Service providers are missing a trick without a chief medical officer

HFS Research recently published its HFS Top 10: HCP Service Providers, 2022 report covering 17 service providers that render services to primary care, acute care, and rehabilitation market segments. A review of organizational charts from service providers responsible for healthcare service providers (HCP) showed only one has a chief medical officer (CMO), but that company has since reversed course. A few others have a sprinkling of clinicians (doctors and nurses) in their leadership team. Some service providers have CMOs at an enterprise level with no discernable role in the HCP business. The limitation of clinicians in the leadership ranks of an organization responsible for understanding and delivering the needs of health systems and hospitals translates to disconnect and a missed opportunity.

CMO’s play a critical and diverse role irrespective of the type of organization

The two types of CMOs differ based on the enterprises they support. Firstly, a health system (such as CommonSpirit Health) or hospital (such as Jackson Memorial Hospital) CMO, and secondly, a CMO at a service provider (Accenture) or consumer-facing enterprise (Delta Airlines). Despite the differences between a clinical care organization and services or consumer-facing enterprise, the themes of responsibilities remain in the same ballpark, as Exhibit 1 shows.

Exhibit 1: CMO has critical financial, cultural, and health impacts on an organization

Source: HFS Research, 2022

Our focus in this perspective will remain on service providers. The CMOs at service providers have an elevated opportunity across regulations management, advisory, and business development roles.

A CMO understands clinical-impacting regulations, can translate them into business parlance, and help refine products, services, and marketing attributes. In a market with a very low tolerance for not being accurate (life and death) and slow to react (penalties and market perception), a CMO’s role can be the difference between being in business and not.

A CMO’s clinical advice can help service providers define and develop market-differentiating solutions and services. In a crowded market where everyone claims to reduce costs and improve experiences, a CMO’s angle on improving health outcomes can be the difference between winning business or not. The CMO’s ability to interact with other clinician leadership at health systems on an equal footing, appreciate clinical challenges, and address them with empathy and urgency is critical. A CMO’s leadership for service providers can sustainably address key challenges health systems and hospitals face as they come under more pressure due to staffing shortages, tightening regulations, and increasing competition.

Clinicians in leadership ranks are likely to help service providers grow

Service providers have the propensity to repurpose their medical directors whose primary function is clinical compliance to be their CMOs. Medical directors are invariably aligned with client deliverables but are not necessarily business savvy and not in the leadership ranks. The impact they have is compliance, generally at an account level. As a result, service providers have not been able to appreciate the strategic importance of CMOs.

A strategically positioned CMO can have an overweight impact on business performance. HFS’ HCP Top 10 in early 2022 analyzed multiple growth attributes of the 17 service providers that participated in the study and found that among service providers with the highest revenue growth, four of the top five had clinicians in their leadership ranks, as shown in Exhibit 2.

Exhibit 2: Revenue growth correlates with having CMOs or clinicians in the leadership ranks

Sample: HCP Top 10, 2022
Source: HFS Research, 2022

Investment in CMO’s is an investment in growth of the business

CMOs at service providers can command compensation anywhere from $200,000 to $300,000 annually before bonuses and incentives, which could add another 30% of their base. That may seem like a high number for an individual contributor role with no revenue targets. However, in the context of the CMO’s role as a strategic advisor to clients, product evangelist, and market maker through the clinician network, there is an argument that their compensation is a small investment with significant upside.

Service providers tend to be cost-conscious, as most businesses are when there is an unclear return on investment. Those with a heritage of arbitrage or a propensity to make cost a differentiator is particularly sensitive to strategic roles. Other service providers that have expanded into healthcare from a pure IT services heritage have not caught on to the domain nuances. Whatever the cause for the reticence to hiring CMOs in their leadership ranks, service providers must overcome it, given the impact strategically positioned CMOs can have.

The Bottom Line: Service providers with no CMO in their leadership ranks put their growth at risk.

CMO postings have increased by approximately 19% since 2020, according to workforce analytics firm Burning Glass Technologies. The pandemic has awakened enterprises to the need for CMOs as they navigate public health crises, support their employees, and find new ways to grow. Consumer-facing companies like Constellation Brand (Robert Mondavi, Corona beer, Casa Noble Tequila), Salesforce, Delta, and Kroger all have a CMO or similar position called something like “chief health and wellness officer.” As consumer-facing enterprises recognize the need for CMOs and rush to bring them on, service providers selling into the HCP market must ponder why they think they can be successful without a CMO in a market that will only get more specialized and competitive.