“When it comes to hiring senior leaders, labs today are more diligent in recruiting and interviewing candidates for key executive and management positions. One reason for this change is the shrinking financial margins at most labs.”
—Adam Slone, Founder, Slone Partners
CEO SUMMARY: There is a clear shift in the hiring practices of clinical labs and pathology groups. Under financial pressure and reacting to competitive marketplace changes, labs are more diligent when interviewing candidates for C-suite positions or other top leadership jobs. Adam Slone and Tara Kochis are executives and at one of the lab industry’s more active recruiting firms. They say that the high-demand candidate in today’s lab marketplace is someone with demonstrated leadership skills and proven experience at business development. Today’s tougher lab market means that no lab can afford to make a bad hiring decision. The following interview discusses the hottest sectors of the lab job market.
EDITOR’S NOTE: The following interview was conducted with Adam Slone, founder and CEO of Slone Partners, and Tara Kochis, President. The company, founded in 2000, is a national recruitment firm based in Miami Beach, Florida. It specializes in identifying top executive, management, leadership, and scientific talent for diagnostic and lab testing companies.
EDITOR: With the rapid changes unfolding in healthcare and laboratory medicine, could you tell us which types of lab management jobs are in highest demand?
SLONE: The demand for laboratory directors and top-level management has always been high for experienced clinical laboratory leaders. What has changed is that employers are putting in the extra effort when hiring top-level directors and members of the C-suite.
EDITOR: Do you associate this trend with the tougher finances for clinical labs and pathology groups due to budget cuts and reduced reimbursement?
KOCHIS: That is part of the story. At the same time, labs are more complex organizations to manage and operate. Particularly at the leadership level, no lab can afford to make a bad hiring decision. More and more this is true.
EDITOR: Are you saying there is a smaller margin of error when hiring a new senior-level lab administrator or executive in lab organizations compared with the past?
KOCHIS: Hiring at this level is so important that the consequence of making a bad hiring decision can be significant for any lab. Whoever the lab hires at this level will have a direct effect on the company’s success and its ability to be sustainable in the future marketplace. Now more than ever, clinical laboratory companies recognize that they have to hire the right leaders.
EDITOR: What trends in the lab marketplace are causing labs to be more diligent now about filling the top spots than they were 12 months ago?
SLONE: There is pressure on reimbursement. Payers’ continually make threats to enact additional cuts to spending on lab testing. Molecular and genetic technologies are both expensive and add complexity to lab operations. Plus state and federal regulators are holding labs to a higher standard.
EDITOR: What are labs doing differently today when they want to recruit management talent? What should candidates expect from prospective employers?
SLONE: Labs are taking a more deliberate approach to hiring. First, they set aside more time for interviews and testing and they make committees part of the interview process. Second, labs want members of the board of directors and other top executives involved in the decision-making to mitigate the risk of hiring the wrong person. This year—more than any year in the past—we see that labs are more deliberate and careful in how they vet candidates.
EDITOR: The fact that laboratories have become more deliberate and spend more time when interviewing top-level candidates makes sense during a time when there is much uncertainty about both clinical services and financial stability. Are there different hiring trends at the manager and lower levels?
KOCHIS: This is quite on interesting issue. At some manager and lower levels, labs frequently do not go outside to hire. Rather, we see much greater emphasis on hiring from within. Anecdotally, we’ve seen situations where, if labs can’t find the right candidate, they might not fill that spot.
EDITOR: Has “hire from within” reduced search assignments handled by Slone Partners?
KOCHIS: Despite this trend, our firm is still placing outside candidates for our lab clients at a steady pace.
EDITOR: When hiring senior positions, how do lab employers value technical skills and management skills? Has there been a change in the demand of labs for one skill over the other?
SLONE: In the past, labs frequently hired only those top level staff who have the right technical experience. Today, employers want top managers in labs to possess both technical expertise and business skills.
EDITOR: What is causing this change?
SLONE: I see three reasons why this trend is so strong. The first reason is the need for diversification in a lab’s client mix and business skills. Clinical labs today see the importance of being involved in biopharmaceuticals or clinical trials.
EDITOR: That makes sense. Advances in companion diagnostics bring labs closer to development of pharmaceuticals. What is the next factor?
SLONE: The second reason is that labs need to serve both hospitals and office-based physicians today. Thus, a lab now working with physicians must be able to work with hospitals as well. The opposite is also true. A lab working closely with hospitals needs to develop appropriate services for physicians.
EDITOR: Your comments show how laboratory organizations are beginning to realize that they cannot have just one source of revenue.
SLONE: That’s true. It is why labs want to recruit the expertise needed to serve a variety of lab customers. It includes the biopharma and clinical trial companies, along with firms involved in drug development and biotechnology. In the past six months, we’ve seen a heightened focus in those areas.
