B.E. Smith Team | January 16, 2018
Top 12 Healthcare Trends for 2018
Healthcare leaders enter 2018 with an optimistic outlook. Generally speaking, 2018 will be a year where healthcare executives focus their attention on fostering stronger collaborations and partnerships, advancing clinical initiatives in patient care, and driving improved efficiency in performance and reducing financial risk. In many ways 2018 will mirror 2017, but with several key differences that will undoubtedly impact all facets of the healthcare industry.
The annual B.E. Smith Healthcare Leadership Intelligence Report again illuminated a range of industry topics, issues, and needs focused across four high-impact areas:
- Industry Directions
- Workforce Recruitment and Retention
B.E. Smith has mined responses from the 2018 Healthcare Trends Survey, conducted additional research, and added insights from its advisory practice to identify a complex set of challenges and opportunities. This Intelligence Report outlines the 12 crucial trends for 2018.
Methodology & Demographics
An impressive cross-section of over 800 hospital leaders completed B.E. Smith’s 2018 Healthcare Trends Survey. The survey was distributed in November and December 2017. Of the healthcare professionals who responded to the survey, 19% represented the C-suite, 12% Senior Vice Presidents and Vice Presidents, 50% Directors, 8% Managers, as well as 11% various other healthcare leadership titles and positions. Generationally, 86% were either Baby Boomer or GenX, the two groups dominating today’s executive ranks.
Outlook for 2018 Mainly Positive
One year into a new political landscape, leaders largely view 2018 positively, with 47% of survey respondents outright optimistic and another 28% neutral. Individual comments revealed that this optimism springs from healthcare’s growth prospects, resiliency, and leadership talent. Representative statements include:
- “There will always be a demand for healthcare providers.”
- For those “willing to change, healthcare is an exciting, challenging industry.”
- “The investment in human capital and how it is managed… remains a primary determinant of an organization’s success.”
- Our management “will lead us in the right direction.”
For some healthcare professionals, the industry’s path forward remains unclear. According to the survey, 25% of healthcare professionals are concerned about the year ahead. One cause is lack of clear consensus on emerging directions. For example, University of Utah surveyed patients, doctors, and employers and discovered that “while most stakeholders agree that healthcare must deliver ‘value,’ it’s not clear what that means, or how they’d prioritize the components of cost, service, and quality.”(1) For senior healthcare executives, this presents an opportunity for strong leadership by communicating a comprehensive and clear direction on strategy to remove concerns surrounding uncertainty.
Government Regulations and Financial Pressures Top Concerns
Consistent with past surveys, government regulations (45%) and financial constraints (41%) were listed as the top two forces that will cause the greatest disruption in healthcare in 2018. Garnering smaller percentages were retail health, a changing workforce, and advanced technology. “Increased regulatory and reimbursement requirements” were also cited by 49% - far outpacing any other response - as the issues most likely to impact their organization’s future. The American Hospital Association recently identified 629 regulatory mandates providers must comply with in nine areas.(2) Respondents to the B.E. Smith survey said regulatory changes contained “too many unknowns,” placing demands that “affect the bottom line, morale, and workflow,” and likely to spawn “dramatic changes in the quality of care.” The financial and regulatory factors manifest themselves in a closely-related matrix of 2018 concerns, captured in Figure 1, featuring heightened risk, speed of change, and institutional complexity.
