cabin’ is some 27,500 square feet in size.  At the time of its construction, it was the largest log structure on earth.  It is still in the top five.  The magnitude and scale of the mansion defy description.  As I said, you need to see it for yourself.  The mansion is so large, the Mandrell family regularly lost their children in the house so everyone had to carry walkie-talkies to stay in touch.  A huge indoor swimming pool, indoor shooting range, 5,500 square foot ‘great room’, arcade, commercial kitchen, lavish finishes and irreplaceable casework and finishes overwhelm the visitor.

At the time I visited Fontanel, I was struggling personally with what I perceived to be a lack of ability to have the degree of favorable transformational influence in the organizations I served as an interim executive.  I knew what needed to happen.  I knew what it looked like when it is right and what it looks like when it is not right.  I was frustrated by  the fact that the organizations just did not seem to be as interested in changing as I expected.  Many of my recommendations either fell on deaf ears or were humored then subsequently ignored.

You can easily spend an entire day at Fontanel.  There is a lot to see and do.  It takes a while to begin to comprehend the magnitude of the mansion.  To me it was as impressive if not more impressive in its own way than the Biltmore house.  Late in the day we had an opportunity to hear Barbara’s daughter Jamie speak.  She stayed with the new owners of Fontanel as an interpreter and her comments brought the place to life.  I was standing with a group of people listening to Jamie talk about her childhood experience at Fontanel.  She was explaining that she had to reach high school age where she started getting out into friends’ homes before she realized that her childhood experience was any different than that of any other child.  She and her brothers assumed that their childhood experience characterized by wealth, maids, butlers, chauffeurs and the like was no different than the childhood experience of other children.

It was at this second that I could have been knocked over with a feather.  I was overwhelmed by a wave of dawning realization that nearly overcame me.  In one second, I got it!  In the blink of an eye, I finally understood the problem I was experiencing.  The reason that I could not get people in the organizations to see my vision for what they and their organization could be was that the environment they were in as dysfunctional as it might be is their sense of normalcy.  They cannot see the possibility of something so much better because their view of the world is characterized by their role in their environment.  They frequently see little if anything that needs to be fixed.  It is normal for me to hear, “Everything here was fine until you showed up and starting changing everything.”

In one organization I served, the Vice President of Finance told me one day that she was there when I came and that she would be there after I was gone.  She went on to explain that she had ‘broken-in and trained’ five CFOs and had survived them all as she would survive me.  We managed to co-exist for a few months primarily because as an interim, I resist  taking personnel actions that will alter someone’s career unless I am forced into a situation where my options have been reduced to one.  In this case, the first thing my successor did was rid himself and the organization of this caustic cancer of an employee.  I have seen multiple examples in organizations that I have served of shock and awe when the degree of dysfunction, sub-optimization and loss were revealed.

The only thing worse than a dysfunctional culture is a toxic culture.  A dysfunctional culture fails to meet the needs of the organization while a toxic culture is more detrimental to the organization because it characterized by active degradation.  There are a number of characterizations of dysfunctional or toxic culture many of which are obvious to independent, disinterested observers while being transparent to the people that are a part of the toxic culture.   These phenomena are more easily recognized to the degree the observer is viewing the situation academically or clinically without personalization of the circumstances or any of the people involved in the issue.  The problem with this is that people rarely change.  In fact, most of us are extremely resistant to change.  The observation of this phenomena over a long time spent in a variety of organizations has led me to the conclusion that achieving a change in culture without changing the cast of characters is generally a fool’s errand.  Ascension Health is the largest not-for-profit healthcare system in the US.  Ascension is also the largest US Catholic healthcare organization.  Ascension places high value on the worth of individuals and in my experience errs on the side of doing the right thing by people in its employ.  I have seen the focus inspired by this culture in Ascension hospitals lead them to make substantial investments trying to salvage leaders that should have been long gone.  Sadly, more often than not, these efforts fail and the person ends up leaving the organization anyway.

How does this apply to leadership?  Every time an organization is presented with the opportunity to fill a leadership position, it needs to think about the role and function that now needs new leadership.  In the case of senior executive positions, I strongly recommend that an assessment be conducted to document the degree to which the previous incumbent and the function was meeting the needs of the organization.  Some organizations have a stronger bias than others to promote from within.  While I support this organizational value, it can be problematic.  There is no substitute or alternative that I know of for the enriching experience of working in different organizations, cultures and climates.  This experience provides insight and perspective that is un-achievable for persons that have grown up in the organization with most or all of their experience being in that organization.  They have no capacity to see things differently than how they currently exist.  In some cases I have seen, internal candidates have been victimized by poor or weak mentorship or leadership in the organization.

This is not to say that an internal candidate should not be considered.  The internal candidate does have the experience and insight to know the history of the organization and the location of every closet where a skeleton is hung and the site of every grave.  They can be up to speed immediately while it can take an outsider months to come up to their full potential.

