Physician-leaders and hospital performance revisited

Reflecting the increasing relevance of quality outcomes for hospital payments, some hospital boards have promoted physicians into top-management positions. So far, however, the literature regarding the impact of physician leadership on care quality or cost is limited. The aim of this study is to examine the link between the educational background of a hospital's CEO and its performance in terms of medical quality and financial success. Examining data of 370 German hospitals for the year 2016, this study uses the second largest sample of its kind and the largest for a single country. Multivariate regression analysis with matching is used to model the effect of the CEO's education, controlling for tenure, competition, hospital size and ownership. We find that physician-led hospitals have lower in-hospital mortality rates for pneumonia and higher patient satisfaction (at the 5% and 1% significance level, respectively). In contrast, institutions led by managers with economics or business degrees have better financial performance (at the 10% significance level) and superior outcomes for hip and knee surgeries (at the 1% and 10% significance level). Our findings support prior results regarding financial outcomes and mortality. However, including a broad spectrum of measures for clinical quality, we draw a more nuanced picture that does not point to the straightforward interpretation that physician CEOs lead to superior medical quality.