Continuing to Manage Challenging Economics
The economic trends bear out leaders’ perceptions of the challenging environment. Spending grew 4.7% from October 2016 to 2017, below government forecasts but exceeding GDP growth and therefore of continuing concern.(3) Healthcare accounts for 32% of spending, but its growth rate was only 2.5%, half of last year’s. Prices rose a scant 1.4%.(4) One analysis found 60% of respondents concerned about “the government’s effort to reduce healthcare spending.”(5)
Still, healthcare professionals surveyed by B.E. Smith are optimistic. Cost discipline among healthcare leaders is strong in hospitals, and 65% of CEOs “view shared-risk models as an opportunity.”(6) They are increasingly embracing the new approaches: 58% reported over 10% of revenue tied to value/outcomes/shared risk with 21% of those registering between 26% and 75%.(7)
Outpatient Care/Population Health Management are Prime Value Strategies
Two pathways to value-based care are greater reliance on non-acute settings and population health management. Hospitals now generate over 47% of their revenue from outpatient care, well up from 20 years ago.(8) Telemedicine is also on the rise, offered by 75% of institutions.(9)
The B.E. Smith Intelligence report found 57% of organizations have a population health management strategy in place or being implemented. Another study indicated 83% have a “total” or “significant” commitment to this strategy.(10)
Strategy and Vision Top Most Needed Leadership Competencies
As Figure 1 shows, the top executive concern in the B.E. Smith survey is finding leaders with today’s demanded competencies. The clear number one desired attribute is Vision/Strategy. Three additional qualities received significant votes: Integrity, Communication Skills, and Agility. The results echo a Deloitte study in which CEOs sought leaders who are “forward-thinking and adaptable.”(11) Organizations are establishing strategic objectives “to increase the innovation skills of leadership,” and 91% in one study expected to do so by 2022.(12)
Select B.E. Smith survey comments in Figure 2 capture the demand and necessity for strong leadership in 2018 and beyond.
People Relationships Central to Executive Satisfaction
The Intelligence Report annually takes the pulse of leaders’ attitudes on their career status. Overall job satisfaction is very high at 85%, including a third who are “highly satisfied.” Figure 3 shows the powerful role played by interpersonal relationships in the components of satisfaction. Survey respondents identified colleagues as the top source of their engagement and a strong fourth place for intent to stay. Another factor, management, showed nearly equal results. The two variables together account for a 50% response for engagement and 37% for retention – exceeding other motivators. The findings support counselingB.E. Smith continually provides organizations regarding building a culture that emphasizes teamwork, good communication, transparency, and the “soft skills” of management.
Location and Culture Share Stage with Compensation as Recruitment Influencers
Recruitment is an ongoing focus for healthcare organizations. While overall job growth declined a bit in 2017 to just under 2%, that wasn’t the case for all healthcare providers. Outpatient care centers saw an increase of 5.8%, the highest segment, while hospitals were 1.4%.(13) Forecasts suggest competitive markets in 2018 and the years ahead. Government statistics project healthcare as the country’s top employer by 2024.
In 2018, healthcare leaders will be focused on the growing hiring gap facing the industry. In 2015, that gap exceeded 500,000 jobs. The net result is a “superheated competitive environment for quality healthcare professionals that has been labeled a ‘war for talent.’”(14) To stay competitive and keep key initiatives moving forward, healthcare leaders will need to explore all strategies to fill increasing job openings quickly.
Leaders in the B.E. Smith survey ratified this sentiment, with 24% naming access to high quality talent as their leading recruitment challenge. That response was edged out this year from its perennial top spot by “organization location/community” at 33% (see Figure 4). Cultural fit was a strong third challenge (16%). When asked which factors most positively influence the talent search, respondents clearly pointed to two: compensation at 37% and organizational brand/culture at 31%. Several observations emerge from this data:
- Culture continues to exert significant workforce, operational, and strategic impact. The survey shows culture’s role begins at the hiring stage.
- Organizations will need to move beyond conventional relocation subsidies and creatively structure compensation to overcome many candidates’ heightened geographical resistance.
- Technology will help as hospitals use “the most advanced sourcing methods available” involving “multilayered digital outreach,” analytics and other tools.(15)
Senior Leadership Gaps a Special Concern
A particularly vexing issue is filling senior executive vacancies, especially in the C-suite. Turnover at the C-Suite level, in particular among CEOs, has been elevated the past several years. A recent survey by ACHE placed CEO turnover in healthcare at 18% in 2016. The trend appears to be continuing in 2017, with 30 CEO departures in medium to large hospitals in the first half of the year.
