The Tricky Art of Leadership Succession: Who Wants the Ball?
It is a well-accepted axiom in business that to be successful, a leader must want to lead. The truth, though, is that business entities often struggle to find leaders because no one really wants to put in the time or make the effort to push the organization up the hill. This is particularly true for medical practices, where many physicians only want to treat patients, and they look askance at administrative duties. Radiologists are no different from other physicians in this regard. Edward J. Petrella, MD, recently stepped aside as president/CEO of South Jersey Radiology Associates (SJRA), PA, Camden, New Jersey. Petrella learned the lesson of the desire-to-lead vacuum early. He found himself in a leadership role at SJRA by default. “In many practices, leadership falls to whoever is willing to take the green banana,” Petrella says. “I volunteered to do the business side of it. I didn’t want to, but nobody else was stepping up to the plate.” Long before he decided to step aside, at the beginning of 2011, Petrella began looking among SJRA’s younger partners for a successor. He fastened on William F. Muhr Jr, MD, an MRI subspecialist who showed interest in administration. For several years, Petrella says, he nurtured and mentored Muhr, bringing him along slowly. In January, Muhr succeeded Petrella as SJRA’s president and CEO. The irony, Muhr says, is that he was the only one who wanted the job. The pattern of a desire vacuum in leadership had continued for 20 years. “The job was open to anyone who was interested,” Muhr says, “and I was the only one. The partnership approved the change.” Of course, by the time Muhr took over, he had been groomed and targeted for succession for years. Nonetheless, there weren’t many partners clamoring for the leadership role. “The world is run by those who show up,” Petrella says, quoting an anonymous aphorism. Seeing a Better Way Petrella himself showed up as SJRA leader, he says, because he could no longer endure watching money go to waste in uncollected billings. If the practice could collect the additional money, Petrella says, it could expand its locations. It could hire subspecialists and purchase technology to stay abreast (or ahead) of competitors. This is exactly what the practice did once he took over, Petrella says. SJRA has deep roots. It began as a practice reading for a single Camden hospital nearly 80 years ago. When Petrella joined the practice, in the early 1970s, it had two outpatient centers and was reading for two hospitals. Today, the group has 45 radiologists (most are partners) and 10 centers, and it reads for three hospitals. It also has become a highly subspecialized practice and a show site for a major modality manufacturer. SJRA was fifth in the nation to install its vendor’s dual-source CT and third to deploy its 256-channel MRI, Petrella says. “I was with the practice for 10 years, and the practice hadn’t grown much,” he recalls. “We had a haphazard billing system. You were handed a bill when you left, and if you paid, you paid. If you didn’t pay, nobody sent you a second bill. The only way you got a second bill was if you came back to the same office for a second procedure and they said you had a balance.” SJRA first tried using billing companies to collect its outstanding receivables, but this didn’t work well. Petrella says, “You gave them the information, and they charged a percent of collections as a fee. It was 8% or 9% at the time. When you look at the dynamic, if you work the percentage of what is collected, 85% comes in easily. To collect between 85% and more than 90% requires a lot more effort, and the billing companies weren’t doing that because it cost them too much.” Petrella convinced SJRA to hire a billing manager and bring collections in-house. The amounts collected went up and the cost to collect them declined. With the heightened cash flow, the practice was able to open new centers and purchase imaging equipment. “I saw that unless somebody made sure we were collecting our money, we were going to be in a difficult position in keeping up with technology,” Petrella says. “I said, ‘OK I’ll take the leadership role.’” He adds that he was lucky that his partners valued his administrative role. He began with one full day per week devoted to administrative work and gradually increased that to three days. “Not being full-time created the need for those long evening hours and weekends spent on the practice,” he recalls. “My partners pushed me to take more time because, when working, I was constantly interrupted by administrative tasks.” One of Their Own A key decision made by the SJRA partners was that the practice would be led by one of their own. “The alternative, which many are doing today, is to hire a nonphysician CEO,” Petrella says. “For some groups, that has worked, and for some, the results have been disastrous. There is a big learning curve to the practice of radiology. We always felt we wanted a radiologist in charge.” Another major decision that SJRA physicians made was to keep the administrative side as lean as possible and devote the money saved to upgrading technology and building a subspecialty-oriented imaging-delivery system. “We don’t have a big administrative infrastructure,” he says. “The corollary to that is that it is very demanding on the infrastructure we do have.” About 15 years go, Petrella was given the joint titles of president/CEO of the practice and chair at Virtua Health, Marlton, New Jersey. At SJRA, being president meant overseeing the activities of the board, and being CEO meant maintaining the vision for the practice, as well as dealing with major contracts. He had a single administrative assistant who maintained his schedule, and the practice continues to run with a combination COO/CFO, a director of human resources, and an IT director. When Petrella led the practice, SJRA’s board of directors, on which each partner has a seat, met monthly to make decisions. Since Muhr took the reins, an executive committee was added to make intermediary decisions. Rules and bylaws were written governing which decisions are made by the executive committee and which must be made by the entire board. As a hands-on leader whose children were grown, Petrella recalls poring over financial reports into the wee hours. Today, more of the day-to-day responsibility for running the practice has been transferred to the COO. Grooming a Successor Petrella says that it wasn’t too many years after he took over as president/CEO that he spotted Muhr as a potential successor—a younger partner who had an interest in administration. “He got involved and, over the next eight or 10 years, he took on more and more responsibility for running the practice,” Petrella says. “Bill was willing to roll up his sleeves. Succession is a matter of finding somebody who has the talent and the interest to put in the time.” Petrella groomed Muhr by involving him in specific projects and research, as well as introducing him to the hospital administrators and various payors. Involving Muhr in contract negotiations with payors was an important step. “You have to know where the data are, and you’ve got to