Physicians Leading | Leading Physicians

The Danger and Opportunity of Leading a Hospital

Interview · August 7, 2017

Jeff Balser and Tom Lee discuss Balser's leadership of academic medical center Vanderbilt

Tom Lee interviews Jeff Balser, MD, PhD, President and Chief Executive Officer for Vanderbilt University Medical Center.


Tom Lee: This is Tom Lee on behalf of NEJM Catalyst. I’m speaking today with Jeff Balser, the Dean of the Vanderbilt School of Medicine and the President and CEO of Vanderbilt Medical Center. Jeff is an anesthesiologist, he’s an MD, he’s a PhD, he’s an engineer by training. He’s an old-school triple threat who became Chair of the Department of Anesthesia before moving into his overarching management role. Jeff rose to the top in the old way, but now he’s trying to lead his academic medical center into a new era in which being a department chair is different from the era in which he became a department chair, and that’s what we’re talking about today.

Jeff, when I go back to my own training in the early 1980s, when Eugene Braunwald was Chair of Medicine at my hospital, Brigham & Women’s, the department chair was very much the most powerful figure on the landscape. Today though, I hear some chairs complain that they feel like middle managers in a matrix organization. Can you tell me what that’s about?

Jeff Balser: One way to think about this is to follow the money over history, and as you know, in the 1990s with the Balanced Budget Act, there was a big shift in how reimbursement for health care worked. It used to be that the clinical departments could not only finance their own clinical activities, but really just finance the research enterprise for the whole medical center out of their professional revenues. That gradually came to a close with the realignment of payments to be much more in the hospital realm, and the outpatient ancillary realm, and less in the professional fee side.

And that has really moved to a place whereas [with] most academic medical centers, the research budgets are largely supported by technical margin out of the hospitals, and there have been big articles written about that. In many of our academic medical centers, those numbers rise north of $100 million a year. So, the departments are really very much dependent upon the health system around them now to finance the academic enterprise that they and the entire medical center is dependent upon. That’s one source of the feeling of being in the middle.

It’s also a little bit of a result of the way that many academic medical centers are governed, in that there are a lot of bosses. Many academic medical centers have an entirely separate hospital government structure relative to the academic structure, so the dean works for the university and the hospital works for a board that’s separate from the university, and the chairs are kind of in the middle. Academic medical centers vary tremendously in how integrated or not integrated those structures are, but I think the less integrated they are, the more potential there is for frustration by the department chairs, because trying to get something done often requires the support of both sides of the house, the academic side as well as the hospital side. And sometimes that’s difficult to accomplish in a very fractionated government structure.

Lee: The nature of health care and research today is that almost everyone is really in the middle of a matrix organization, even you. You’ve got your responsibilities to the medical center, the hospital, the doctors, and the university. Life is complicated, but it’s a real problem if department chairs are unhappy with their roles, isn’t it?

Balser: It’s a real problem. I think a big reason it’s a problem is because — and what really no one should ever forget — is that the department chairs are really the talent scouts for the organization. The retention and recruitment of the faculty — that responsibility — is held by the department chair. If you’ve ever been a department chair, what wakes you up at 3 o’clock in the morning is the worry that you’re going to lose a valuable faculty member, or how are you going to fill that position that you desperately need to fill. Nobody really holds that stress and tension the way a department chair holds it.

Our success in the end is highly dependent upon the quality of the faculty they recruit and retain. Those faculty are determining our success, not just in the clinical mission, which is essential, but also in the research mission and the educational mission, and they have to constantly be finding people that can do all three, because they hold all of those missions in their departments, just like the overall enterprise holds all those missions. So, the department chair, unlike anyone else in the academic medical center, has all three missions buried in their responsibility. Other than in cases where the head of the medical center is unified under one governance and everyone reports to that individual, they’re the only person in the medical center who holds all three of those missions together. Their role in the academic medical center is absolutely vital. And as we think about the future, identifying the best structures, management resources, and frankly decision rights to support them in their role are going to be critical to our success.

