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The Physician-Administrator Partnership at Mayo Clinic

2001; Elsevier BV; Volume: 76; Issue: 1 Linguagem: Inglês

10.4065/76.1.107

1942-5546

John H. Herrell,

Healthcare Quality and Management

One hundred years ago, Dr Will and Dr Charlie Mayo were seeing their medical practice grow at a rate that required business practices to match. Mr William Graham, an elder brother of Edith Mayo (Mrs Charlie) and the brother of one of the original partners, Dr Christopher Graham, was asked by Dr Will to make some sense out of the partnership's books. The year was 1901, and it was rumored that the finances of the partnership were in disarray. Mr Graham, a semiretired businessman in Rochester, was then in his late 50s. From then on, Mr Graham continued to come to the business office almost daily until his death at age 93 in 1940. In 1908, Dr Will decided the clinic had reached a state of organization that required more sophisticated business management. He was impressed by a 19-year-old man who had recently moved to Rochester from Winona to work at the First National Bank of Rochester. He hired young Harry Harwick, and the two of them formed the first physician-administrator partnership, a model that has served this institution well for more than 90 years. In 1910, Harry Harwick married William Graham's daughter, Margaret. Their son, J. William Harwick, joined the section of administration after graduating from Dartmouth in 1935, and their daughter, Margaret, married a young internist on the Mayo staff, Dr Wallace E. Herrell. Bill Harwick became secretary of the Board of Governors in 1953, the year Harry Harwick retired after 44 years as Mayo's first chief administrative officer. Bill Harwick served the Board of Governors as secretary until he retired in 1976 as well as a brief stint as chief administrative officer from 1972 to 1976 after the retirement of Mr Slade Schuster. Dr Wallace and Margaret Harwick Herrell's son, John, joined the administrative department in 1968 after a 3-year banking career in Chicago, following his graduation from the Harvard Business School. He was named chief administrative officer in 1993 and steps down from that role in 2001, 100 years after his great-grandfather first joined the Mayo partnership. This obviously is the history of my family. I do not know of any other non–family-owned enterprise where one family has served in the business affairs of that enterprise for 100 continuous years. I never knew my greatgrandfather, William Graham, but I spent a great deal of time with my grandfather, Harry Harwick, and worked with my uncle, Bill Harwick, for 8 years before his retirement. These family ties bring a unique perspective to the Mayo tradition of the physician-administrator partnership model. To understand the uniqueness of this physician-administrator model, it is necessary to understand the uniqueness of the Mayo business model. The professional staff at Mayo Clinic is salaried. There are no incentive pay schemes, and this is true for both physicians and professional administrators. Thus, the financial incentives of the physicians and the professional administrators are aligned. Both groups can focus on what is best for the patient without one group profiting from the other. This structure also has allowed us to set aside capital over the years to meet the institution's long-term financial needs. The practice of medicine in a not-for-profit setting will never be highly profitable because we are a group of professionals who have bonded together to conduct our professional lives within this model. If the practice is highly profitable, it will be reflected in the staff salaries. However, salaries are determined for the year, and there is no expectation of more in a given year, which would not be possible in a setting in which staff are incentivized. The lack of incentive pay allows for a margin to be saved and reinvested. Another aspect of the Mayo business model that sets us apart from others in health care, particularly other academic medical centers, is the concept of physician leadership. Physician leadership does not necessarily mean physician management of everything, but physician leadership is an essential element in the direction of everything. I believe strongly that physicians are and must be responsible for what happens in the care of patients. This is true regardless of the business model. What differentiates Mayo Clinic is the structure that makes the physician accountable for what happens throughout the institution. If the institution fails, the physicians have only themselves to blame. This fact affects physician behavior at Mayo Clinic in a positive way. They must keep the institution's interests in mind because those interests are aligned with their own. In the typical academic medical center, administrators and physicians are constantly jockeying for position and advantage. Their relationship appears to be adversarial, and their interests are often not aligned. Prior to 1986, Mayo Clinic suffered from some characteristics of such a misalignment when Saint Marys and Rochester Methodist hospitals were separately managed and governed. Because of the closed staff nature of these hospitals and the unique character of the Sisters of Saint Francis, however, alignment of interests was not as bad as may typically be found in other settings, but it was far from perfect. The integration of Mayo Clinic with Saint Marys and Rochester Methodist hospitals in 1986 was a watershed event in the history of the institution. At that point, we brought the cooperative physician-administrator model, which had existed in the outpatient setting for 78 years, to the inpatient setting, beginning with the relationship developed by my grandfather and Dr Will. We now manage our hospital environments with a triumvirate of a physician leader, a nurse leader, and a senior administrator. This team ensures that the nursing staff has input into management of the hospital in a way seldom if ever seen at other medical institutions. We now can focus all our attention on what is best for the patient, both clinically and financially. We now consciously blur the distinction between outpatient and inpatient care, again with the only consideration being the best interest of the patient. Sadly many medical centers spend too much time and energy protecting