This transcript of the discussion has been edited for clarity and length
Most of us are doing well if we know debits are on the left and credits go on the right. Your days of studying histology have done little to prepare you for deciphering a P&L statement. Clearly, a basic understanding of finance is needed today to be an effective chief medical officer (CMO).
Mike Sacopulos: My guest on this episode will guide you through the opaque world of finance. Lee Scheinbart, MD, CPE, practiced hematology/oncology over a career as a physician. He founded William Childs Hospice House and has served as a chief medical officer for multiple organizations. Dr. Scheinbart is an author, and his new book, The Chief Medical Officer’s Financial Primer: The Vital Handbook for Physician Executives is published by the American Association for Physician Leadership. Lee Scheinbart, welcome to SoundPractice.
Lee Scheinbart, MD, CPE: Thanks, Mike. Thanks for having me today.
Sacopulos: Would you please tell us more about your path as a physician and a leader?
Scheinbart: I trained as a classic internist and went into my fellowship and particularly into medical oncology and practiced for nearly 20 years in east central Florida. During the latter part of that, I found myself being brought into opportunities to promote our cancer program through the region and ultimately became the medical director of our cancer program and served as the service line director. We doubled our footprint. We created new services for the folks in our area, and then I was tapped on the shoulder to be a vice president of medical affairs for some of the local hospitals. After doing that for a few years, I was given the opportunity to be the chief medical officer of our hospital division at our regional health system.
In 2015, I was encouraged to join the American Association for Physician Leadership (AAPL) and begin to study for those roles and to consider earning my Certified Physician Executive (CPE) credential. I did that and found myself very engaged in leadership training and growing a set of skills that I didn’t learn in medical school or in my residency. It served me well when I became chief medical officer to have those skills and tools in my back pocket. Particularly as COVID came, there was an enormous amount of responsibility for any CMO in any health and hospital system; and having been trained a bit in leadership, I found that to be very rewarding. I stepped away from that role. I had a plan very early in my life that I would retire at a certain age. I didn’t do very well in that regard and found myself transitioning back into leadership responsibilities pretty quickly and found myself writing for AAPL.
Sacopulos: Let’s talk about that, because you have a book out and the book is The Chief Medical Officer’s Financial Primer. How did you come to write the book?
Scheinbart: I’ve been writing for AAPL for a little while during this transition in my life, and I was fortunate enough to have met with Nancy Collins, senior vice president for content and publishing. She and I began a correspondence around the things that I was writing, and she introduced me to Dr. Mark Olszyk, who, as you know, has written another book for AAPL, The Chief Medical Officer’s Essential Guidebook. In the act of doing that and being selected to be a contributor, I began to form an idea of writing a book for CMOs as well. Nancy and I had several conversations about that.
My idea at first didn’t really resonate with the audience or the focus groups that she consulted where she receives input from physician executives and physician leaders. She shared with me a couple of other ideas, and what people seem to be hungry for is a greater understanding of the finances of healthcare. Not a day goes by that we don’t see something on the internet about health systems and finances and private equity and changes in payment and reimbursement. She said it would be very timely and topical and asked if I could take that on. And I didn’t hesitate. I said, “I have a lot of experience in this area, and I’d be happy to give it a shot.” So that’s what I did.
Sacopulos: Tell me a little bit about the target audience for the book. Are these physicians, healthcare managers, mid- or early-career?
Scheinbart: When you start out in the active writing, you put together a proposal and an outline and you believe you have a roadmap. It doesn’t always go that way because the act of writing is a very creative but deliberate process. And I think that the best way to answer that is I wrote this for aspiring physician executives who are reasonably new, the book that somebody would’ve written for me 15 years ago as I was beginning to advance my career into areas that I had not been trained in formally. I had my younger self in mind and I had who I think are the folks who would want to read this today that are beginning to explore executive leadership careers, administrative roles and responsibilities, directorships, and ultimately chief medical officers. I do think that this is accessible by just about anybody who is growing into healthcare leadership. It is any service line leader, medical director, nursing leader, administrative, even nonclinical administrators. I think there’s a lot of value for anyone who is seeking to have a broad view of healthcare finances.
