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SHOULD DOCTORS

RUN HOSPITALS?

AMANDA GOODALL*

Introduction

The question of whether hospitals are better run bydoctors or non-medically trained managers has beenhotly debated for a number of years. In the past, hos-pitals were routinely led by doctors. All that haschanged. In the UK and the US, most hospital chiefexecutive officers (CEOs) are now non-physicianmanagers rather than physicians (Falcone andSatiani 2008). Of the 6,500 hospitals in the US, only235 are led by physicians (Gunderman and Kanter2009).

It has been suggested that placing physicians in lead-ership positions can result in improved hospital per-formance and patient care (Horton 2008, Falconeand Satiani 2008, Darzi 2009, Candace and Giordana2009, Dwyer 2010). A few years ago the UK estab-lished five academic health science centres. Theirmission is to bring the practice of medicine closer toresearch – in the hope that innovative science can bemore quickly translated into clinical procedures(Smith 2009). Physician leadership was also priori-tised in the 2008 National Health Service (NHS)review (Darzi 2008, 2009). Some outstanding USmedical facilities – for example the Cleveland andMayo clinics – have explicitly introduced leadershiptraining (for example, Stoller, Berkowitz and Bailin2007, Stoller 2013), and management and leadershipeducation is being incorporated into medicaldegrees.

Despite the growing body of research into hospitalperformance, there are currently no empirical stud-ies that assess the physician-leadership hypothesisthat hospitals perform better when they are led bydoctors. To establish a clear relationship between

leadership and organisational outcomes is challeng-ing. Unlike in medical trials, random assignment – inthis case of chief executive officers to hospitals –cannot be used. My research provides an empiricalinquiry (Goodall 2011). It looks at the leaders cur-rently being hired by hospitals and examineswhether CEOs in hospitals ranked higher are typi-cally physicians or non-medical managers.

Specialist leaders versus generalists

The issue about whether hospital leaders are, orshould be, doctors or managers relates to the largerquestion about specialist leaders versus generalists.This topic is germane because there is recent evi-dence that major US firms have moved away fromhiring CEOs who are specialists and towards theselection of generalist leaders (Frydman 2007; Bert -rand 2009). Frydman (2007) examines the careerpaths of the three highest-paid executives from 1936to 2003 (total of 708 managers) in the top fiftyUS public corporations (in the year 1960). Shepatterns a rise in the number of business degreesheld by executives, and a concomitant decline intechnical degrees (science, engineering and law). Asthe overwhelming majority of hospital leaders inthe US are general managers (85 percent), it seemslikely that hospital management has followed thissame trend.

I first considered the question of specialist leadersversus generalists in the context of research uni -versities, after having worked closely with twoorganisational leaders. I noticed that both pre -sidents that I worked with had different ideasabout institutional priorities: one, who had beenan obsessive and very highly cited researcher,focused on hiring great scholars; whereas the other,who had stopped doing research early in his careerto become an administrator, seemed less interestedin research output and scholarship. This led me toask the question, who should lead research universi-ties? Should they essentially be good scholars orgood managers?

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* Cass Business School London / IZA Bonn.

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My study of university presidents was published inse veral journals and a book (Goodall 2009b).The fin dings suggests that there is a relationshipbetween uni versity performance and leadership byan accomplished scholar (Goodall 2006; 2009a,b).I found that not only were the best universities in theworld more likely to be led by outstanding scholars(e.g. the Stanfords and MITs), but I could also show,in longitudinal data, that universities improved theirperformance over time when better scholars tookthe reins. Thus, I found that a leader’s characteristics(success in scholarship) were closely aligned with thecore busi ness activity of a university (research andteaching).

