MD or MBA as CEO? Wrong Question?


As I've worked with different hospitals and different leaders, I've sometimes wondered if there's been a study on the differences in results between hospitals that have a physician CEO vs. those that have a non-physician CEO. Which hospitals have better quality? Which have better financial results?

The New York Times “Well” blog recently addressed this question in a post called “Should Hospitals Be Run by Doctors?”, citing a study published in the journal Social Science & Medicine,  Should hospitals be run by doctors? The more I think about it, I wonder if that is even the right question to ask?

One study showed that only 235 of the 6,500 hospitals in the U.S. are run by a physician. I was surprised the number was that low.

From the Social Science & Medicine study, they concluded:

The study found that overall hospital quality scores were about 25 percent higher when doctors ran the hospital, compared with other hospitals. For cancer care, doctor-run hospitals posted scores 33 percent higher.

The NY Times piece rightfully points out that the study could be confusing correlation with causation, that physician CEO candidates might be drawn to the hospitals that were already performing better.

It may be that top hospitals are simply more likely to seek out doctor leaders, and top doctor managers seek out the best hospitals. However, the study notes that at the very least, the data show that the best hospitals appear to be choosing physician executives, while lower-ranked hospitals typically rely on managers with a business or administrative background.

The study shares some of the expected stereotypes, that business people are naturally more concerned about the bottom line and physicians are, of course, more concerned about patient care. That's quite a generalization.

The study also cites one reasonable reason that a manager who understands the real work would be more effective:

They are more likely to better understand the conditions under which their fellow core workers — doctors and nurses — will function best,” she wrote in an e-mail. “If a leader creates optimal working conditions for the core workers, then that is likely to create a more efficient organization.”

There's been a similar debate in the auto industry for a long time about who should be leading, summed up by the title of the new book from former Chrysler and GM executive Bob Lutz:  Car Guys vs. Bean Counters: The Battle for the Soul of American Business. Bob Lutz is a “car guy” and he was fed up with the “bean counters” making short sighted decisions (read more about that here).

Maybe instead of painting all doctors and all administrative/business people with the same broad brush, maybe it all comes down to behaviors.

At a department level in a hospital, the most effective organizations are those who have an incredibly strong partnership between their clinical director and their administrative (business) director. When there's a great Lean culture, they tend to have the same mindsets and behaviors – things that would “create optimal working conditions” as the NY Times put it.

Maybe hospitals need a similar tandem of physicians and business leaders? Departments often have co-directors, why not co-CEOs for the hospital?

John Toussaint, MD, CEO of the ThedaCare Center for Healthcare Value has shared his framework of behaviors that he categorizes as “white coat leadership” versus “lean leadership.” Toussaint explains that the white coat, as traditionally worn by doctors, can breed an arrogance and other attitudes that get in the way of effective leadership. He always points out, as well, that white coats can be worn (in spirit) by non-physician executives, as well.

So, I'd suppose John's theory is that hospitals who are run by “white coat leaders” would underperform hospitals run by Lean leaders. It will be interesting to see that study when it is done.

What would you expect the results to be? How many “Lean improvement leadership” style CEOs do we have right now?

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Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.


  1. My wife, the RN, would say that hospitals should be run by an RN with a Lean certificate and an MBA. Too many doctors are concerned about the prestige of the MD tag. Once again, a stereotype.

  2. Interesting topic. My suspicion is that it’s not just the CEO, but the entire management team that is the key to success; the atmosphere that is created, the expectations, the accountability, and the measurement of results. I’d be interested to see the study go a little deeper beyond the CEO to determine the important elements of success.

    • Great point, Dean, There’s also that element of the superhero CEO, something we see across different industries. The CEO often gets too much credit as the sole person who moved things forward.

      I talked to a hospital CEO the other day, a non-physician, who has done great things with lean and process improvement, but what struck me most was the humility of going out of his way to say that their improvement wasn’t his sole work or brilliance, that it was the hard work of the other leaders and the rest of the organization.

      He’s definitely not that “white coat” leader style. So again, that seems to be the key to success for me.

