When hospitals look for new leaders, the instinct is often the same: Put a doctor in charge. After all, who better to run a hospital than someone who understands medicine from years of practice?
According to new research from economists Cristóbal Otero of Columbia Business School and Pablo Muñoz of the Universidad de Chile, this assumption may be flawed. In a large-scale reform of Chile’s public sector, changes to how leaders were recruited and paid led to an 8-percent reduction in patient mortality. And much of that improvement, the researchers found, was driven by leaders with formal training in management rather than medicine.
The findings carry implications far beyond healthcare, challenging long-held beliefs about who should run public institutions.
A real-world experiment in leadership
To conduct their research, Otero and Muñoz took advantage of a rare policy shift. In 2003, Chile introduced competitive recruitment and pay improvements for senior executives across the public sector.
Hospitals provided an unusually clear window into leadership effectiveness. That’s because, unlike many public agencies, their goals remain stable over time, and performance can be captured through a single, high-stakes outcome: whether patients live or die.
The researchers analyzed data from more than 180 hospitals, landing on mortality rates as their central metric because of its proven usefulness in measuring the quality of medical care. While those numbers don’t tell the whole story of hospitals’ performance, other studies have shown they’re a good indicator of overall treatment effectiveness. “If you’re able to reduce deaths, you’re doing a bunch of different things right,” Otero said.
To determine mortality rates, he and Muñoz merged two data sets: discharge data from hospitals and deaths immediately following hospital discharges, which they were able to tally from public records. They also assembled a novel dataset containing every manager of every public hospital in Chile—including their educational and professional backgrounds—from 2005-2019. They paid special attention to whether the managers had a management degree, a medical degree or both—an essential step for analyzing which manager characteristics were associated with differences in hospital performance.
Inside the performance gains
When Otero and Muñoz compared outcomes before and after the reform, the results were dramatic. Within three years, mortality rates in public hospitals fell by roughly 8 percent. Using a variety of methods, Otero and Muñoz ruled out differences in patient composition as a factor in this decline. Instead, they concluded that the lower death rates were caused by better medical care following the introduction of new managers.
Digging deeper, the researchers found that the improvement in patient outcomes could be tied specifically to hospitals whose managers had a background in business and management.
“Before the reform, the social norm was that doctors should manage hospitals,” Otero said. “The reform made it more likely that leaders with degrees in business and administration, rather than medicine, would apply for these positions. It also incentivized doctors who were interested in management positions to study management.”
One mechanism for better care stood out in particular: staff stability. After new managers were brought in, doctor turnover dropped significantly. Drawing on previous research that demonstrates a positive correlation between improved management practices, reduced staff turnover and better performance, the researchers argued that the better patient outcomes could be explained by better hospital management.
Lessons for public institutions everywhere
For hospitals, the implications are clear. Clinical expertise is essential on the front lines of care, but it may not be the most important qualification for executive leadership positions.
That doesn’t mean medical knowledge is irrelevant. Rather, the study suggests that running a hospital is fundamentally a management challenge, one that benefits from formal training in leadership, operations and organizational design. And leaders who choose to work in the public sector may also be highly motivated by mission rather than money.
The study holds lessons for organizations across the public sector. If management quality can affect mortality rates in hospitals, there is reason to think it may also shape productivity in other public institutions—a long-overlooked topic for researchers, even though the public sector accounts for almost a third of global GDP.
“I would love to see a similar paper studying police commissioners or university presidents and chancellors in the U.S., for example,” Otero said. “The question of who manages these organizations really matters.”