Sacopulos: It’s very well done and very accessible. A majority of physicians now work for entities not owned or controlled by physicians. Has the disappearance of independent practices altered the role of chief medical officer?
Scheinbart: It has, perhaps on two levels. One is that the next chief medical officer that’s hired in an organization may never have been in an independent practice and really has never experienced all the minutiae and details and dynamics of how money flows in a clinical setting. In fact, I had a call with a physician who is very seasoned and he is trying to establish a new practice model. This individual has an MBA, very advanced, very seasoned, but didn’t have the background and so, therefore, didn’t have the navigation points of what it was like to create your own billing system 30 years ago and what that really looks like and how that money is returned to your practice after you’ve put in the time and energy to set up a billing system. So I think that today’s CMOs may lack a historical waypoint in order to understand how money moves. I think this will give them both the historical and practical waypoints to think about how they will conduct themselves in their organization.
Sacopulos: Well, I think you’re absolutely correct and it makes your book all the more necessary for individuals, because there’s been historic change and people don’t have skills that they would’ve acquired through their own practices over time. So I think it makes your book all the more valuable to your colleagues.
Scheinbart: And Mike, if I could add, the second element that you were alluding to: if a chief medical officer has influence, responsibility, or authority over a large number of physicians, and if they are independent physicians and the chief medical officer has never been independent, they won’t really understand the environment of what those individuals are experiencing, and it would set up unnecessary tension and difficulty. This gives a rapid look at how to approach people who have never been employed, have never been part of a big system, and are still actively doing well in their independent role and how you can talk their language.
Sacopulos: That’s an excellent point. Tell me, during the process of writing your book The Chief Medical Officer’s Financial Primer, were you surprised by any fact or situation that you came across?
Scheinbart: I think the biggest surprise is how easy it would be for anybody to find themselves distressed by the current state of healthcare economics and not understand how we got here and want to fall into the trap of learned helplessness or victim mindset where the whole universe is conspiring against the physician trying to do what they have been professionally and competently trained to do. When your training is very focused on deliberate skills, knowledge acquisition, and then delivering of that all day every day to someone in need of our skill set, your aperture becomes very, very narrow in the scope of how you go through your day.
When you step back and open that aperture and look at the environment of how money has been split up so many ways from its origination site to its destination, it feels a little empowering to recognize it isn’t any one physician’s fault and no one is specifically targeting any physician about how the money is moving. It really is a constellation of a lot of different elements that come together. I think the surprise is, the higher you go up in orbit to look at it, you have a new perspective, and that is important in leadership and CMOs can obtain that perspective, which will help them immensely.
Sacopulos: That’s a really interesting point. And it seems to me that it might also impact how clinical care is provided with that type of perspective. Am I correct?
Scheinbart: You’re absolutely correct. The role of the chief medical officer has changed over the years. And you know this and you’ve interviewed many people who have shared their stories with you. For example, when I was the vice president of medical affairs, the responsibilities were very specific around quality of the medical staff, the credentialing, the peer review, and things that occur in front of the medical executive committee. That is a very traditional role in that regard. But as you move up, say, to a chief medical officer or a chief physician executive role, the scope of your responsibility is much larger and involves a larger slice of the entire organization, whether it’s case management or risk management or quality or high reliability or patient experience.
People use the phrase “scope creep.” Whatever you want to say, there’s more responsibilities in front of chief medical officers. By understanding that macro environment of the economics, I think it makes you a much more effective medical officer to understand what I might do over here on this side of the house versus what I might do on that side of the house to create a value proposition, to provide the clinical care to make sure the patient is receiving the highest and best care possible with a limited amount of resources which affect everybody involved.
Sacopulos: Excellent. Maybe we could drill down into some specifics in the book. What elements of healthcare finance do you find are critical for CMOs to properly understand?
Scheinbart: One of the most important things for young aspiring physician executives, and CMOs in particular, is depending on how they transition their career and what training they have, they may not have a good grasp on things like length of stay. They’ve probably heard about it during their clinical practice and maybe even been admonished about how to lower their individual length of stay or the length of stay of their team or their group, but they may not really understand the finances involved and why that’s materially important. Another very simple example is practicing physicians in the hospital, particularly hospitalists who provide a lot of documentation, often are given queries to look at their documentation in real-time while the patient is still hospitalized and perhaps be more specific or more accurate about the problem set and what is happening with the patient.
