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  • Writer's pictureJamie Wood

Why Business Acumen is Critical for the Healthcare Industry

The Business Drivers of Healthcare

Doctors and nurses have the critical role of giving life-saving care — but they also, like all employees, play a part in the financial strategy of their company. Developing business savvy leaders who can utilize business acumen skills is essential in the healthcare industry.

Hospitals face many unique challenges compared to say someone in retail, oil and gas, IT, or telecom. Particularly in the fact that they're dealing with human lives. They're also serving a product that people typically don't want to buy. Nobody's out there hoping to buy healthcare services, right? It's something that happens to you, but when it does you want the highest quality care.

So what levers do you pull to be an affordable healthcare provider at a high quality? Well, it's primarily in how well you use your assets and how well you use your labor.

Business Driver: People

The biggest part is labor. It's skilled labor. It's people. Doctors, nurses, techs, housekeeping, food services, pharmacy, all those different organizations. About 60% of the cost structure of the average hospital is labor wages and benefits showing just how important people are to the care process.

Business acumen in healthcare is incredibly important as healthcare organizations are really mission-driven. They're focusing on serving their community and creating a high-quality patient experience. They've got providers that they need to take care of and attract and so their focus isn't always necessarily on the business and finances quite as out front as some of those other priorities. But those healthcare organizations that can develop leaders to have a high degree of business and financial acumen, are those that are going to really be able to separate themselves now and into the future.

Business Driver: Assets

Sister Irene Krauss, who was the first head of the American Hospital and the first female head of the American Hospital Association, coined the popular phrase, "no margin no mission." And that's particularly relevant within healthcare because driving margin and being able to understand what levers leaders can pull to do that by relying on that business acumen gives them an increased capability in furthering that mission. So it's incredibly important for provider organizations — healthcare providers — to see the gap that can exist in business acumen and take steps to close it.

In my experience working with healthcare providers, I worked for a large integrated delivery system in the bay area running their continuous improvement program for about five years. And the leaders in healthcare are typically people who love the people that they serve, they have a strong bias toward patient safety and patient quality, and they're just the heart and soul of the organization. They're truly fearless.

Business Acumen Leaders in Healthcare

And oftentimes they're the only person who is courageous enough to leave the bedside and take on the challenge of leadership. Unfortunately, there are not a lot of people who are interested in stepping up and taking on that challenge. They have so many individual competencies, but they're not trained in the business and financial side. They're clinical people who have stepped up to leadership.

But in my experience working in those organizations, those leaders who were able to close that gap with business acumen and see both sides of the equation — being able to understand the interplay between safety, quality, the patient experience, AND the financial results for running their particular part of the business — were those who are able to be seen as someone who “gets it." Often times that's how I think about business acumen, it's somebody who just kind of “gets it”. And those people are the ones who are tapped to lead new and innovative projects.

Healthcare organizations that can develop that competency in their people are the ones who are going to stand out and win in the long run.

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