  3. There’s so much awesome in this post!

    “At a department level in a hospital, the most effective organizations are those who have an incredibly strong partnership between their clinical director and their administrative (business) director. When there’s a great Lean culture, they tend to have the same mindsets and behaviors – things that would ‘create optimal working conditions’ as the NY Times put it.”

    Just, simply, wow. I feel like there’s a lot this can be extended to.

      • Hey, Mark!

        Definitely have thoughts :) I’ve worked on a lot of software and I’ve seen projects succeed and fail under a variety of conditions.

        As a company grows larger (above the 10 person watermark), it’s classic to expect communication to break down. Small teams were crafted (via Agile, Scrum, etc.) to reduce the communication channels and allow flexibility as targets change. Yet, I’ve seen agile teams and scrum teams succumb to the demands of fluctuation, fall apart as mandates wipe out work or totally change gears (the technology being flexible and the psychology of the team being flexible are two separate things!).

        To some degree (and this is just from observations), I feel that one of the crucial reasons for project failure in software (remember, in software, for average sized companies, only ~16% of projects are completed on-time and on-budget) is a lack of respect between the business guys (executives, marketing, etc.) and the developers (engineers, artists, designers).

        I’ve seen several companies now (in fact, every software house I’ve worked at) where there was a separation between the business guys and the developers to a physical level. That is, the business people were in another building or on another floor. Additionally, there typically was a one way channel from business to development that was capable of changing demands (ranging from features to timelines) at a moment’s notice without push-back.

        Smaller companies have a significantly higher success rate when it comes to developing software. I believe a lot of that goes back to the ease with which relationships are forged in a smaller organization. With constant exposure happening between developers and business people, mutual respect can develop.

        Without respect, it’s much easier to force a team to scrap a design without consideration for their psychological attachment, to force crunch without concern for their quality of life, and to generally push all of the buttons that generate poor quality code.

        Bit of a ramble, that :) Big subject. Let me know if any of that isn’t clear or doesn’t make sense!

        • That makes a lot of sense, Andrew.

          It seems there a parallel in that teamwork and mutual respect between:

          1) medical director and administrative director
          2) product team and market team (in a startup)
          3) tech co-founder and non-tech co-founder (in a startup)

  4. My take on this is that hospitals or departments that perform exceedingly well are led by people that are principle centered (borrowing Stephen Covey’s term). And by that I mean they are not guided by things like profit(or lack therof),productivity and quality alone. Instead they are focussed on establishing trust, empowering employees and being open to learning from everyone.
    In my limited experience I have seen these principles in both doctors and business folks.

    Interestingly, in India most hospital CEOs tend to be doctors.But as the health industry there is rapidly changing with the economy this trend is slowly changing. I wonder if more doctors were CEOs in US healthcare in the 60s and 70s?

  5. William & Kenneth Hopper’s book “The Puritan Gift”, which was highly recommended by Bill Waddell, takes a very strong stand that organizations should be run by people with “domain expertise”.

    Doctors in charge of hospitals, bankers in charge of banks, engineers in charge of technology companies.

    The argument is largely what you’ve stated about understanding how the working-level of the business functions. Their belief is that the finance folks belong at the right hand of a leader who rose up doing the organization’s core business.

    The automotive example is a good one. Ford has succeeded relative to GM & Chrysler in the hands of a “product guy”– an engineer who’s career was spend developing, building, and delivering complex products. His MIT MBA is incidental to his experience in the domain.

    That said, I suspect an RN in many cases has a better idea of the workings of the hospital than an MD who has focused mostly on his individual skills and knowledge. Similarly an airline might be better run by a gate agent who’s familiar with ground operations, customers, and scheduling than a pilot who spends little time outside the cockpit.

    • I agree that it is essential to understand the work to be an effective leader, especially when change comes into play.

      However, can going to the gemba, asking questions, and listening fill the gap? It seems common especially for lean thinkers to be able to see the key elements of the process whether it is making cheese, electronic components, or doing surgery through gemba walks and other methods of understanding.