look at what is happening to your costs,” Petrella advises. “Our costs are not static; there is competition for technical staff. Our rates may not go up, but our costs do. There is an analysis that has to go into it. We have to work as a team, so we incorporated Bill into that process. We opened a couple of facilities in the past two years, so you have to bring your future leader into that evaluation.” When Muhr took over as SJRA’s president and CEO, Petrella says, it was easy to hand over the reins. “I always said I want to get out at the top of the game,” he says. “I’d rather leave when I want to leave, instead of mumbling my way out the door.” Petrella adds that the era during which he presided over SJRA was one of outstanding growth for radiology, but the coming era that Muhr will confront will be much more austere than his own. “Many like leadership titles, but are unwilling to do the work necessary to lead and grow a practice,” Petrella notes. “Some practices give the title based on longevity, rotate leadership, or go on autopilot. Selecting new leaders means evaluating who will do the work. Bill showed up and helped do the work necessary to run the practice and business.” Working half-time now, Petrella plans to retire at the end of 2011. Looking Ahead Muhr is well aware of the fiscal tightening that is taking place in all of imaging, including SJRA. “I think of the environment of the late 1990s through 2008 or so, when we were seeing double-digit procedure growth: If you put the scanner in, they would come,” he begins. “That was national and international, but in the past several years, the market has been flat, and CT volumes have seen a decrease. We are now static or consolidating.” One reason that Muhr wanted the SJRA CEO/president job was to guide the practice through the new austerity initiatives that payors are imposing. “It’s an interesting challenge to take our practice, as structured, and refashion it for the new world of health care,” Muhr says. “We may not be recognizable, 10 years down the road.” Muhr points to the mergers and acquisitions that are taking place throughout health care. “We’re seeing a lot of activity,” he says. “Everybody is looking at it. There also is a rethinking of the way we approach patients. Radiologists are faceless, behind closed doors. There has to be a more integrated mindset of collaborating with other physicians and other health systems.” One of Muhr’s challenges is to give the SJRA physicians constant reality checks about outside pressure to cut imaging costs as part of reshaping health care. “When you’re managing physicians, you’re basically trying to manage people who are smart, successful, typical type A people, who are driven on their own,” he notes. “You can’t be high-handed. You’ve got to engage the physicians and make them want to make the changes that you want to make. You can’t just live with things, either; that’s not going to work.” The other radiologists in the practice need to be reminded of broader health-industry patterns, Muhr says. “We’ve had a successful practice, but we have to keep our eyes on the future because we may have to change,” he says. “Businesses that don’t change almost invariably fail—that’s a reality check.” Muhr says that the toughest thing that he has done was making the decision to close an underperforming vascular angiography interventional center, which involved laying off staff. “The most challenging are the personnel decisions,” he adds. It also has been challenging to stand up to his fellow physicians. “You do have to talk to them, if you get a complaint from a referring physician,” he says. “You have to tell them, in a bosslike way, that they can’t keep doing that. I’m increasingly comfortable, but the first couple of months were interesting.” Muhr, as CEO and president, receives no extra pay or additional benefits, but the practice grants him three days a week for administrative work. He has one vote on the SJRA board of directors, and he shares equally with the other partners in the profits of the practice. The single leadership benefit, other than the pleasure of meeting the challenge, is that he is relieved of on-call duties. A Personal Stamp Muhr says that he has aimed to head the practice ever since taking over the body-imaging section years earlier (a role he’s had to give up, as CEO). One thing that he has refused to do is to give up clinical work. He interprets MRI studies at least two days per week. “I love MRI,” Muhr says, but he also recognizes how important solid leadership is. “In a lot of medical practices, not a lot of value is given to the management and operational infrastructure,” he says. “When I started here, the chief of the group (Joseph Centrone, MD) ran the practice on the fly, out of a briefcase, and with one secretary. As we grew, it became clear that we needed support staff. There was a fair amount of resistance when we needed administrative infrastructure, a COO, and operational support. I think it makes sense that medical practices keep physicians in the top level of leadership—they need that insight—but it’s also critical for medical practices to have appropriate management in place. I inherited a very nice infrastructure.” Muhr has already overseen the creation of the seven-member executive committee, as a more flexible vehicle for making quick decisions on midlevel matters. It can approve six-figure expenditures, Muhr says. For bigger expenditures (such as buying scanners or opening new imaging centers), the full board of directors must still approve. In the future, SJRA will focus more on what Muhr calls reproducible reporting standards. He wants protocols in place so that reports are completed in the same way by all the radiologists, at least within each imaging section. “One of the problems, in all of medicine, is that we’re not a reproducible industry,” he says. “When you get on a plane, the pilot goes through a checklist used by every other pilot. In radiology, a report might be issued eight different ways. We want the reports to agree for each imaging section. Reproducibility is the first measure of quality. I’m pushing hard for that.” Thinking of the Entity Muhr is also pushing to get younger leaders into the administrative pipeline. Even though he has been CEO for only a few months, he’s already looking at a longer continuity of leadership than just his own turn at the helm. “We want to get somewhat more formal management training for people,” he says. “We do have one physician with an MBA, and he could be the vice chair. We have a quality-assurance director. I’m identifying people to put in key positions.” One lesson that Muhr has learned at SJRA is that the practice rules. “We have always taken a long-term view of what is appropriate for the practice,” he says. “I saw physicians at the end of their careers voting to add new technology (which would eat into profits and pay) because they knew it was for the long-term health of the practice. They said, ‘Don’t think of me; think of the entity.’” That might be the single best reason that succession planning in leadership is important. The practice depends on it. George Wiley is a contributing writer for Radiology Business Journal.