The Financial Pressures That Chairs of Clinical Departments Face—and How to Manage Them

Doctors discussing finances

Financial Challenges and Strategic Solutions for Healthcare Leaders

Chairs of major clinical departments have always faced budgetary pressures. But the effects of the COVID pandemic—which have led to rising medical usage—as well as inflation and labor shortages are just some of the acute financial stressors taxing academic health centers right now. 

“Costs of labor and goods are going up, but there is pressure to tamp down the rate of increase of health care costs. Many purchasers want to move from fee-for-service to alternative payment models, but these can be difficult for medical centers dealing with new technology,” explains Jeffrey Levin-Scherz, MD, assistant professor in the Department of Health Policy and Management at the Harvard T.H. Chan School of Public Health and program director of the Program for Chairs of Clinical Services.

Thus, it seems like a daunting challenge to both address challenges and also maintain a tighter hold on budget and margins—but luckily, it’s not insurmountable. 

The Problem of Fee-for-Service and Utilization for Health Care Chairs

Ultimately, many pre-existing challenges that make up a department’s financial picture (and, in a larger way, the health care system) come down to misaligned goals and values: 

  • Revenue: In the past (and still in the present, in some cases), chairs have often been held accountable for increasing the revenue of their department or center. This focus can be harmful because it may incentivize team members to focus on revenue and services over the demonstrated needs of the patients.
  • Low-Value Services: Fundamentally, clinicians and other medical professionals aim to serve patients but can sometimes overemphasize volume, including services and procedures that have less “value” than others. For example, this could be an expensive test that might only be relevant for a few but is used on many. Not helping matters is the fact that certain pay systems encourage low-value services, and historically, hospital financial success has been judged by the number of beds filled.
  • Financial Toxicity: Because 100 million people in the United States have medical debt, it’s important for chairs to remember the trickle-down burden of high health care costs on patients. This means clinicians will also need to internalize the focus on value—which many already believe in theory but can get sidetracked because of the above. 

Where Chairs Can Begin to Focus Attention as they Address Financial Strain

It’s important to keep in mind that a chair can’t fundamentally change entire payment systems overnight, nor can they have an impact on the larger health care system on their own. But, with focus and precision, they can still make impacts in their organization:

  • Setting and Executing Goals: This does not simply mean a nebulous goal like “save money,” but a precise, thought-out action plan targeting the most effective cost-saving measures. “Be sure that decisions about people and processes are consistent with achieving those goals,” says Levin-Scherz.
  • Understanding Policies and Procedures: Once a direction is established, a chair should seek to deeply understand the inner financial workings of their organizations, particularly how complicated policies and procedures may play a role. Beyond potentially streamlining finances, educating others in the organization—especially faculty members—can help the organization align on goals and needs. 
  • Utilization: This ranges from organization to organization, but a good first step is to isolate which procedures and services are low-value and can either be outsourced or downscaled. Making this value-centric work clear to clinicians and other professionals is critical, and can even be its own goal. This may take time, so it’s important to measure success incrementally.
  • Develop Better Reporting and Systems: To understand utilization and waste (as well as measure whether initiatives are working), reporting will further identify wasted costs in the system. With that in mind, “excellent business analytics staff are a key to success,” adds Levin-Scherz.

Looking Forward Beyond Short-Term Financial Goals

Beyond the immediate goal of optimization, chairs can pay attention to larger-scale issues that can also impact finances. In the realm of hiring, for example, an increased focus on diversity, equity, and inclusion (DEI) is important to consider when hiring faculty, developing programs, and designing policies and procedures. 

“A special issue is being sure that there are professional growth opportunities for those who have historically been discriminated against within academic medicine, including women and people of color,” explains Levin-Scherz. It will also be important to integrate leaders and DEI work into the organization itself, which also means looking at cost and waste for patients who have historically been underrepresented. 

Another important aspect to pay attention to is climate change—in other words, advocating for decisions and programs that will decrease a department’s carbon footprint and helping to decrease the impact of future global warming. Ultimately, this will likely mean a number of infrastructure changes, including developments in technology involving more sustainable forms of energy. When done correctly, this can also proactively address operational costs. 

So, taking the long view around finances, which means looking beyond the immediate budgetary needs of the organization and towards the bigger picture in and around the organization, can translate to improved financial health and better results for chairs of major clinical departments.

Harvard T.H. Chan School of Public Health offers the Program for Chairs of Clinical Services, a two-week systematic study of critical leadership and management issues facing chairs, their departments, and teaching hospitals.