      I really think that behaviors are what make a good leader, and that with the right behaviors the a good leader can be a good leader in any industry.

  6. Very interesting post and discussion! Of course, inter-personal differences might be greater than then the difference between those two categories (a lot of “noise” in the data, so to speak).
    Something I remembered when reading the post was IHI’s efforts to engage senior hospital leadership and especially the boards to understand and hold the CEO and others accountable for clinical outcomes. Every physician CEO will learn about financial metrics, but many folks with administrative, law, or business backgrounds (who often sit on the boards) will hopefully understand at least to some degree measures and metrics. This will, of course, become more important with the advent of ACOs and things like the Alternative Quality Contract in Massachusetts.

  7. I am definitely in the “wrong question” category. How many of those MD-CEOs are in hospitals with a “clinic” structure and the overall involvement of the physicians’ group in hospital governance is the real defining factor? Those hospitals always have MD-CEO leadership.

    But going back to the domain leadership versus professional administrator discussion: What about the mid-career epiphany factor—the engineer, the MD, the professor who has succeeded by all measures and conventions of their profession and has a wake-up call about the bigger picture? That is the John Toussaint story and other break-through leaders. There is leap of vision beyond professional training that connects all the dots. When we look at the individual nurses discussed above, did the individual have that leap of vision as oppose to the educational discipline? Can MBA administrators cultivate a vision leap?

    The more and more I learn about successful healthcare Lean, the more I see the target is about vision leap and connecting the dots. It is about horizontal thinking.

  8. Mark, do you have any feel for how the numbers would compare for hospitals/healthcare sytems that are adopting Lean? How many of them are run my doctors vs nurses vs administrators?

    • Tom, good question.

      Looking at the first 3 networks in the Healthcare Value Network (organizations very committed to Lean), my rough count is:

      12 out of 33 organizations are MD/CEOs (36%)

      The national number in general was just 4%

      Now, in the case of Healthcare Value Network, there are some “systems” and non-hospital organizations (and there are a few vacancies at the moment… and I didn’t count Kaiser Permanente because they are such a huge organization and just part of it participates in the Network. That 12 number was a quick count from the CEOs I know or a online search of their bio. It might not be 100% accurate.

      But, either way there seems to be an interesting gap in that 4% vs 36%, yes?

      Not sure what to make of that.

  9. Mark, As you posit, “MD or MBA?” is the wrong question.

    A better question is, “who don’t you want as CEO?”.

    Just as lean exposes organizational weaknesses it also exposes leadership weaknesses.

    As you suggest, the bright MHA grad from one of the top universities who is fast tracked straight into an executive position lacking deep organizational understanding will likely find themselves wholly unable to understand the organizational issues of leading a lean transformation. As lean becomes more of the rage I suspect there will be some high profile lean failures.

    One type of leader that will fail every time with lean is the narcissist. There are many of these in hospital CEO positions as they are often charismatic high achievers. They will even be drawn to lean as they see it as an improved accountability system and fail to recognize that it is really an empowerment system. Unable to recognize that lean can’t be implemented through management by objective and unable to change even if they did, they will continue to punish the organization for their lean failure until lean will be the enemy to all.

    As we all know, lean transformation is serious business. CEOs would do well to have a third party analysis of the organization and their own competency before such an undertaking. The CEO that balks at this really stating that they aren’t ready yet.

  10. The comment, “that business people are naturally more concerned about the bottom line and physicians are, of course, more concerned about patient care” hits at the heart of the Toyota mantra. The customer! Many other good insights and thoughts by all.
    My experience is it doesn’t matter about your previous training. If the CEO is truly customer focused and leads their team in the lean journey, you have an operation that everyone wins in.

  11. No MBA! Hospitals need to be run by those with an evidence based mindset. I would prefer an md rn or organizational psychologist who uses lean principles and evidence based management. Hire the MBA as a director of the business side but the overall vision of the hospital needs to be run by someone with some kind of clinical background with a strong patient advisory board. I also think the hero worship needs to go in terms of management..we have seen what it has done to safety..


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