CEO departures, in particular, have substantial ramifications impacting all levels of an organization. According to the Intelligence Report, 86% of respondents identified the top four areas most influenced by the departure of a CEO (see Figure 5):
- Strategic planning and service development
- Employee/physician engagement
- Financial performance
- Community relationships
CEO departures also tend to have a cascade effect within hospital leadership. CFOs, COOs, and CNOs were among the top executives identified as the most likely to leave an organization following the departure of the CEO. (See Figure 6.) As in last year’s survey, two-thirds felt that finding quality candidates is the biggest obstacle to replacing these leaders.
Organizations are expanding horizons to fill the leadership gap, looking beyond the healthcare industry for senior talent, both to augment the candidate pool and to import new skills. Finance and Hospitality were again deemed most desirable sources, mentioned by 34% and 27% respectively. Two others notably emerged this year: Information Technology (18%), showing the influence technology and analytics are having on healthcare, and Life Sciences/Pharma (13%), perhaps underscoring the major impact on cost and care from ground-breaking scientific discoveries.
A growing number of organizations are also turning to Interim Leadership as a solution to senior leadership vacancy. By leveraging C-Suite Interim Leaders, organizations can rely on strong temporary leadership to move key initiatives forward while identifying and recruiting the long-term placement. A strategy which is critically important as healthcare organizations search for solutions to progressively increasing recruitment time frames. Partnering with a recruitment firm, particularly one which offers both Interim Leadership and Executive Search, can reduce the risks of a lengthy recruitment.
Job Change Willingness a Latent Retention Issue
One of the best recruitment strategies is retention of existing leaders. According to this year’s survey, retention could be particularly challenging in 2018. While down from 2017, the survey still found a heightened propensity for healthcare professionals to leave their organizations. In fact, more than 35% of respondents said they were contemplating a job change in 2018 (see Figure 7). While a decrease from last year’s 57%, the number nevertheless implies looming turnover issues. Adding to the complexity, 87% of healthcare professionals would consider leaving for the right opportunity, with 75% acknowledging that at least one organization approached them with a job opportunity in the past year (see Figure 8). While 58% chose not to pursue the opportunity, the 18% who did form a significant cohort that could disrupt retention goals.
Retention is clearly linked to positive engagement. The Intelligence Report’s annual assessment of this issue found that 68% of respondents – up slightly from 2017 - agreed or strongly agreed that their employees are “actively engaged.” The corresponding figure for physician engagement was 56%, suggesting need for greater attention. Indeed, many predict increased turnover from physician burnout. A study at Stanford found that doctors reporting burnout left the organization at twice the rate of others, and estimates run as high as $500,000 to $1,000,000 to replace a physician.(16)
Helping ensure that the professionals whom you value do not leave is a complex undertaking. Surveyed leaders identified at nearly equal levels three forces contributing to optimal retention: compensation, brand/culture, and management. Leadership development and colleagues also garnered significant mentions. These factors share dynamics, but each demands unique approaches. Many organizations engage outside help in these areas to navigate the complexity.
Organizations Relying on Tried and True Methods to Strengthen Leadership
Another focal point of the Intelligence Report is organizational strategies to build leadership strength. Compared to 2017, leaders expressed a significantly increased preference for internal development – 75% this year - as well as a solid uptick in recruiting proven leaders from outside. Somewhat riskier strategies such as hiring emerging leaders from other healthcare institutions saw some declined emphasis. The overall risk environment may be inducing management to rely on more controllable, tested strategies.
Interim Leadership is proving to be one such strategy. B.E. Smith has seen a recent increase in organizations utilizing interim leadership to develop current and emerging leaders. Organizations rely on interim leaders with years of experience to mentor, coach, and prepare executives for a future position or current opening. This unique relationship bolsters an executives leadership skills while ensure a successful transition into the new leadership position.
Leadership assessments are another centerpiece of many development programs. The survey found that these are most frequently conducted for senior and nursing executives, less so for managers and other staff (see Figure 9). B.E. Smith believes strongly that broadening the scope of assessments to encompass the full range of management levels contributes significantly to building engagement and promoting retention. Utilizing assessments in this manner will provide the organization with a method to identify potential future leaders and develop plans to build necessary skillsets. As a result organizations create a leadership pipeline, expanding the talent pool across the organization and through the workforce ranks, significantly reducing the risks associated with unexpected turnover.