Lee: It’s definitely clear, if you have an unhappy department chair, it’s really going to be hard to have happy young faculty, and it’s going to be really hard to attract terrific young trainees and students, so this is hugely important. But let’s talk about that multiple mission concept, which you laid out. Certainly, we all grew up in love with the concept of teaching research patient care, but as you know, Michael Porter and I write about how organizations really can’t afford to be neurotic about multiple missions and get paralyzed by being unable to make choices — that if you’re going to compete successfully on the value of care, you [have] to be organized around it, and you [have]  to be doing whatever it takes to meet patients’ needs as efficiently as possible. And that means a couple of challenging things. It means that you have to figure out how to do teaching and research within high-value health care, and it also means that work has to go on across department lines. This is challenging, and you can’t have department chairs being indifferent. You certainly can’t have them sabotage the work. How are you dealing with this at Vanderbilt?

Balser: Yeah, it’s a great question. As you know, I’m very much a supporter of the notion of [what we call] patient care centers. Your work with Michael references them as ICUs, Integrated Patient Care Units. Trying to aggregate all the things that a certain kind of patient needs around a disease entity and having everything come together to support that clinical niche is a valid concept, and I think one that many medical centers are moving toward. Of course, the danger is that in a research institution, if you build those patient care centers to be even more powerful than the clinical departments, then suddenly the department chairs have yet another master that they’re serving. And so, what we have tried to do at Vanderbilt is take that model and tweak it so that we can build patient care centers — but not create a schizophrenia for the department chairs with yet another entity that they’re trying to manage into — while at the same time safeguarding the faculty recruitment and retention imperative, as well as the academic mission.

We can talk about some specific things we’ve done. One is that each patient care center here has its own steering committee. Think of it as a little board. That patient care center is guided by a hospital director, a nursing director, an administrative leader, and a medical director, and the department chairs involved in that entity sit on that steering committee. If it’s the cardiac patient care center, then the chair of surgery and the chair of medicine both sit on that steering committee with the hospital director and the nursing director. They have input in that way.

We’ve found that to really give the chairs the impact they need with these patient care centers, we’ve given them sole hiring and firing authority over the medical director of the patient care center. We feel like it’s not appropriate to tell the department chairs, “Look, go hire these faculty, support them, pull their personnel action forms, worry about their salaries, and give them enough time that we continue to have a vibrant research and training enterprise, but at the same time, have no control over the polices that are set forth around how they will operate clinically.”

We know the chairs don’t have the time to manage the details of the cardiac patient care center’s clinical enterprise, so the balance there is that the department chairs get to pick from their own faculty, who’s going to actually do that, and that person is accountable to them. If they’re really unhappy with that individual, they can make a change. That has really helped us in giving the department chairs a strong sense that they do have some control over the clinical practice, the allocation of effort, and all the things that go on in the patient care centers, but at the same time, [we’re] not putting them in a position where they’re just having to live the day-to-day management of those patient care centers. Because at our place, the PPCs are growing in number, size, and importance, so we’re trying to thread that needle where the chairs have some reasonable amount of control over what’s going on around them, but not have to manage the details while they’re trying to do everything else.

Lee: One of the ways in which you’ve taken on these challenges is, you have the chairs report to you. That is [about] 30 people reporting to you. How do you make that work? It’s hard to have 30 people report to you.

Balser: Well, I thought about cloning myself, but we couldn’t get that to work yet.

What I have done is create a management structure. First, I would I say that the fact that I serve as both the dean of the medical school and the CEO of the medical centers here, that’s not a unique structure. There are other structures in America: Penn, Johns Hopkins, and very recently, Michigan has gone to that structure. What it effectively does is give the department chairs a promotion. If the department chairs are reporting to a dean who reports either outside of the health system or to a health system’s leader, the chairs are one chair below, or two chairs below the leader of the organization, yet they’re responsible for an incredibly valuable talent pool that drives patient care in the organization. Having there be no one between them and the CEO role for the health system has intrinsic value for them. It seats them at the table where the big decisions are made, and they’re much more in the know because I sit with them as a group every two weeks for a few hours and we talk about the big stuff that’s going on, [and I] meet with them individually.

