When we think of transformative industries, sectors like technology and clean energy likely come to mind first. But today, healthcare is at a transformation crossroads, too. And that’s widening the gap between the challenges healthcare leaders must tackle and the skills and experiences their careers might have equipped them with thus far.
The Sobering Facts
Health systems are under tremendous pressure from various fronts, most notably a significant discrepancy between workforce supply and demand. In fact, the American Association of Medical Colleges (AAMC) projects a shortfall of 124,000 physicians by 2034 (1).
The demand side of the problem is driven by an uptick in chronic disease and an aging population, with the number of Americans aged 65 or older forecast to rise by over 42% by 2034, per AAMC (2). On the supply side, more providers are leaving the field as they reach retirement age or change careers, sometimes in pursuit of the remote work environments fueled by the pandemic. And per the American Association of Colleges of Nursing, 2022 was the first year in over a decade that enrollment in bachelor’s degree nursing programs fell, contributing to a shrinking pipeline of new talent that further hampers supply (3).
The supply-and-demand dilemma is front and center for most health systems, but it’s just one of many challenges in this evolving, volatile industry. Complicating the picture is the mounting pressure to deliver better clinical outcomes, using innovative approaches that make care more efficacious and care delivery more efficient. Better access to care is an equally pressing issue, constrained by geographic and financial hurdles. Yet, despite many care services moving to more convenient outpatient and home settings, hospital capacity remains a challenge that is expected to persist, according to the 2023 Impact of Change Forecast from Sg2 (4).
Meanwhile, persistently high wages, higher services and supplies costs, and reduced reimbursements from private payers and the Centers for Medicare and Medicaid Services (CMS) threaten health system profitability. That trend isn’t likely to reverse soon, as labor shortages will continue to drive up wages and reimbursements aren’t expected to keep pace with inflation. The shift to outpatient procedures at ambulatory surgery centers (ASCs) further stresses the bottom line for institutions that depend on high-margin inpatient services.
How Health Systems are Responding
Though health systems are under increasing pressure to deliver improved care more efficiently, they recognize that cost-cutting their way out of the problem isn’t the answer. Instead, many are taking a more transformative approach—rethinking care delivery models and organizational structures to align with today’s healthcare needs and challenges, while striving to replace reactive, sporadic care with proactive, preventive care.
Some are undertaking major restructurings to better focus and allocate limited resources where they can make the most impact. Others are forming affiliations and joint ventures aimed at commercializing new solutions to improve care delivery and generate new revenue streams. From robotics and other forms of AI to telehealth and virtual nursing, the quest to innovate through technology is spurring institutions and health systems to form very different strategic partnerships than they have in the past.
While cutting operational costs or dropping unprofitable service lines remain stark realities for many healthcare organizations, they’re often using those savings to invest in initiatives that will transform how they deliver care in a rapidly changing industry. A prime example is the increase in health system investments in ASCs and clinics to improve access to curative treatments, ease hospital capacity constraints, and capture a piece of the burgeoning outpatient services business.
Preparing Leaders for the Transformation
As with any industry embarking on a major transformation, the healthcare sector faces a daunting task: Preparing the leaders of today and tomorrow to guide the shift to a future state that is both radically different and not fully defined. The well-worn phrase, “what got you here won’t get you there” is an apt description of the challenge.
Many healthcare leaders have moved up the ranks through an administrative and/or clinical path, taking on new and unfamiliar management responsibilities over time. During periods of relative stability, they might have felt fully equipped to lead a team, division, or entire organization along a known path, following an established vision and strategy. But leading in times of incredible volatility and rapid change involves a whole different set of skills and capabilities. Many leaders simply aren’t exposed to the requisite skills and experiences during a traditional healthcare career path. In other cases, those skills weren’t nearly as vital for healthcare leaders as they are today.
Consider the wide range of skills and competencies our fast-changing and highly uncertain healthcare industry demands of its leaders:
- They must be able to make strategic decisions that are informed by data and analytics, while distributing decision-making authority where it makes sense, acting with a sense of urgency, and maintaining agility.
- They need to solve problems that are cross-disciplinary in nature, requiring the ability to form relationships, collaborate, and think holistically.
- They must be equipped to truly lead vs simply manage, in order to motivate their teams to buy into new directions and become deeply invested in the organization’s success.
- They need to demonstrate resilience at a time of uncertainty and volatility, both within the healthcare industry and across the macroenvironment.
- They need the ability to assess which levers to pull and when for the best operational outcomes, despite the fact that there are fewer viable levers in healthcare today.
- They require influencing and persuasion skills to work effectively with new or different stakeholders than they’re accustomed to, especially when working toward objectives like better integrating hospital operations or improving care access.
- They need to feel confident and equipped to challenge the status quo, create a new vision, and guide teams to develop solutions to difficult, evolving problems.
- And to shape and direct wholesale culture change, they need a wide range of skills and capabilities that their former roles did not likely expose them to or help them develop.
To equip current and future leaders to drive organizational and industry transformation—and help them thrive in roles that go far beyond clinical outcomes and care quality—health systems and institutions need to take a markedly different approach to attracting, retaining, and developing effective leaders. In Part 2 of this two-part series, we delve into the strategies and best practices that can help healthcare organizations move in this direction.
In a competitive and turbulent landscape, the Odgers Berndtson Healthcare Practice supports organizations in recruiting transformational leaders with the ambition and strategic vision to pursue new opportunities. And our Leadership Advisory Practice helps organizations develop leaders, strengthen value-creating teams, and prepare for what’s next. Learn how we can help your organization meet the challenges of a transformational healthcare industry.