Over the last few years I have examined thequestion of how much core business knowledgeleaders should have in a number of different settings.One was the highly-skilled environment of basket-ball, where it is possible to clearly identify the coach-es’ characteristics and teams’ performance. In astudy with Larry Kahn and Andrew Oswald wefound a strong relationship between brilliance as abasketball player and the (much later) winningpercentage and playoff success of that person asa basketball coach. Indeed, we found that the bet terthe player (they played for the All-Stars), the bet tertheir performance as a coach (Goodall, Kahn andOswald, 2011). In my most recent study I haveshifted setting again, this time looking at thecompetitive industry of Formula 1 World Con -structors’ Championship. My co-author GannaPogrebna and I use six decades of field data fromFormula 1. In our study we measure the change inleader (F1 principal), with the change in per -formance (the number of Grand Prix wins andpodiums) over the 60 years. In our calculations wecontrol for the race circuit, the race year, the con-structors (McLaren, Red Bull, Ferrari, etc), and thenumber of cars that qualified. Our primary resultsshow that the most successful team leaders inFormula 1 motor racing are more likely to havestarted their careers as drivers or mechanics – ascompared with leaders who were principally man-agers or engineers (with degrees). When we lookedfurther into the data we found that the result isdriven by team principals who were themselves for-mer racing drivers. In other words, time spent asa driver has a big effect on future performance asa leader. The extra probability of gaining apo dium position when a driver has had a decade’sexperience of competitive racing is about one-in-seven.

Studying CEOs of top-ranked US hospitals

The study of hospital leaders outlined here uses asimple cross-section methodology at a given time. Ittherefore cannot make claims about the effective-ness of leaders; instead, it can shed light on who tophospitals hire as CEO. The wealthiest and most pres-tigious hospitals arguably have the widest choice ofleadership candidates. If it can be shown that hospi-tals positioned higher in a widely-used media rank-ing are more likely to be led by medical expertsrather than managers, this is one form of evidencethat physician-leaders may make effective CEOs.

The paper identifies the CEOs in the top rankedhospitals in America – determining whether thosehospitals situated higher in the league-table aremore likely to be headed by physician-leaders or byprofessional managers. To this end, one particularquality ranking is used, namely the league tables pro-duced by US News and World Report’s “BestHospitals” 2009.

The US News and World Report ranking is designedto inform consumers about where to seek treatmentsfor serious or complex medical problems. Media-generated league tables cannot be viewed as entire-ly reliable measures of quality. However, using ratingsystems as heuristic devices to assess healthcareproviders has nonetheless become common in theUS (Schneider and Epstein 1998) and it has beenshown to influence consumers’ behaviour (Pope2009). I use this ranking because it is one of the most

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Cancer Digestion Heart

Physician CEO Manager CEO

Mean Index of Hospital Quality (IHQ)Score of hospitals led by physician CEOs and manager CEOs

in three specialty fields

IHQ Scores

Source: The author.

Figure 1

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well-established in its field. The dataset in my studycovers the top-100 hospitals in the three specialistfields of cancer, digestive disorders and heart andheart surgery. Each hospital CEO is then identifiedand classified into one of two categories – physician-leaders, who have been trained in medicine (MD),and leaders who are non-physician managers.

Physician-led hospitals are higher-quality hospitals

To establish whether hospitals higher in the rank-ings are more likely to be led by physicians, I uset-tests and regression equations. I do this for the top-100 hospitals in each of the three medical fields ofcancer, heart and heart surgery and digestive dis -orders.

In the field of cancer there are 51 physician-leadersamong this set of 100 CEOs. Thirty-three are in thetop-50 hospitals and 18 lead hospitals in the lower50 group. For the other two specialities, there are34 physician-leaders in the top-100 hospitals indigestive disorders, and 37 in heart and heart surgeryrespectively. As can be seen in Figure 1, in each ofthe three cases, the average quality score of hospitalswhere the chief executive officer is a physician isgreater than the score of the hospitals where theCEO is a professional manager.

In the statistical analyses, the regression equationsreveal that the presence of a physician-CEO ispositi ve ly associated with an extra eight to nine hos-

pital qua lity points (at the p<0.001 level) – in short,hospital quality scores are approximately 25 percenthigher in physician-run hospitals than in the averagehospital.