The moral of this story is to be cognizant of your culture and the degree to which it might be impeding your ability as a leader to move your area of responsibility forward.  You need to ask yourself the very hard question of the degree to which you might be part of the problem.  This is one reason that continuing professional education is so valuable.  You need to be concentrating on improving your education and skills continuously.  In this process, you will begin to gain clarity as to how you may have been sub-optimizing.  This is also an example of how consultants can be very valuable to your personal survival probability.  Use them for their subject matter expertise but ask them questions and listen to them very carefully.  You have experience in a few organizations.  They have experience in many organizations and are uniquely qualified to help you understand where your organization might be missing opportunities to improve.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.

The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link in the menu bar at the top of this web page.
This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission.  I note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

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How do I get ahead?

A frequent question I get is how do I advance my career?  How do I get ahead in the organization?  This is a question I asked myself a lot earlier in my career.

The first question to ask is what does it mean to you to ‘get ahead?’  Success is not always best measured by career accomplishment.  I have learned that life is full of trade-offs.  If you wish to advance your professional career, you are going to have to pay a price.  The price is measured in short-term sacrifice for longer term goals, moving to where the opportunities are, pursuing advanced education and professional credentialing among others.  These ‘prices’ are higher than many people are willing or able to pay.  The effect is that they get trapped in roles where they can not realize or achieve their full potential.

When I was coming along, I was always looking up and ahead.  I was the first in my family to earn a college degree.  My parents did not understand college but they did recognize that people with college educations did better.  In college I was exposed to people that had achieved much personal and professional success.  I was inspired to replicate what these people had done so that I could enjoy the niceties of life that they had earned.  When I started working, it seemed to me that given the chance, I  could do better than the people ahead of me in the organization.  I set myself to learning what they had done to become qualified for their roles and I started closing the gaps of experience, expertise, knowledge and credentialing.  Before long, I was given consideration and started achieving my goals of reaching advanced roles in healthcare administration.

One of the things that occurred to me along this road is that the key thing organizations select and reward leaders for is cognitive skills.  Decision making in my opinion is one of the most if not the most valuable skills a leader can develop.  The better you are equipped to make decisions, the more responsibility the organization will bestow upon you.  The larger the responsibility, the more substantial the risks and rewards associated with the decisions you are called upon to make.  These risks and rewards are ultimately reflected in the remuneration for which you are eligible.

In my practice as an Interim Executive, I learned that the primary factor differentiating organizations that were doing well from those that ended up with challenges and transitions is less than optimal decision making.  Show me an organization with challenges, operational difficulties and unacceptable financial results and I will show you leadership that has compiled a poor record as a result of questionable decision making.

As I have reflected upon this phenomenon, it has occurred to me that as we progress through our career and through increasingly responsible roles, the nature of our work changes.  This has led to the development of my ‘Model of Career Progression.’

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Early on in our career, the amount of ‘work’ we do is how we are measured.  The work is usually measured in volume and it frequently requires a high level of technical skill but not much cognitive skill.  For example, what field on what page do I access to find certain information?  How many ‘activities’ can I complete in one day?  I once had a senior leader ask me if I had reviewed certain accounting journal entries.  I told him that I did not know what drawer the journal entries were stored in.  I did not know where the journal entry pad was and I could not remember whether the debits went by the door or the window.  What an outrageously stupid question!  I have not reviewed journal entries since I was a Controller over thirty years ago.  I am not paid to review journal entries, I am paid to assure that the organization’s financial statements are timely, materially accurate and that they fairly state the financial position and operating results of the organization.  Can you see the difference?

As you advance in an organization, technical skill becomes less important and decision making skill becomes much more important.  At higher levels of responsibility, you become more of a generalist because you are not evaluated based on how much ‘work’ you do.  You are evaluated based on the results of your leadership, particularly as it relates to the outcomes of your decision making regardless of how much time and effort you expend in the process.

In my opinion, the development of cognitive ability is what will launch or limit your ability to advance in an organization.  How do you develop cognitive ability?  All of us are limited at some level by our basic intellect but I do not think that is what constrains most people.  The reason is that people like Earl Nightingale and others have said that most of us rarely use more than 10% of our mental capacity so I am not buying the theory that people are not ‘smart enough’ to do higher level cognitive work.  The way you develop your skills is to invest in yourself by seeking advanced education and professional credentialing in your area of expertise or interest.  Continuous self study helps you to cement your position when given opportunities to function at higher levels.  Experience in multiple situations is also helpful.  You do not necessarily have to leave the organization to gain this experience.  I have counseled numerous young people to seek opportunities in other ares of the organization to learn as much as they can about how the enterprise functions and to see where their areas of greatest interest or gifts lie.

There has never been a time in healthcare that more and better leadership is desparately needed.  There are plenty of opportunities available for those who wish to advance their careers.  All you have to do if you are one of these people is to start investing in yourself.  I can assure you from my own personal experience that investment in yourself is the best investment you will ever make.  I don’t care how cliche the phrase is.  It has served me and a number of other very successful people I know extremely well.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.
The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link in the menu bar at the top of this web page.
This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission.  I note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

 

Are you into ‘sadistics’?

