After nearly three decades at the helm of Texas Children’s Hospital, President and CEO Mark Wallace has a good idea of what it takes to lead a hospital. “Leadership is the sum of three things: Vision plus structure plus people, with people by far being the most important ingredient in the equation,” he says.
His tenure at the Houston teaching hospital has been marked by both small touches and broad strokes. When he took over the reins in 1989, Texas Children’s comprised one seven-floor building with 350,000 square feet and 1,400 employees. Today, it has a constellation of buildings and facilities in 73 locations in Houston, encompassing about 11 million square feet and 11,000 employees. The hospital, ranked fourth among children’s hospitals in the U.S. by U.S. News & World Report, also benefits from 1,400 full-time academic faculty members, thanks to a partnership with Baylor College of Medicine. Its FY 2015 total operating revenue was $2.84 billion.
In 2006, Texas Children’s expanded its mission to obstetrics and gynecology services for women, with an emphasis on high-risk OB, maternal and fetal medicine and perinatology. Four years later, the hospital opened the Pavilion for Women. Last year, the hospital delivered 6,000 babies, 21% of them high-risk.
Today, Wallace is overseeing two major capital expansions totaling more than $900 million, which will add roughly 1.1 million more square feet of space.
The first is a $360 million, 550,000-square-foot children’s hospital in The Woodlands, 37 miles north of the main campus. Outpatient clinics will open in October, followed by inpatient beds in April 2017. The second — a $575 million, 19-floor vertical expansion of the Pavilion for Women — will expand Texas Children’s heart center, acute inpatient operating rooms and number and size of ICU beds. It’s due for completion in July 2018.
But leading a hospital and leaving a major imprint is no easy task. In 2015, hospital CEO turnover was 18%, fueled in part by consolidation, the emergence of new care models, and movement of CEOs within health systems, according to a recent report by the American College of Healthcare Executives. With the average hospital CEO’s tenure just five to 10 years, what are the keys to success?
According to Carrie Hackett, president and managing partner of executive recruitment firm Grant Cooper, leadership is the No. 1 quality search teams are looking for in a hospital CEO. They’re looking for some with inherent leadership skills that engender the support and confidence of the providers, patients, and surrounding community.
While CEOs need to lead in the boardroom and in the C-suite, the best leaders are those who engage at all levels of the organization, says Wallace, who makes daily rounds to get the pulse of Texas Children’s. “Employees want to see me out in the organization, talking to them, listening to them, getting answers from them and showing that I care about them,” he says.
Last summer, Wallace visited all 73 locations over a two-month period, greeting each clinician and employee, as well as many patients and family members. He spent about an hour in each place and says the experience was gratifying. “I saw the same culture in every single location … It’s positive, it’s upbeat, it’s mission-oriented and focused on patient care and satisfaction,” he says.
A successful hospital CEO also knows how to cultivate leadership within the organization, Wallace believes. “The key to success in any organization … is leadership, and it’s leadership at all levels,” he says.
Indeed, the key to the long-term success of a hospital is engaging and empowering those on the front lines of care, according to the American College of Healthcare Executives’ most recent guide to effective leadership.
Next on the list of qualities today’s CEO needs is financial skills. Hospitals are looking for someone “who can strategically plan, develop and execute on short- and long-term goals, and who has a solid understanding of all aspects of healthcare financing, says Hackett. “There’s so much related to the finances, the way hospitals are reimbursed, and it’s changing dramatically.”
Wallace agrees. With the shift to value-based medicine and population health, hospitals have to make sure that care is provided in the most appropriate medical setting. “That’s what payers are asking us to do. That’s what patients and families are asking us to do. And I think that was one of the major themes of the Affordable Care Act as well, to develop this ability of providing a system of right care, right place at the rime time.”
He attributes Texas Children’s success not just to in large part to its physician leadership team, which he has spent a lot of time cultivating. “It’s incredibly gratifying and it’s made a big difference, as there’s a disproportionate emphasis today on quality, on metrics, on outcomes, on measurement, on proving that we are taking good care of patients and trying to bend the cost curve at the same time,” he says.
“Executives and MBAs can’t do that by themselves. We have to have physicians and clinicians at the table helping us accomplish that.”
Commitment to community
Since hospitals are often one of the larger employers in a community, it also helps to have a strong external face. That’s especially important if the hospital is nonprofit, like Texas Children’s.
It’s very important to tell stories to the community about Texas Children’s, its mission and strategy, says Wallace. “One of the ways that we’re able to offset the deficiencies in reimbursement from Medicaid and other payers is through having very successful capital campaigns … [that] help us fund our capital expansions, as well as the recruitment of outstanding physicians, nurses and others to Houston.”
Advice for future CEOs
According to ACHE’s annual survey of top issues confronting hospitals, healthcare finance, safety and quality lead the list. To that, Wallace would add recruiting top talent, both in the C-suite and in medicine. And to do that, CEOs have to be vigilant of capital resources, operating expenses and FTEs. At Texas Children’s, salaries and benefits represent about 55% of the cost structure. “It’s a big challenge, especially for a [teaching hospital] … where we’re taking care of the sickest of the sick,” he says.
The CEO of the future will need to be creative and innovative and think differently about healthcare delivery, says Hackett. “They’re going to have to think about what is best practice for healthcare delivery for the patient and how do we get reimbursed … because, historically, it was let’s keep our beds filled, and the future is not going in that direction.”
Wallace encourages young executives and physician leaders coming out of MBA programs and residencies to think about leadership and develop a clear definition that they can share with others.
“You’d be surprised at how many CEOs draw a blank on being able to define leadership and what it means to them personally,” he says. “Well, it’s pretty tough to be a really effective leader, to be a dynamic leader, to be transformational, if you haven’t defined leadership for yourself.”
What keeps him up at night is Texas Children’s 11,000 employees — 70% of whom are women, many of them single mothers. “I feel a real sense of responsibility to all of our employees and making sure that we’re building and sustaining a culture where they feel loved, validated and nurtured,” Wallace says.