EDITOR: What is the third factor?
SLONE: When hiring, labs want top level executives who have both the technical and business expertise needed to meet the challenges of declining reimbursement and organic growth. There is high demand for individuals with the skills to build the lab’s revenue while, at the same time, managing operations to contain costs. The market is looking for executives and managers who are effective at work flow analysis and introducing the effective use of Lean Six Sigma methods.
EDITOR: That leads me to the issue of the economy and I want to ask two questions about that. First, what effect did the recession have on compensation for clinical lab management and staff and, second, if compensation went down, have you seen it climb back up again?
KOCHIS: The short answer is that we didn’t see a sharp decrease or increase in compensation in any particular segment of healthcare over the course of the recession. Having said that, I would also say that the economy definitely affects salary.
EDITOR: Please explain.
KOCHIS: When things are great, hospitals, health systems, and clinical laboratories will pay whatever it takes to get the people they need. But the single most important factor affecting salaries is the value a hiring company sees in each candidate. It may cost a hospital or health system about $20,000 more to hire one candidate over another. However, the candidate getting the extra $20,000 may stay longer. That’s a question of value for the hiring company.
EDITOR: It strikes me that this is not a universal approach when providers want to hire a top candidate.
KOCHIS: That’s true. We have other clients, who, for whatever reason, are inflexible about adding extra dollars to the offer to help capture their candidate. They have restraints and so our job is to work within those restraints.
EDITOR: I am curious about what factors outside the business cycle that you see affect the compensation labs will pay for management candidates.
KOCHIS: In our experience, healthcare is not immune to the economic swings that affect all businesses. However, a different set of factors drives compensation in hospitals, health systems, and clinical laboratories. Those factors are more segment driven.
EDITOR: Could you elaborate?
KOCHIS: One of these factors is that not-for-profit hospitals and health systems—including their laboratories—have equity issues to which they are bound. Thus, if a physician is slated to be hired for a particular job, that job has a salary range and the range doesn’t change much. That’s a limiting factor. On the other hand, commercial laboratory companies have more flexibility to react to market demand for people they want to hire for certain positions.
EDITOR: Does this put hospitals at a disadvantage when recruiting a premier candidate for a lab leadership position?
KOCHIS: Perhaps. This doesn’t mean that hospitals don’t find the best people. It simply means the candidate pool is not as deep and so hospitals and health systems may need to look a little harder.
EDITOR: My second question about the economy also relates to the downturn that started in 2009. Did many labs trim their mid-management ranks as a result of the downturn? After all, few labs could survive without having all authorized mid-management positions filled with competent people, wouldn’t you agree?
KOCHIS: Absolutely. The mid-and upper-management levels of all labs must be staffed with people who are capable clinically. That’s always been true. But, today, the management staff also needs to be capable from a business perspective.
EDITOR: This is consistent with your experience that today’s hiring marketplace wants candidates with both the clinical and business skills.
KOCHIS: Labs today want to hire leaders who understand the financial consequences of their decisions. What shifted in the market to bring this on is the decline in lab test reimbursement. That change shows up in the requirement by hiring labs that their ideal candidate should bring comparable expertise in clinical or technical laboratory operations along with the business expertise needed to execute strategy.
SLONE: Allow me to chime in here. It is important that pathologists and lab administrators preparing to fill these types of positions should recognize this important development in the lab marketplace. For years, a candidate could get by on his or her skills in laboratory science. Now there is much more emphasis on the business side of clinical laboratories and the work that this new hire will do to build a firm foundation in the business management of the lab and its operations.
EDITOR: Is it tough to find qualified candidates who can fulfill both of these management requirements?
SLONE: If you look at successful labs today, nearly everyone on their management teams can deliver tangible business outcomes and possess the required scientific expertise. For years, labs could hire the clinically-skilled pathologists and scientists they needed rather inexpensively. That has changed today, because of the management skills that are needed along with the clinical skills.
EDITOR: To sum up this point, because of the ongoing changes in the lab testing marketplace, the margin for error is smaller than it was just a few years ago. That is why those labs now hiring take extra care to convince themselves that the candidate can deliver without any misfires.
SLONE: That is true.
EDITOR: What positions would you say are in the highest demand? Is it one of the C-suite positions or something specialized like a director of sales or marketing?
KOCHIS: You may be surprised to learn that it is two other positions. One is managed care reimbursement and the other is billing. That’s not the answer most people would expect. Over the past two years, a number of labs have added people with those skills to their management teams.
EDITOR: That must be a response to actions by payers to narrow their networks and to negotiate tougher terms with labs when contracts need to be renewed.
KOCHIS: We think that is correct. There is a third position with a big spike in demand. Labs want more sales people on the street. They tell us that, if they are to compete effectively and bring in new revenue, they need more competent sales people who can go after that business.