Statistics – the one discipline that almost anyone that has ever been forced through does everything in their power to forget anything they learned as soon as they can.  I used to be a member of this crowd.  In fact, the first statistics course I encountered in undergraduate school nearly ended my college career.  The D I received in that course remains my proudest academic achievement.  For a number of years, I thought my sadistical torture was over and behind me.  Then I enrolled in a post graduate program at The University of Alabama at Birmingham and much to my chagrin, in order to finish a doctorate program I was going to have to complete five more statistics courses including an Applied Multivariate Statistics for Health Administration course.  The icing on the cake was the requirement that my dissertation be based on statistically valid research.  By the time I completed my doctorate degree, I fully understood the meaning of evidence-based leadership in healthcare administration.

What I have learned about ‘sadistics’ is that it is not nearly as complicated and intimidating as most people think.  In fact, to prove my degree of neurocognitive disorder, I will admit that I now study quantitative methods for fun.  They got to me at UAB.  As I learn better the application of the discipline, I cannot get enough knowledge or understanding of it.  For example, I am currently trying to get my head around Chua’s incredible article on Normative Decision Theory and its application to healthcare administration and strategy development.  Pretty good stuff for those of you that are interested in making yourselves better at what you do.

For the most part, statisticians are interested in understanding if this thing is different from that thing or if there is some kind of relationship between two or more things.  Some of them even try to make sense of the magnitude and frequency of the vibration (variance) of things.  They waste time trying to figure out what the probability might be that they are drawing the correct conclusion from what they are seeing.  Why anyone in healthcare administration would care about such a trivial concept escapes me.  One of the things that statisticians are obsessed with that does have profound application in healthcare administration is what they call ‘effect’ or more precisely, isolation of effect.  In other words, what the hell is happening and does the thing I think is causing what I am seeing really have anything to do with it?

As healthcare administrators, we spend a lot of (too much) time looking at data.  What we really need is information.  What in the data is relevant?  Is the change we are seeing in the data significant or is the change within the realm of expected normal variation?  Two of the worst mistakes we can make as leaders are to fail to react to data that is telling us something is not right or reacting to something when there is no legitimate reason for concern.  For those of you sensing statistical ghosts, I am talking about type I and type II (alpha and beta) errors.

The CMS is increasing its focus on payment for outcome instead of payment for throughput.  In this process, the risk associated with outcomes that vary (variance) from the expected outcome that will be the basis of reimbursement and that risk will be borne solely by the provider.

Those of you that follow my blog regularly know that I frequently digress and I am feeling the need to digress right now.  Sometimes, my digressions devolve to rants and I am feeling one coming on.  I have heard about all I care to hear about population health management and integrated delivery systems.  The largest part the cost of an episode of illness in most cases is the hospitalization.  Leadership teams are distracted into grandiose fantasies of managing the health of large populations.  The hypocrisy of this is that the same leadership teams cannot find the courage, will  or means to manage the population under their direct control.  If there were ever a group of people that know how to utilize healthcare benefits, it is healthcare workers.  Healthcare groups routinely utilize healthcare benefits at higher rates than their non-healthcare counter-parts.  What I do not understand is why provider organization leaders I have worked with in multiple organizations go to meetings to obsess over medical homes and population health management while they fail or refuse to do anything about the inappropriate utilization that is occurring right under their noses.  One leader I worked with was talking about medical homes before most people had any idea what a medical home was.  In spite of the fact that the organization had all of the resources necessary to develop and implement medical homes for their employees, they did nothing to demonstrate what a medical home was or what it might accomplish while the leaders were running up and down the road selling the idea to other organizations.  The message I was hearing was, “We are not doing anything about our medical costs and utilization but trust us, we will help you manage yours.”  Why would anyone expect to be believed while doing this?  I postulate that if you are the low cost, high quality provider, organizations needing the services you provide will be blazing a path to your door.  If you are not a low cost, high quality provider, either your organization will be left behind, it will become a part of a larger organization with utilization management capabilities or someone else will be running it.  I do not believe that the responsibility to achieve better outcomes and cost can be outsourced.

One of the fascinating aspects of healthcare cost is that a disproportionate amount of cost is concentrated in a relatively small number of resource intensive or catastrophic cases.  It is not unusual to see over half of the entire cost of a health plan was driven by less than five percent of the covered lives.  There is a lot in the press about the very high percentage of Medicare expenditures during the final two weeks of life.  The CMS is currently proposing to establish reimbursement for physicians to manage palliative care.  The point of this is that you do not have to manage the health of a population.  You have to case manage the cost that is being driven by a very small part of the population.  The question is who are the people?  What are their problems? Are resources being allocated efficiently for the best benefit of the patients?  In order to manage a population, we have to identify those at risk of becoming large claims and help them manage their conditions including medical costs incurred outside the hospital.  The other 95% will take care of themselves.