Greater Attention to Career Advancement Needed
Individual perception of advancement potential looms large in the satisfaction/engagement equation. Figure 10 displays current sentiment charted by the B.E. Smith survey. The data offers good news: 58% say they are either on a promotion track or content with their present positions. Hospitals appear to be doing well by their employees. But the 32% indicating “must leave to advance” shows an opportunity for improvement still exists. These leaders are significantly less satisfied than their peers – only 13% of this group said they were highly satisfied with their job overall.
Addressing this dissatisfaction carries urgency given that fully 41% of the must-leave group said they are considering a job change within six months (see Figure 11). Placing organizations at risk of losing a potentially large amount of talent. Organizations should commit to consistent, ongoing senior management – even board level – attention to this issue.
Succession Planning Holds Steady
Another vital component of leadership development is succession planning. B.E. Smith monitors this area closely as part of its client advisory work. The incidence of succession planning programs is holding steady. One-third of respondents say their organizations have a program in place, with 22% of organizations offering succession planning to all leadership levels. Informal programs dominate at 58%, possibly implying variability in states of commitment and efficacy. Also remaining steady, however, is the 37% of organizations with no succession program – an opportunity for continuing improvement.
A range of strategies is typically deployed in the succession planning mix. Organizational planning and mentoring were each listed as program strategies used by an impressive two-thirds of respondents. Almost half utilize executive coaching and formal skills assessments. This year’s survey introduced a new question asking which strategies leaders would most like to add to their succession planning programs. Figure 12 shows strong interest in coaching, skills assessment, and use of interim executives. All three greatly enhance the outcomes of succession plans, and the latter tool is a proven vehicle to smooth executive transitions and improve recruiting by permitting time to search for the best-fit candidate. Despite having varied options, 51% of organizations use only one or two. There is clearly considerable room for growth in the amount, extent, and variety of succession planning programs.
Healthcare leaders enter 2018 with an optimistic outlook. While healthcare will face several key challenges in the year ahead, the survey clearly shows executives are viewing these as opportunities to display strong leadership and leave a lasting impression on their organizations, staff, patients, and communities. B.E. Smith will monitor these and related trends throughout the year to offer continuing insight and guidance to healthcare organizations and leaders.
- J. Commins, “What Does ‘Value’ Mean in Healthcare?” HealthLeaders.com, December 11, 2017.
- American Hospital Association, Regulatory Overload, October 2017.
- Altarum Center for Value in Health Care, “Insights from Monthly National Health Spending Data,” Spending Brief, December 15, 2017.
- Altarum Center for Value in Health Care, “Insights from Monthly National Health Spending Data,” Price Brief, November 9, 2017.
- American Hospital Association, “The 2018 Environmental Scan,” Hospitals & Health Networks, October 2017.
- AHA Environmental Scan.
- Truven Health Analytics,” Factfile: Drivers and Barriers to Value-Based Care Adoption,” HealthLeaders Media, December 2017.
- AHA Environmental Scan.
- Foley & Lardner, 2017 Telemedicine and Digital Health Survey, 2017.
- “Population Health: Providers Still Struggling to Build Community Connections,” Modern Healthcare, Sept 18, 2017.
- K. Gooch, “Medicaid’s Future a Top Concern for 85% of Healthcare CEOs,” Becker’s Hospital CFO Report, August 3,2017.
- AHA Environmental Scan.
- Altarum Center for Sustainable Health Spending, “Insights from Monthly Employment Data,” Labor Brief, November 9, 2017.
- AMN Healthcare, “21st Century Sourcing: Solving the Healthcare Supply-Demand Crunch,” AMN Healthcare News, 2017.
- AMN Healthcare, “21st Century Sourcing: Solving the Healthcare Supply-Demand Crunch.”
- L. Butcher, “Understanding Physician Burnout,” Trustee, October 9, 2017.