their separate inpatient and outpatient turfs. The last distinguishing feature of the Mayo business model is the centralized purse. Fees and salaries are set centrally and not by each department, as is typical of most major medical centers. Department chairs are asked to concentrate on quality, the efficient use of resources, and the personal development of their colleagues. Mayo is a meritocracy. There are no haves and have-nots. Research ideas are funded based on their merits, not on how much revenue a department can generate. Capital is allocated to the greatest clinical need. The integrated practice is reinforced by integrated finances. It is this integrated financial structure that allows for and fosters cooperation among the members of the staff. No one loses when a patient is referred to a colleague, and the patient wins, with the assurance that the clinician with the best expertise in a given area is the one focused on the patient's problem. Human beings are economic animals and respond to economic stimuli. We have worked very hard at Mayo to remove the stimuli that work against the patient's interest and the interests of our colleagues. If there is a weakness, it is the lack of incentive to work harder and longer. However, I have always marveled at the dedication and selfless effort Mayo staff bring to their jobs. I cannot explain it with economic theory, but I believe it is the result of the peer review and peer interactions inherent in the integrated practice. All of us interact to an unusual degree with our colleagues, and the pride of belonging to a successful team is the prime motivator. Having said all this, I would like to focus on the physician-administrator partnership that has developed at Mayo Clinic and make some observations about how it developed and where it is heading. The administrative people who have served this institution for 100 years have shared a common attribute: They have all believed deeply in the values of the institution and have taken great pride in its accomplishments. The pursuit of personal wealth is certainly not high on anyone's list, or we would not be here. Just as our physician colleagues, we are salaried with no bonuses, no profit sharing, and no stock options. Most of my classmates from the Harvard Business School have done a little better financially than I have. But I, like many of my administrative colleagues, was attracted to a higher calling. I was working for a Chicago commercial bank in 1968 and mentioned to my mother that working at the Mayo Clinic must be gratifying, given the noble purpose of the institution. I never considered actually doing it. She obviously talked with her brother, Bill Harwick, and shortly thereafter I received a call from Slade Schuster saying they needed someone in finance within the Mayo Department of Administration. After a period of introspection, I dragged my poor wife, kicking and screaming, from Chicago to Rochester. The rest is history. All the chief administrative officers of Mayo after my grandfather, except Bob Fleming, were born in Rochester and all understood the culture and values of this great institution. Bob Fleming came to Rochester in his early 20s to play hockey for the Mustangs, a local semiprofessional team, got a job in the business office, and spent more than 40 years at Mayo Clinic. We all believed in the greatness of Mayo Clinic and were motivated by a desire to be part of it. It is remarkable that H. J. Harwick has had only 5 successors: Slade Schuster, Bill Harwick, Bob Roesler, Bob Fleming, and me. The great disappointment I have had as an administrator at Mayo Clinic is that occasionally I encounter an attitude among my physician colleagues that assumes that I have an agenda different from theirs. At times, some of the physicians seem to assume that administrators only care about money and do not share the physician's values. If we cared only about money, we would not be here. Administrators do not receive a bonus if the institution makes more money. The business model I described earlier is carefully designed to align our interests, not to create competing forces. The physicians have as much at stake as administrators do to ensure that the institution prospers financially. Administrators have as much at stake as the physicians do to ensure that the patients are well cared for and that our research and education programs are second to none. As I said earlier, the physicians are responsible and accountable for the success of the institution. Administrators are responsible and accountable to our physician colleagues to help make that happen. We have knowledge and skills they may not have and play a vital role in this institution's success, but the measures of success are identical for both groups. As Mayo Clinic becomes larger and more complex, the management skills of people trained in management and its allied professions will become even more important in ensuring the future of the institution, which is too complex to be managed by amateurs. I would entreat my physician colleagues not to become overly enamored with becoming business managers. Trust your administrative colleagues to have your best interests at heart. The practicing physician acting in a part-time management capacity with an educated, experienced, and trained administrative colleague is a model that works best for this institution. It ensures that everything we do is done with a physician's perspective in an efficient and effective way. At the end of this year, I will step down as chief administrative officer, and for the first time in 100 years, no member of my family will be engaged in the management of Mayo Clinic's business affairs. I hope the Graham-Harwick-Herrell family will be remembered as one that has contributed in a remarkable way to this great institution. It has been good to us, and I believe we have earned our keep. The future is truly exciting to behold. The information revolution and the genomic revolution are waiting for Mayo to take a leadership role, and we are in a great position to do so. The physicians, other scientists, and administrators on our staff have the talent and ability to take this institution to greater heights. Mayo has the financial, intellectual, cultural, and physical resources to make that happen, and I am proud that my family and I have played a role in the creation of that potential.