HFMA VIEWS

Scott MacStravic, PhD

There is a constant debate, in the media, if not in board rooms, regarding how much business executives are worth. Some amazing compensation packages have been given to chief executives, where many millions are common, and even a hundred million or more is not unheard of -- in recruiting, rewarding and retaining, and even in “golden parachutes” when they leave.

This same lofty evaluation of executive worth is reflected in executive health programs offered by hospitals and physician practices, and in hospital “VIP suite” accommodations that many firms pay for in order to make their executives healthy and happy. But the science behind such evaluation is remarkably weak. It is easier to attribute the success of a business, in general and in any particular year, to executives than to scientifically demonstrate the connection between what executives have actually done and the results achieved. But it is not necessarily more accurate to conclude that success has really been caused by such executives.

One of the many approaches to improving an organization’s performance is to work on empowering employees to improve their performance. This reflects the obvious reality that the organization’s performance is largely the sum of the workforce’s performance. And the empowerment of employees – improving their abilities to perform, their motivation to perform, their “just-in-time” awareness of best practices when engaged in performing their roles – is usually accompanied by systems that reduce the executive role to one of enabling, more than directing and controlling.

When organizations think highly of their employees’ worth, they often increase their investments in employee benefits and development. A large number of employers are returning to the old “paternalistic” practice of offering onsite medical clinics, for example. These have significantly greater roles than the former “occupational health” focus on pre-employment physicals and job-injury care. They offer the same kind of convenience, of both place and time, as do retail clinics, along with a wide range of proactive health protection and improvement services, roughly the same services as do executive health programs, though not at quite the same “luxury” level.

Businesses can be arrayed along a continuum reflecting their overall sense of the value of their employees. Some are doing their best to reduce total employment, replacing employees with customer self-service, offshoring and outsourcing functions, relying on machines wherever possible. Many pay their employees as little as possible, and also tend not to offer them any health or other “fringe” benefits that long ago passed being of only “fringe” importance to employees. These do not invest in employee health, development, or anything beyond making sure slots are filled.

Healthcare organizations usually fall toward the other end of the continuum, appreciating the significant and irreplaceable value of many of their employees, at least. Many outsource some functions, usually support and overhead activities, in contrast to basic care delivery and revenue generating functions. And most tend to pay their executives significantly less than the compensation packages given to for-profit business executives, though some not-for-profit hospitals have been criticized for their generosity with their CEOs on occasion.

One of the most revealing examples of the worth of employees emerged recently at the West Jefferson Medical Center outside of New Orleans. After purchasing, for $3.5 million, the CyberKnife cancer treatment technology, in January 2006, and making it a prominent feature in its advertising, it suspended use of the technology in February of 2007. And the reason for letting the machine stand idle was the lack of a single employee who was necessary to operate and maintain it. [M. Gordon “Idle Medical Equipment Upsets Board” (New Orleans) Times-Picayune Apr 18, 2007 (www.nola.com)]

Like the loss of a kingdom for want of a horseshoe nail, the lack of this key employee, who apparently wanted more than the hospital administration thought appropriate, meant that the machine could not be used, since there was no one else who could make it work. Whatever the “justice” of the situation, the hospital was left without the use of and revenue from this high-tech machine because of not having an employee, suggesting that in this case, at least, the employee was worth a great deal.

As hospitals are increasingly being compensated based on their quality and cost performance, the value of employees should increasingly be determined through performance measurement, evaluation and compensation. Already, the science of measuring the worth of employees -- in terms of performance measures such as revenue per employee, productivity, quality and customer satisfaction – is well advanced.

It seems likely that the worth of employees as objects for health maintenance and improvement, job skills development, and pay-for-performance (P4P) compensation will increasingly be recognized by hospitals and other healthcare organizations whose revenue is based at least partly on P4P revenue. Of course, as employees, themselves, become more aware of their worth, issues of what is adequate and fair compensation are sure to arise, with the relative compensation of executives vs. employees playing a major role in judging what is fair and adequate.