A good friend and classmate of mine was recently appointed CEO of a metropolitan safety net hospital.  Joe’s dissertation topic was on population health management so I suspicion he might know something about the topic.  If there were ever a population needing help managing their health, it is the people that utilize safety net hospitals.  What do you think one of the first things Joe did after arriving at the hospital?  He hired a Ph. D. statistician to head up his clinical quality department.  This is the difference between Joe and me.  Because of my background, experience and training, I tend to focus on helping the hospital reduce its cost by operating more efficiently.  Joe’s approach is to manage cost by stopping inefficient and inappropriate utilization of hospital services.  If we ever get a chance to work together, we are going to set some organization on fire.  We won’t make the cover of Rolling Stones but we might make the cover of Modern Healthcare.

Why would Joe do such a thing anyway?  Do you think it might be to have someone in his charge that could make sense of the mountain of data every hospital accumulates and give him some information that he can respond in ways that might improve patient outcomes and hospital costs?  I wonder if it might have anything to do with isolation of effects that are driving costs and outcome and focusing very limited resources in areas that might make a difference?  Do you think the application of quantitative methods might have some potential benefit to help prioritize initiatives that would make a material difference quickly?  Do you wonder how long it will be before Joe knows which of his physicians’ practice is too expensive for the hospital to afford?  Too often, leadership teams get drawn off their focus by trivial distractions that have little if any potential to make a lasting difference in the organization while issues that are costing thousands of dollars per day are ignored.  If you really want to get fancy, you can start thinking about variance and the analysis of variance or ANOVA as a means to understand the significance of the effect that is being observed.

A leadership team has a limited ability to focus because of a phenomenon that I describe as bandwidth constraint or not enough of us to go around.  The more items the leadership team takes up, its ability to provide concentrated focus on any particular item is degraded.  I have been frustrated by my failed efforts to get leadership teams to agree on what is important and resolve themselves to focus on a few high priority items that everyone agrees will make a significant difference if implemented while ignoring distractions.  A year later, the performance of the organization has failed to improve and most of the strategic initiatives remain incomplete and no one can remember what most of the time was spent on during the year.  Anyone that has ever hunted birds knows what usually happens when a rabbit runs between the dogs and the birds.  Where do you think this term ‘chasing rabbits’ came from anyway?

The world is changing quickly.  Our ability as leaders to make sense of what is happening around us and to discern how to respond effectively will define our potential for success.  One of the tools that can dramatically enhance this ability is to replace old skill sets that have little future potential with the skill sets necessary for survival in a different world.  Among these is quantitative methods.  The best part of this is that you do not have to know statistics but you need experts who do know statistics and who know how to mine ‘big data.’  If you are an occupant of most of the C-suite roles, you have become a generalist. We do not need the high technical knowledge required of many of those that report to us.  But you do have to have the correct resources in the organization if you plan to survive.

Throughout this article, I have interchanged the proper use of the word ‘statistics’ with a form that resonates with anyone that has ever been tortured by study of the subject; ‘sadistics’, a term coined by another classmate, Dr. Jim Burkhart that is currently the CEO of another large, municipal safety net hospital.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.
The easiest way to keep abreast of this blog is to become a follower.  You will be notified of all updates as they occur.  To become a follower, just click the “Following” link in the menu bar at the top of this web page.
This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission.  I note and  provide links to supporting documentation for non-original material.

Are you a CEO? Have you been caught looking? Do you know anyone that has been caught looking?

I recently took part in reminisces of some of the organizations that some of my friends and I have served or known about.  One of the more common reasons for CEO turnover is an unexpected accounting adjustment.  Eight figure adjustments that go the wrong way are too common and there are few things that will get a CEO fired faster than his board learning that they are going to have to absorb a $50+ million loss that occurred on the CEO’s watch.  Like it or not, the CEO will be held accountable for hiring or retaining a CFO that could not produce accurate and timely financial reports.  He is expected to have a sufficient grasp of what the CFO is doing to control their work.

A common cause of this type of an adjustment is overstatement of the value of accounts receivable or stated another way, understatement of contractual allowances.  These understatements lead to interim income statements being overstated in terms of operating margin.  How does this happen?  Sometimes the CFO does not fully understand what he is doing, his models fail or he becomes confused by changes he cannot explain.  In other instances, CFOs are under withering pressure to produce results to meet expectations of a financial plan, corporate organization or worst of all, incentive compensation targets.

In my experience, few CEOs appreciate the degree of potential error in net revenue estimates or the degree to which their CFO may be exercising judgment in the determination of the appropriate valuation of accounts receivable.  Unless there is absolute transparency and crystal clear communications between the CEO and CFO on these issues, there is a very good chance that the CEO is setting himself up for a very unpleasant surprise.

Given this risk, what is a CEO to do?  How does the CEO manage and mitigate this risk?  How can he know his balance sheet is properly stated?