And the physician may only be receiving these queries without really understand the larger impact. So suddenly you’re chief medical officer, and someone might tell you the target this year is to reduce the unanswered queries by a certain percentage or to have an impact on the clinical documentation to go from X to Y. But if you don’t really understand what that actually accomplishes, it can be very unsatisfying, because you’re just trying to teach to the test and make the number but don’t understand the value proposition. A chief medical officer who understands the value proposition of length of stay or clinical documentation or case mix index or how RVUs work or how facility fees work becomes of tremendous value to the organization.
The CMO sits at that intersection within the organizational delivery of care. The organization may exist and has an infrastructure and patients are receiving care, but the CMO is one of the few folks who can understand both domains. There are less than 6%, I think, of health systems that have physician CEOs. Now, they may have been a nurse or a physical therapist or respiratory therapist. I know quite a few that are excellent and they’re clinicians and CEOs, but there’s an overwhelming number of leaders of healthcare that have never actually with their hands or their minds delivered care. The CMO needs to recognize that they are incredibly valuable, they have influence on the things that bring value and they drive value. So that’s why I think it’s important that they know even those fine details of what we’re talking about.
Sacopulos: And do you find that CMOs do a lot of translating of financial information to actual practicing clinicians to help them understand what the organization that they work for is facing?
Scheinbart: It depends. I’ve been in many, many environments over the last few years listening and learning, whether it’s in a rural setting or an urban practice, or a safety net hospital in the middle of a very large city. I think you have to meet your physicians, your medical staff, where they’re at. They don’t all want to know. They’re frustrated about a great number of things. So if you come at them with information they’re not ready to receive or they don’t want to receive, you’re not going to really bring anything new or interesting to them. Rather, you have to understand what their motivations are. This is another part of leadership development. Maybe they care more about the fact that a CMO might be asking somebody to discharge a patient too early because of length of stay. So then the conversation takes on a different nuance.
It’s not about the dollars, it’s about, well, what happens if the patient stays too long? Are they at risk of hospital-acquired events? Are they at risk of an even longer stay if something goes in the wrong direction? Hospitals are very tricky places for people. Then it becomes a clinical conversation, and then maybe at a later date, they’re much more open to the notion of what’s the real value. And in some circumstances, sometimes patients have a coinsurance or a copay depending on their payer for every day that they’re in the hospital, and a physician may not know that. And if you tell them, this is going to cost your patient a lot of money, they may think about this a little differently.
Sacopulos: That’s an interesting point because it really ... also impacts the finances of the patients as well, right?
Scheinbart: Yes.
Sacopulos: And oftentimes that’s not thought of as much as it should be.
Scheinbart: Right.
Sacopulos: We are running out of time. And your book is tremendous. I would like you to make in what in my world would be a closing argument. Tell us why they need to have this book. I can tell people, but it’s much better if it comes from you.
Scheinbart: I would say that this is no substitute for studying economics, no substitute for earning an MBA if that’s something you personally desire or, as we’ve learned, really broadens your skill set and your credibility when you’re seeking the role. But if you want to expand your leadership abilities, I would tell you this is a leadership book. It will help you as the reader understand the environment in which you will find yourself at a very macro level. It’s done in a constructive way to help you assemble in a story-like fashion, in a story narrative what really happens to people as they experience the stress of economics of care.
By understanding at that level and at a larger macro level, you have a better handle on the environment — how you bring value to yourself and your role, and how you bring value to the organization. It has been said that if you want to be successful as a chief medical officer, then you need to help your boss be successful and help your organization be successful, and over time develop strategies because you’ve understood the environment differently. And it’s strategic thinking that is critically important as you grow into your leadership role.
Sacopulos: The book is The Chief Medical Officer’s Financial Primer: The Vital Handbook for Physician Executives. My guest and the author of the book is Dr. Lee Scheinbart. Thank you so much for your time.
Scheinbart: You’re quite welcome. Thanks for having me.