Exclusive Interview: Lessons from Wayne Sensor's Fall at Alegent Health

Philip Betbeze, for HealthLeaders Media, October 30, 2009

I've gotten huge response from my column last week about the difficulty of large-scale culture change at hospitals and health systems, epitomized by the sudden resignation of Wayne Sensor as CEO of Omaha's Alegent Health after two physician confidence votes went against him. Much of that response has been in support of Sensor, some has been in support of the docs, and almost all has been off the record or otherwise anonymous. And let me tell you, I've heard all kinds of stuff. More on that later.

"There are probably not a lot of CEOs who would be comfortable talking about this," Wayne Sensor told me earlier this week. "But my greatest desire is to help others who wish to lead transformation."

Well, I can guarantee he's right about one thing: there aren't a lot of CEOs who would talk publicly about the physician revolt he oversaw or the circumstances surrounding his resignation. In fact, I don't know if I would be talking to me were I in his shoes. But Wayne Sensor has always been different, ever since I was working the finance beat back in 2005 and talked to him for the first time. And I appreciate his openness.

At the time I first talked with him, Sensor's hospital system was at the cutting edge of making patient cost in healthcare more transparent through Alegent's MyCost online tool, still alive and well on Alegent's Web site, despite the shift in public debate away from patient involvement and responsibility and toward government involvement and "public options."

At the time, the trend of hiring physicians directly to work for the hospital was well-established at some of the best known, highest quality institutions in the nation, but that was a select group. Since, employing physicians become much more of a trend, and it's produced some heated disagreements between hospital executive leadership and independent physicians who practice at and refer patients to such hospitals.

But what you want to hear about is the circumstances surrounding Sensor's dismissal, so let's get that out of the way. Here's what I know from my conversation with Sensor, as well as news reports:

A large portion of the independent physicians who refer to Alegent hospitals decided he hadn't been honest with them about a plan to gradually transform the system to an employed physician model. He tells me that he thought he had embarked on this plan thoughtfully, honestly, and with the support of both the board and key physicians who wielded power in the organization, although those physicians weren't employees. Turns out, more of them disagreed with his perception than agreed.

What's fact is that over the 5 ½ years Sensor led the organization, the employed physician contingent has grown steadily, and now numbers about 200 of the 1,200 physicians on the system's staff. Clearly, the relationship between Sensor and independent physicians soured badly evidenced by a large contingent of doctors who had stopped referring to Alegent facilities or who threatened to do so. Subsequently, the board requested his resignation and he complied. He didn't want to resign.

I've heard lots of other salacious stuff that is reported to have been a contributing factor in the resignation from well-placed sources who refused to go on the record either with me or with Cheryl Clark, one of my colleagues at HealthLeaders Media who did some early reporting on the story. So I take that information for what it's worth: not much.

When we talked, Sensor didn't want to go into the details of his departure, but he did say this:

"Our physicians didn't necessarily feel a need for the change (to an employed model) in that reimbursement hasn't largely changed, and that provides great understanding of where they're coming from. That said, they largely supported that vision, but they have to understand what that means when the rubber hits the road. If you're affecting physicians' practice of medicine and in some cases, incomes, that creates tremendous tension and anxiety."

Sensor conceded that he's learned a lot in the past couple of weeks about what went so wrong and how it might have been avoided. My sense is that this type of transformation, as I indicated last week, is inherently pioneering and dangerous to the CEO's career track, so embarking on that level of change is rare. But long-term, if fee-for-service medical payments are undone in favor of so-called "bundled payments," employing physicians seems not only the right thing to do for patient care but necessary financially and operationally. That's a big "if," though.

Perhaps Sensor's biggest misstep was that there was no immediate pragmatic need for the transformation in many physicians' eyes. That doesn't mean it isn't smart, strategically. Still, Sensor wanted me to share with other hospital executives the five main lessons he's learned on this difficult journey, all direct quotes from our conversation:

Be ever mindful of the speed of change: "The filters I would encourage others to apply are two: The organization's ability to assimilate change--uniquely the CEO's responsibility--and leadership's ability to manage the change itself. On how many fronts can you manage the change at one time?"
Create urgency and receptiveness to change, even without a driving platform: "The full impact of healthcare reform will be felt in 2012 and beyond. Reimbursement has historically been the arbiter of change in healthcare, and reimbursement hasn't changed yet. So how do we create an incentive for change when the reality is that (physician) incomes are pretty strong and practices are busy? Many physicians suggested that they don't believe healthcare reform will change anything. That suggests there's not a receptiveness to change."
Create real expectations and understanding of the implications of the change: "There's no doubt that to this day there's widespread support for the vision and strategy of Alegent Health. Yet to be pragmatic, when you start to consolidate clinical services such as cardiovascular and it impacts cardiology practices, we shouldn't be surprised if that creates tremendous tension and anxiety for physician partners. It's great to agree on philosophies, but it's important to really make sure people understand what it really means when the rubber hits the road."
Implications of a growing employed physician practice: "This must be aimed specifically at the independent affiliated physicians in your market. Part of what makes the Alegent story fascinating is that the standard-bearers in the models many want to emulate are almost exclusively closed medical staffs. Alegent has 1,200 physicians of which only 200 are employed and yet experienced tremendous growth in the employed sector in the past five years. The environment is driving physicians to seek employment, and that creates tremendous pressure on the existing affiliated physicians. But what does that mean to the ones who aren't employed? You have to demonstrate that they still have an important role as well."
Is the structure of the organization conducive to transformational change? "This can be applied to the whole organization or parts or the organization. Alegent's five metro hospitals have five independent medical staffs, each with their own structures, each organized around a hospital, while the organization is moving to create systems of care across the enterprise. Well, that's conflictual. So you must really take a hard look and make sure the structures are conducive to the change you want to achieve."

I'll finish with one more quote from Sensor, as I asked him what he would do differently if he could rewind the clock on his tenure: "This experience illustrates how difficult transformational change is in healthcare. This was a good petri dish for change and a lot of it occurred. Generally, I have no regrets. I had an opportunity to lead a progressive organization and to do some wonderful things that affect patients. I hope they carry that momentum forward and distinguish themselves. The five lessons I just shared with you are retrospective, and that's easy. In real time, those are some things I would've done more rigorously, more intentionally, and that is what I would focus on if I had a redo."

At that point, I asked Sensor if he was familiar with a little book by Joseph Heller called Catch-22, which is the genesis for that term describing a no-win situation. He laughed, but didn't take the bait.