Without going into vexing detail about how all of these calculations are done, there are a few high level indicators that every CEO should be watching as indicators that things are not as they appear.  First, the CEO should review and understand every adjusting entry made by the outside auditors during the external audit.  Each of these entries represents either the correction of an error found by the auditors or a difference of opinion between the auditor and the CFO as to how a transaction should be recorded.  In a perfect world, there would be no audit adjustments and they are sometimes symptomatic of problems in your finance department.  If you have experienced adjustments, your focus should be to see that they are eliminated.  If your finance team cannot get this done, you have a problem that will probably not improve on its own.  These errors are also symptoms of the fact that your interim financial statements were not correct.  The magnitude of the adjustments or the difference between the last interim statement and the audit indicates the lack of precision of your finance team.

The CEO should also be cognizant of the contents of the management letter.  The management letter addressees internal control matters.  Again, in a perfect world, there would be no comments.  I have seen organizations that did not even get a management letter which is almost as bad.

Another thing the CEO should be doing is meeting privately with the audit partner.  There is no one that is in a better position to evaluate the efficacy of an organization’s accounting and finance functions.  My point here is not to address the audit process but to help a CEO avoid being blind sided by a large, unexpected adjustment.

Time and again, I have seen CEOs taken totally by surprise when their auditors recommend large, unfavorable adjustments to the value of receivables, revenues and profits.  All of these items are directly linked.  Time and again, the CEO that likely had no idea what was going on in his finance department is one of the first victims of the transitions these events precipitate.  The point of this article is to explain this linkage and give a CEO a couple of VERY POWERFUL tools to identify a potential problem.

Each month, your accounting department revalues receivables and in this process recomputes the reserves needed to reduce receivables to their realizable amount.  While these calculations can be very complex, the idea behind them is simple and compelling.  The other side of the adjustment to the value of receivables is the contractual allowance on the income statement.  The contractual allowance is what reduces gross revenue to net revenue.  If the contractual is too small, net revenue is inflated which leads to an inflation of operating income.  If the contractual is too large, net revenue and operating income are unnecessarily reduced.  Unfortunately, most errors go the other (wrong) way.  Note that I am including bad debt expense in this discussion as it too is a deduction from revenue (contractual) that reduces self pay receivables to their realizable amount.

How on earth can a CEO know if all of this is right?  The answer is extremely simple.  The CEO needs to look at only two indicators.  The first is the ratio of cash collections related to patient services to net revenue.  Net patient service revenue (NPSR) is nothing more complicated than an estimate of how much of the gross revenue will ultimately be collected.  If the NPSR estimate is correct, it will be proven over time by cash collections related to that patient revenue.  In other words, if your cash collections related to patients is less than your NPSR, you have a potential problem brewing.  In every situation where I became engaged in an organization that had just experienced a large adjustment to receivables, the cash to NPSR statistic was well below 100%.

A lot of people fail to grasp the magnitude of money involved in these estimates.  One organization I served was running a cash to NPSR ratio of 93% just before it experienced a write-down in receivables of over $60 million.  Consider a medium sized hospital with $1 billion of gross revenue.  Every percentage point of $1 billion is $10 million per year.  Be understated by 7% as was the case in the example I cited and you are looking down the barrel of a $70 million accounting adjustment that will reduce (or maybe obliterate is a better word) your operating margin for years and set you on a new, unplanned career path.  If anyone had been looking at this statistic, this tragedy may have been averted.  In the cited case, both the CEO and CFO along with a few others were ‘freed up to seek other opportunities.’

Changes in the magnitude of receivables (AR Days) can affect this statistic but if the cash is much below 97.5%, you had better start getting an explanation of the cause.  Why do I say 97.5%?  To account for normal variation, it is not unusual to see this statistic vary across a 5% (+/- 2 1/2%) range.  When it gets outside of that corridor, the CEO had better be pressing for answers.  He cannot say he was surprised by a proposed adjustment if his cash to NPSR ratio was low. He (and his CFO for that matter) should have seen it coming.

The second key indicator is yield on gross revenue.  What is NPSR as a percentage of Gross Patient Revenue?  The nominal value is not particularly  important as it varies widely by organization and by region of the country.  The explanation of this phenomena is beyond the scope of this article.  If the organization raises its prices and nothing else happens, yield will decrease because all payors do not participate equally in a price increase.  For example, an organization does not realize much of a price increase charged to Medicaid and/or self pay patients.   If the yield is going up, there are two primary reasons.  The first is that revenue cycle performance is improving significantly and if this is the (rare) case, good for you. This improvement should be validated by a decrease in gross and net A/R days. The second reason for increasing yield is that the contractual allowances discussed above are inadequate and you have increasing risk of an unfavorable adjustment in your future.  As I stated earlier, the nominal value of the yield statistic is not as important as its change over time.  A change in yield can be reconciled to the dollar by someone that knows what they are doing.  If the statistic is not decreasing slowly over time, you should be asking for explanations or seeking help from independent advisors to help you understand what is happening if you do not like the explanations you are getting.