How do you make that work when you’re trying to manage the entire academic medical center? What you need to do is have a lot of help. I have executive vice presidents around me. I have one for the clinical enterprise. I have a few for the research enterprise, and I have folks managing the educational enterprise, and I have a CFO, and I have a chief administrative officer who worries about space. The chairs work directly with those folks around me on the issues they’re managing day to day, and they’re not below those people. They’re toe-to-toe with those folks, and I’m depending upon my team around me, responsible for those areas, to work with the chairs, and help them get their work done. But there’s no kind of misalignment where I’m thinking one thing and the dean’s thinking something else. We’re all aligned in how we’re supporting the department chairs, and at the end of the day, if we can’t get something worked out then I’m getting involved. We’ve been at this now about 8 years in this structure. We were in the older, more traditional structure of separate dean and CEO until 2009, and I think if you ask our department chairs they would say they like it a whole lot better [now]. Not only do they get the questions resolved more rapidly, but they get a single answer, and they get a more consolidated structure to work in. It’s not perfect. No structure is perfect, but this has helped them.

The other thing we’ve done is create a forum for the chairs and the leaders of the health system, the other folks I’ve mentioned, including our hospital directors, to all meet in a large group setting in a very structured format once a quarter. We call it Goal Fest, and everybody in that room, the department chairs and all the health system leadership have goals, and we’re incented by those goals, and the goals are all aligned. The hospital director will have goals around the surgical enterprise, and the chair of surgery will have those same goals, and what we have everybody do is present their goals to the whole group, and then talk about which ones they’re hitting, and which ones they’re not hitting and why. The chairs do that, as well as the hospital directors. As you can imagine, the first time we did this 6 or 7 years ago, it wasn’t easy because folks didn’t know each other that well; they [had] never talked about these kinds of goals and the challenges with hitting them in a group setting in front of each other. What we found is that, over time, people have learned to think more as a team. The success of health systems moving forward, I think, is more dependent upon teamwork.

We started this discussion with you outlining how when you were growing up, the department chairs could largely operate in a silo and everything was fine, and I think today it’s the opposite. If you [have] silo activity, you’re probably going to fail, and we’re much more like a professional team. If you think of a basketball team, if we’re all not working together really well, it doesn’t matter if you have the dream team — you’re still going to lose. That’s the reality today. So creating ways that the department chairs and the leading administrators in the medical center [can] actively work together in a team setting is crucial, and has really been a big benefit to us.

Lee: Let me close by asking you this: I’ve been following Vanderbilt closely, and 4, 5, 6 years ago, you guys went through some pretty choppy waters with very stressful financial challenges. You had to downsize personnel. Your relationship with the university changed. But things feel like they’re headed in the right direction now. Could you have made the changes that you made if you hadn’t had the crisis of 4 or 5 years ago?

Balser: That’s a great question. Lots of people have said, “never waste a good crisis.” But also, significant change almost always tends to occur during crises, and I would say that if the financial pressures on this medical center had not been what they were — and they were huge, we had about a $250 million operating deficit. It was a structural deficit, we didn’t actually turn in an operating margin that low, but we saw that size, that scale of structural deficit in front of us, that required the entire medical center to rethink how it was working. And I think that the whole management team, including the department chairs, faced with a challenge of that magnitude, had to come together and learn more about how we work together as a team — it sort of forced that.

It’s not something I ever want to go through again, but I do believe that it made us stronger. You know, the old adage, “what doesn’t kill you makes you stronger,” and it did make us stronger to go through that very difficult time. Now that we’re beyond it, we’re like a basketball team that’s had a lot of practice. When challenges come at us, we have reflexes to work as a team to come back from adversity, and I think we feel a little more confident in our ability to do that, having been through the difficult time you alluded to, and we do feel stronger and we are doing very well.

I would agree with you that I don’t think we’d be where we are now if we hadn’t been through what we’ve been through. I think we’ve all learned a lot. I really believe, like the chairs, I’m also learning all the time about the best ways to manage in the complex environment that we all find ourselves managing in. And if we don’t always have a healthy skepticism as to whether we’ve got it right and are open to learning, I think we’re all sunk. I’m learning from their chairs, from my chairs, and I hope they’re also learning from me all the time.

Lee: I’ll end with something you may well know, which is [that] the Chinese character for crisis is actually two words, danger and opportunity, and certainly it’s really played out that way for you. I want to thank you for your time today, and I’m sure our audience appreciates it. We’ll be following along as you do your terrific work at Vanderbilt, Jeff.

Balser: Tom, thank you. I’ve greatly enjoyed it.


This interview originally appeared in NEJM Catalyst on May 24, 2017.

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