EDITOR: Can you explain further about the demand for managed care specialists?
KOCHIS: There are two reasons for the focus on reimbursement. First, Medicare has a more centralized approach to making payment determinations today than it had in the past. Labs that need and want favorable payment determinations must have someone who understands this process and can work effectively with the Medicare and Medicare Authorized Contractors—as well as private payers— to achieve a successful outcome.
EDITOR: That makes sense. Because of the new molecular CPT codes which took effect on January 1 this year and all the new diagnostic tests coming to market, labs do need someone who can manage that process.
KOCHIS: Turning to the demand for candidates with billing skills, not only has Medicare made numerous cuts in lab test reimbursement, it is threatening to make additional cuts. That is why labs must have managers on staff who understand payer issues on both a national level and a local level.
EDITOR: Given how much Medicare and all payers have cut from lab reimbursement, is that also why CFOs and revenue cycle management people are in high demand?
KOCHIS: Yes, labs are watching every penny. They are intensifying their efforts to get paid for every test they perform.
EDITOR: In the job market, you have outlined a demand for executives with strategic skills—such as the ability to develop relationships with private payers—in tandem with a demand for managers with tactical skills to run the coding, billing, and collection functions in an optimal fashion.
SLONE: That’s exactly right. No business can leave money on the table. This is why we say labs are actively recruiting individuals who have these skills.
EDITOR: Would you describe which different sectors of the lab testing industry are doing the most hiring?
SLONE: We continue to see a strong demand in toxicology. We don’t expect the current boom in pain management and toxicology testing to last forever. However there is a lot of pressure on physicians to demonstrate why they are providing their patients with various drugs. Experts predict that reimbursement levels will be cut for toxicology testing, but labs seem to believe there will be enough volume to make up for the decrease in revenue, so it continues to be a high growth area.
EDITOR: What other sectors of the lab industry are actively hiring executives and managers?
SLONE: Molecular testing continues to support an active job market. But we see a bit of slowing in this sector because of an interesting change.
EDITOR: Please explain.
SLONE: A number of labs active in molecular testing are looking at collaborating with academic medical centers. This allows them to tap the expertise of the medical centers. It can also can create competitive advantage in the molecular testing marketplace.
EDITOR: Are laboratories in hospitals and health systems actively hiring?
SLONE: The answer is yes if that hospital or health system is creating a core laboratory to serve the physician groups they have acquired in the past few years. This is an interesting trend because these hospitals and health systems are now looking at the possibility that laboratories will create income. At a minimum, they expect the core laboratories to benefit economically from handling the specimens that originate in the physician groups they own.
EDITOR: That is an interesting development, since inpatient admissions at many hospitals have flattened or declined in recent years.
SLONE: It would be accurate to say that we see a significant number of hospitals and health systems where the volume of lab testing is growing more slowly than the volume growth at a number of independent lab companies.
EDITOR: What other notable developments in the lab testing marketplace have you seen in recent months?
KOCHIS: Along with the trend of hospitals developing their core labs, we have seen another interesting trend that is somewhat related. Certain hospitals and health systems are talking with pathology groups about acquiring those pathologists, thereby making them become employees of the hospital system.
EDITOR: How widespread is this?
KOCHIS: That is hard to tell. But we definitely know of two pathology groups that were recently acquired by hospitals. Both pathology groups are located in the Northeast.
EDITOR: Adam and Tara, this has been an enlightening interview. You’ve helped us understand what labs want today in their executive and manager positions. Thanks for the insights.
SLONE: Thank you.
“There is high demand for individuals with the skills to build the lab’s revenue while, at the same time, managing operations to contain costs.”
“Labs today want to hire leaders who understand the financial consequences of their decisions.”
What Laboratory Positions
Are in Highest Demand?
BUSINESS DEVELOPMENT IS ONE LAB MANAGEMENT POSITION that is in particularly high demand. That is especially true in both the toxicology sector of the lab testing industry as well as the molecular testing sector.
“Every executive and manager with a demonstrated track record in business development and with experience in toxicology and pain management will be a candidate of high interest,” stated Adam Slone, founder and CEO of Slone Partners. “Over the past several years, we’ve seen those physicians with experience in business development attract much interest among labs seeking fresh management talent.
“At the moment, this is also true in the molecular test sector,” said Slone. “There’s an equally strong demand for executives who understand or have some experience in business development for molecular testing.
“Growth-oriented lab organizations are especially attracted to anyone in the lab business who has key contacts in molecular testing,” he noted. “These people are needed in a variety of settings, especially if they can form relationships to transfer technology or create meaningful partnerships. Also desirable is anyone who can assist in the commercialization of a test or product for molecular testing.”