A lot of the financial pressure on hospitals has a root in yield that is declining faster than gross revenue is increasing but that is the topic for another article. 

I would be the first to agree that it is unfair to see a CEO get whacked for a problem like this developing on his watch.  Unfortunately, I have seen this happen time after time as one unsuspecting CEO after another became a victim to judgment or accounting errors in their finance department.  I had Board members in a hospital that had relieved the entire leadership team at one time express remorse for knowing something was wrong but not knowing what questions to ask.  A savvy CEO will know what indicators to watch to give himself the best possible chance of not being caught looking.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two you would find value in.  I can also help with career transitions or career planning.
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This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission.  I note and  provide links to supporting documentation for non-original material.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

How fast can you teach finance?

Sometimes, I am asked, “How did we get into this mess?”  “What did we do wrong?”  My standard answer lies in a phenomena that I have seen in one challenged organization after another and the thing that inspired me to pursue a doctorate degree in Healthcare Administration that was focused on Evidence Based Leadership.  When an organization becomes challenged, in every case in my experience, there has been a consistent pattern of questionable decision making sometimes spanning years leading up to the transition event.

Organizations that consistently do well have one thing in common.  They make consistent, disciplined, evidence based decisions that work out with a high probability of success.  Organizations that end up challenged and in transition have an equally consistent pattern of non-evidence based decisions that have a high probability of not turning out well.  Everyone makes mistakes.  The name of the game is to win more than you lose.

I am used to hearing, “Everything was OK then all of a sudden, we went off the track.”  They want to know if it can be fixed.

I always say, “Absolutely.”

The next question is inevitably, “What will it take?”

To which I respond, “One thing,” as I hold up a single finger.  Remember the movie City Slickers?

Of course, they want to know what the one thing is to which I reply, “I cannot tell you.”

When they want to know why, I say that if I tell you the ‘one thing’ there will be no further need for me.

After letting them stew for a few minutes, I relent.

The ‘one thing’ is to start making disciplined, evidence based business decisions. That is all.  See to it that this happens in your organization and we will never have a chance to work together.

Decision makers have told me, “I understand this concept but I don’t understand all of this finance stuff”.  I tell them that is not a problem because I don’t understand much of it myself.  A lot of people try to impress others by putting the razzle-dazzle on them. They use big words and arcane concepts in an effort to prove they are smarter than me and to convince me I cannot get where I want to go without their help.

In my opinion, it is easy to make something hard but infinitely more complex to make it simple.  I would argue that you do not understand a concept very well yourself if you cannot put it into terms that a lay person can understand.  All too often, complicated presentations sound like so much BS to lay people.  This is a severe problem if the lay people happen to be members of a Board of Directors.  Spouting BS instead of being clear, understandable and transparent has caused more than one executive I know to end up on the job market creating a gig for me in the process.  It almost always leads to a loss of credibility even when it is technically correct.

I had finance committee members in one organization express concern about ‘Voodoo arithmetic’ and ‘Cookie Jar Accounting.’  The prior CFO that was very good in my opinion had managed to lose credibility by failing to be sufficiently clear and transparent with the Finance Committee and Board of Directors.

I like to tell my clients that I can teach you everything you need to know about finance in a couple of sentences.  This never ceases to galvanize their attention.  You mean that you can learn everything you need to know about corporate finance in a couple of sentences?  The answer is an emphatic YES.  Here we go.

The financial performance of any organization is nothing more or less complicated than the weighted average return on investment of each of its many assets.  Collectively this return is generally described alternatively as return on equity or cost of capital.  Except for operating expenses, every commitment of funds the organization makes is an investment in an asset other than cash.  If the return on this investment is greater than the organization’s cost of capital, the effect of the investment will be to improve the financial performance of the organization.  If the return on an incremental investment is lower than the organization’s cost of capital, its effect on operating performance will be detrimental.  A series of bad investments will lead any organization into trouble. From a finance perspective, it doesn’t matter what the investment is.

There you have it.  Corporate fiance in a few sentences.  Everything you need to know to be successful financially and to lead an organization to improved financial and operating results.

Now, I have some questions for you.

Do you know what your cost of capital is?

Do understand how the cost of capital is derived?

When was the last time you considered the effect of what you were planning was going to have on the organization?

When was the last time you got this question in the Board Room?

What did you do the last time you were present when a politically motivated decision or a decision of expediency was being debated?

When was the last time you included in your project plan a mitigation strategy for a proposed investment that was not accretive in its own right?

Have you done a sensitivity analysis to understand the degree to which your project’s assumptions bear on the expected outcome?

Do you understand from your sensitivity analysis the threshold at which you would not recommend that the project go forward?

When was the last time you did an evaluation of asset returns in your existing portfolio to gain a better understanding of which of your investments are accretive and which are not?