To control for the size of hospital, in the field of can-cer I included a variable for the number of beds.However, this size variable was insignificant and,importantly, it did not affect the importance of physi-cian-leaders.

The US News and World Report ranking alsoincludes an ‘Honor Roll’ category which is made upof the most outstanding hospitals – those thatachieved high hospital quality scores in at least 6specialty fields. Figure 2 shows that the CEOs in‘Honor Roll’ hospitals are more likely to be med-ically trained physician-leaders. Using a simplecheck I have found that in each year since 2009,when the data in this study were collected, ‘HonorRoll’ hospitals have continued to be dominated byphysician CEOs.

Why are better hospitals more likely to be ledby physicians?

This study’s results are cross-sectional associationsand use one particular hospital-quality ranking. Thismeans they have important limitations. The findingsdo not prove that doctors make more effective lead-ers than professional managers. Potentially, they mayeven reveal a form of the reverse – assortativematching – in that the top hospitals may be morelikely to seek out MDs as leaders and vice versa.Arguably, however, the better hospitals will have awider pool of CEO candidates to choose fromthanks to the extra status and wealth that theyattract. This makes the fact established in this studyan interesting one. The results show that hospitalspositioned highest in the ranking made judgementsthat differ from those made by hospitals lower down.On average they chose to hire physician-leaders asCEOs.These findings are consistent with my earlierwork on the role of “expert leaders” in other (non-medical) settings as outlined above.

Cross-sectional analyses can only be suggestive ofcausality. It is nevertheless interesting to considerpossible explanations. What differentiates expertleaders from generalists? Experts may have theadvantage that they have acquired a deep intuitiveknowledge about the core business of their organisa-

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Hospitals led by physician-leaders andprofessional managers in the elite 'Honor Roll'

Number of 'Honor Roll' hospitals

Source: The author, based on US News and World Report ranking.

Figure 2

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tions and this may help with decision-making andinstitutional strategy. Falcone and Satiani (2008,p. 92) suggest that a physician-leader who has spentyears as a medical practitioner has acquired anintegrity that implies “walking the walk” which, theyargue, enhances a leader’s credibility. Physician-lead-ers who have greater credibility may act as role mod-els for medical staff and their presence may helphospitals to attract talented medical personnel.Hiring practices may be driven by homophily – like-for-like selection – thus, great surgeons andresearchers may be more likely to hire other greatsurgeons and researchers. More importantly, it isprobable that physician-leaders share the same val-ues as other medically trained staff, and thereforemay create better working conditions for doctors,surgeons and nurses.

There has been much journalistic coverage in theUK in recent years of the rise of managers and man-agement practices in UK hospitals. UK hospitals areoverwhelmingly led by non-MD managers. Mightthese manager-CEOs have been creating the rightconditions for other managers, but not necessarilyfor their doctors? Such explanations are merely sug-gestive; as the mechanisms are not yet properlyunderstood. The next, and vital, step for researchersis to design longitudinal inquiries into the possibilitythat physician-leaders improve the performance ofhospitals.

Conclusion

There has been much discussion in the US, andincreasingly in Europe, about the relative merits ofhaving physicians and non-physician managers inleadership positions. Yet no evidence has been pub-lished one way or the other. This work does notestablish that physicians make more effective lead-ers when compared with professional managers; butit starts the empirical process. It finds – in each ofthree disciplinary fields – that hospitals positionedhigher in the US News and World Report’s “BestHospitals” ranking are led disproportionately byphysicians. The next, and vital, step for researchers isto design longitudinal inquiries into the possibilitythat physician-leaders improve the performance ofhospitals.

References

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Dwyer, A. J. (2010), “Medical Managers in ContemporaryHealthcare Organisations: A Consideration of the Literature”,Australian Health Review 34, 514–22.

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