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John filed this post from his weekend house where his daughters and grandkids are visiting — from California and Connecticut.  This is the first time all the cousins have been together.  

TYLER, Texas — Cash flow covers a multitude of sins.  There are ample examples — personal anecdotal testimony and formal case studies — that attest to the financial and operational sensitivities of rural/community hospitals.

CEO qualitiesUnlike the Chief Executive Officer of a large medical center whose mistakes rarely immediately find their way to the monthly profit-loss statements, CEOs of small/rural community hospitals say it is not uncommon for similar errors to show up at the end of the month as diminished profits or even a loss.

There are other factors that make running a small hospital challenging.  In a large medical center for example, two or three major admitting physicians can go on vacation and although volumes may fall, there will probably not be an adverse effect on the monthly financials.  In a small town with four physicians, having two active admitters away at the same time probably will result in a loss for the month.  A delayed reimbursement payment from an insurer, or the loss of an experienced financial services manager, issues than can be more easily accommodated in a larger hospital, can have serious consequences for a small hospital’s cash flow.

In other words, the CEO of a rural/community hospital has much less wiggle room than his big system counterpart.

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In larger medical centers there are several layers of leadership and management expertise covering a myriad of more technical issues such as managed care contracting, revenue cycle management and regulatory compliance.  In a small hospital, the CEO will have some supporting staff, but they typically lack the depth of knowledge or experience of personnel in larger hospitals.  This means the CEO is often described by the old business expression: Chief Cook and Bottle Washer.  Skill set deficits and their offsets are important elements for a board to identify and become comfortable with before choosing a new chief administrator.  You get to this point by creating a detailed selection criteria document before you begin the search and then incorporating that document into the screening process as a slate of questions that focus on the criteria for an ideal CEO.

While there are many general leadership qualities that cross all sizes and types of healthcare delivery businesses, the depth of knowledge and hands-on leadership style for a rural/community CEO are critically important.

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Board members evaluating candidates should consider these six points when looking for candidates and in their screening/evaluation process:

  1. Depth of Knowledge – Rural/community hospitals must find candidates whose knowledge of these types of hospitals covers  the waterfront, from business office operations, reimbursement, the revenue cycle and managed care, to ancillary and support department operations. Of increasing importance, rural/community hospital leaders must also have a working knowledge (as opposed to conceptual understanding) of managed care contracting, corporate compliance, recruiting, employee engagement, physician relations, strategic planning and marketing, as well as the ability to manage relationships within the organization and throughout the community. Finally, they must possess a deep understanding of the various government programs and grant programs that are critical to the financial viability of rural community facilities, especially Critical Access Hospitals.
  2. Interpersonal Skills — Effective communication and  strong leadership are intrinsically related.  The day when a small hospital CEO with a depth of knowledge but poor communications skills can succeed are virtually long gone.  Email and monthly meetings with direct reports and a customer relations representative to shield the CEO from irate patients may work in a large hospital, but those behaviors will be the death knell for a small hospital CEO.  Boards must assess a candidate’s proficiency in effectively managing interpersonal relationships throughout the hospital and the community.  This critical skill should be elevated to deal killer status for candidates who either fail to demonstrate these skills, or who cannot provide concrete, verifiable examples of where their interpersonal skills successfully came into play.
  3. Value/Integrity Alignment – You cannot find this out without asking a multiple of questions on a variety of situations.  Boards need to know how a candidate would react.  In my candidate screening interview, I ask about 30 questions that cover this subject covering everything from business ethics, physician relations, and communications to their beliefs and commitment to running a hospital that has a superb reputation for quality care and exceptional patient safety.  We have a subset of questions that zero in on their accomplishments in achieving best-in-class ratings in those areas as well.  The CEO, like it or not, is a highly visible person within the community.  Everything he or she does, or does not do, can come into play, especially when someone becomes upset at the way they or a family member were treated at any stage of the care process. A high degree of self awareness is crucial for a CEO to succeed.
  4. EGO  — Boards should avoid, at all costs, any candidate who thinks they are more important — their style or priorities —  than the mission of the hospital, the patients and the community.  There are more than too many small hospitals today that employ a CEO whose leadership style can only be charitably described as a my-way-or-the-highway approach in terms of setting priorities or in dealing with people.  The boss who adopts a style of “this is the way I always do i and I am not changing,” is just as dangerous as the Vice President of “this is the way it has always been.”  You want a CEO who will listen first, understand, and then establish priorities in collaboration with the Board of Directors.  Spend plenty of time crafting questions that will yield insight into the CEO’s true self.  The board may want the new CEO to change the culture, but it is important to remember that to be successful in executing a cultural transformation, the incoming CEO must understand the existing cultural DNA and begin by effectively harnessing its characteristics.
  5. Check Primary and Secondary References –  Boards should always ask for a minimum of four or five primary references — at least one from each of these categories: superior, peer and a subordinate (direct report).  Using a pastor, college professor or someone in the community who does not have a depth of insight into the candidate’s performance as a leader is not only not appropriate, it should raise a red flag. The business leader might be acceptable as a secondary reference but not as a primary.  Secondary references are those individuals the candidate makes reference to during the interview process. If they use the name, it may be eligible for a secondary reference inquiry, subject to the usual legal protections as well as those rules regarding confidentiality of the candidacy. Astute interviewers know how to data mine that important candidate intelligence information.
  6. Conduct Background Checks –  To avoid the practice of some recruiters who recycle friends, most especially those friends who have stubbed their toes and have several short job tenures, commission a detailed background check.  Investigators should look at all available federal, state and local court records for at least 15 years.  Investigators should also check the CMS list of prohibited participants as well as the sex offenders database.  Even candidates with good track records at work can have background issues.  The last thing you need is to employ someone who is on one of the government’s “bad” lists, has felony conviction that might compromise their ability to serve, of there is a record of poor personal financial management.   A CEO who has a record of writing hot checks (those with insufficient funds), is definitely not a quality you want in a community leader.  At the outset of the first interview you should ask candidates if they have anything in their background they feel a need to disclose.   Most of the time when you ask that question, you will find out what you need to know.  But you still should conduct background review.