Do you understand the difference between return on equity and return on investment?  If you want to get fancy, you can undertake a study of the effects and considerations of leverage on return on investment.

I frequently hear executives say that it is the business of the CFO to know all of the ‘finance stuff.’  My response to this is that if you call yourself an executive and you plan to advocate for anything (especially in a Board room) that requires an investment and you do not have a reasonable command of these concepts, you are an idiot.

Someone might read this and conclude incorrectly that this is all about money and not much else, a complaint I have often heard.  I have a fair amount of experience working in Catholic healthcare.  Every Catholic hospital I have worked in claims to be the one that housed the first nun that uttered the words, “No margin, no mission.”  It is about money but it is about more, the mission.  Unless the organization is financially healthy, it cannot sustain itself and if it loses the ability to sustain itself, it will find its ability to continue to carry out its mission compromised.

This is original work.  I have not seen content of this nature in my extensive dissertation research.  This material is copyrighted by me with reproduction prohibited without prior permission.  I always note and  provide links to supporting documentation for non-original material.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two you would find value in.  I can also help with career transitions or career planning.

Why do CEOs get fired or leave organizations anyway?

In my previous post, I made reference to comments written by ‘TiredofTheOverpaidFailures’ in response to a Becker Review article.

Among other things, this writer said, “As a healthcare staffer for 35 years from entry-level employee to Director, I’ve literally never seen any CFO or CEO leave our organizations for any reason other than to “spend more time with my family”.  It’s true, because in every case they collected an inflated golden parachute for the next 2-3 years and indeed manage to take off time to spend with their family or most of the time do part-time consulting at some other organization where they have no idea the horrific failure they were in the previous position. For that matter, what shape they left the organization in.  They usually consider them “the expert” because they are from somewhere else.”

Clearly, he or she  was very bitter about what they had observed in the front office of their organization over a long period of time.

It is true that some of the folks occupying C-suite offices are not that stellar but more often than not, when they leave it is rarely because they are an idiot.  The system does a pretty good job of weeding out idiots before they can reach positions of such power and influence although I have seen a number of suspects among the casts of characters I have dealt with in healthcare administration.  So if the CEO is not an idiot, why let him go?  I will discuss a variety of situations that I have seen that I believe explain in part why CEO turnover in healthcare is so high.

I frequently hear complaints about what a Board is and is not doing with respect to the organization and the CEO.  A healthcare organization is not much different from a professional sports team.  The Board is the owner and the CEO is the coach.  In the end, like a sports team, the Board only has one switch or lever to use to guide the organization; hire the coach or fire the coach.  As long as the Board has not decided to fire the coach (CEO), by default they are supporting or at least tolerating him.  He is still their guy until the notice is delivered which can happen on the same date that an incentive award is given.  If you do not like what you see the CEO doing, it is not necessarily his fault.  Look to the Board for responsibility for the actions and results of their CEO.

The CEO is taking the organization in the wrong direction.  This does not mean that the direction is actually wrong.  Usually, it is very different from the predecessor’s course of action.  Sometimes, a new CEO will read that the reason for his predecessor’s failure was that he had the organization on the wrong track and the new CEO over compensates and sure enough, in two years or less, the Board concludes the new guy is on the wrong track.  This bad outcome is the fault of the Board.  Strategy and organizational direction is NOT the responsibility of the CEO.  It is the responsibility of the Board.  The CEO can facilitate the process but it should be a Board initiative so that the guidance to the CEO is clear and that the strategy transcends different CEOs should turnover occur.  In fact, a smart Board will insure that a candidate CEO concurs with their strategy BEFORE he is hired.

The leadership of the medical staff comes into the Board room.  I have counseled many CEOs on this phenomena that I believe to be one of the most common reasons for CEO turnover.  Name one case where the leadership of the medical staff went into the Board room and said “The boy is done,” and the Board fired the medial staff.  IT DOES NOT HAPPEN.  Every CEO lives in fear of this phenomena and he has seen many of his peers fall to this situation.  Therefore, CEOs are always constrained in what they can accomplish in the organization because if they push the medical staff too far, even if it is for the right reason, they are done when the vote of no confidence comes.  The CEO typically is hired from out-of-town and relocated to the hospital.  The Board rationalizes that the CEO can find another job elsewhere while doctors are ‘rooted’ in the community.  Whether this logic holds or not, the end result is the same in every case.  If anyone is aware of any case of a Board firing the medical staff and keeping their CEO, I would like to know about it.

A major project fails.  Even projects conceived or started before a CEO’s run starts can fell him.  Major construction projects or I/T projects that are not on time, not on budget or fail to come up flying on both wings represent major risks to a sitting CEO. The CEO does not do the project but he will be held accountable by the Board for failing to put the correct staff, resources and controls in place to ensure that the project is successful and to prevent a medical staff revolt if the medical staff is impacted by the project.

The results are just not there.  A financial plan or a strategic plan should be the result of a process or negotiation undertaken between the Board of Directors, their CEO and his management team.  The plan outlines the intended course of the organization over the coming period.  Once the plan(s) are approved, it is the responsibility of the CEO to execute the plan and deliver the results.  Frequently, the CEO is constrained by limitations of his team and in order to accomplish the organization’s objectives, the team has to be changed.  Sometimes different skill sets or different levels of capability are required than what is present on the incumbent team.  If the CEO fails to deliver the agreed results, the Board is justified in considering removing him for failure to execute.  If the failure is due to weakness of the management team, the CEO still owns the problem.  This is what provokes a lot of the collateral turnover discussed in a previous blog.

Speaking of results, a common error of new CEOs is their failure to get an independent, objective assessment of the organization or conduct their own upon arrival.  A Board tends to be more tolerant of issues that are documented and associated with the prior regime.  A CEO that fails to deliver a thorough assessment to the Board in the earliest part of their run in an organization will discover that after a few months, they will ‘own’ all of the problems in the organization whether they created them or not.  Documenting the initial state of the organization is a good way to establish a base line and clearly delineate what existed at the inception of the CEO’s employment.  An assessment is also a good way to facilitate and support requests for incremental resources to quickly address initial problems.

An Illness or accident interferes with the CEO’s ability to execute.  Sometimes, a CEO is beset by an uncontrollable illness that renders them incapable of continuing their duties.  Boards do not do as good a job of succession planning as they should and when something like this happens, the organization is thrust into an unexpected transition situation.  Sometimes an interim whether internal or external can bridge the gap but if the CEO is permanently disabled, a transition becomes inevitable.  WellStar Health System in Atlanta suffered such an incident in a widely publicized accident when their CEO was riding a motorcycle that he bought at a charity event was struck by an automobile and killed.

Indiscretion.  Don’t ask me why indiscretions occur.  Clearly they arise from CEOs that fail heed the adage of keeping their pen out of the company inkwell.  I know of a case where a CEO fornicated with a physician in a hospital stairwell under the watchful eye of a security camera.  The physician was impregnated and the resulting scandal thrust the organization into an unplanned transition.  A CEO’s position in an organization is very powerful and they have a lot of groupies.  Some of them allow it to go to their head and before they know it, they are felled by their own ego,.

Illegal activity.  The same is true of illegal activity.  Why an otherwise intelligent person with a living standard well above average would engage in illegal activity is one definition of insanity.  This behavior is a living example of Lord Acton’s adage that power tends to corrupt; absolute power corrupts absolutely.  Illegal activity within an organization frequently involves collusion and the fallout can result in collateral turnover and losses of time and resources while the organization is forced to focus on remediation of the crime and the resulting transitions.  A GA hospital CEO ended up in prison following convictions related to government programs.

Fit.  Sometimes, there is a fit problem that was not detected during the interviewing and vetting process.  This lack of fit could be based on personality, skill set or interaction/management style.  Whatever the reason, the hire was a mistake and it will not end well.  Sometimes, family fit is discounted and the CEO’s engagement ends up failing because the family did not relocate or did not tolerate the relocation.

Culture.  A friend quoting his Italian mother liked to say, “The fish stinks from the head.”  Indeed, the culture of an organization emanates from the office of the CEO and the Board room.  The longer a CEO’s predecessor has been in place, the more deeply ingrained the culture he will inherit.  The harder or faster he pushes to implement cultural change, the greater  the risk that he will be come a victim of his efforts.  Organizations resist cultural change and pushing too hard or too fast has more than once resulted in a CEO leaving an organization sooner than he planned.  This is true even if the CEO is acting at the DIRECTION of the Board.  I know of a case where a Board ordered a CEO to take a course of action that resulted in a serious conflict with the medial staff.  The Board had decreed that, “this will not stand.”  Never the less, when the leadership of the Medical staff showed up in the Board room, the CEO was done.  The Board had such remorse that they prepaid over five years of severance but the CEO still left the organization.  By the way, the first successor did not last very long either.

The CEO decides to move on.  It would be nice if organizations created an environment where career advancement transitions could be more open and managed in such a way as to create less turmoil as a result of the transition but this is frequently not the case.  Usually, the first notice a Board has of this situation is when their CEO announces his resignation and thirty-day notice.

Retirement.  Sometimes, the CEO survives until retirement.  If the retirement is handled properly, an orderly succession takes place.  If not, even a retirement can lead to a difficult transition.

The main point of this discussion is to lay groundwork to address the question referenced in my previous blog about the wisdom of severance packages and why I think they are generally the right thing for an organization to do.  My goal in this blog is to illustrate how risky it actually is to be a CEO.  There are a lot of things, many of which are out of the control of a CEO that can lead to CEO turnover.  Part of the reason for a severance agreement is to mitigate risk on both sides of an executive employment deal.  While much of the discussion here has focused on the CEO, the same principles apply to every C-Suite executive generally defined in each organization as the executives reporting directly to the CEO.

Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two you would find value in.  I can also help with career transitions or career planning.

If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.