The typical MBA employment report from a business schools shows that most MBAs have little interest in the healthcare field. At Harvard Business School, for example, only 7% of last year’s MBA graduates ventured into the health care sector, with nearly half of them going into biotech or pharma. It was a similar story at Wharton where less than 6% of the graduating MBAs last year took jobs in health care.
Instead, MBAs largely flock to consulting, finance, and tech companies. That is going to change dramatically over the next five to ten years. With healthcare now accounting for 18% of the American economy, roughly $3.3 trillion in all, the industry is beginning to seek more professional managers and leaders. Healthcare startups, eager to disrupt a largely inefficient delivery system, have become more common. And finally, healthcare is a field where MBAs can play roles that genuinely provide social good.
So we turned to a business school that is already leader in the field, Vanderbilt University’s Owen Graduate School of Management where 16% to 20% of the school’s MBAs typically head into the healthcare field. That’s twice the percentage of Harvard and three times that of Wharton. Owen, in fact, funnels more than five times the percentage of MBAs into healthcare as Columbia, Chicago Booth, or NYU Stern.
WHY VANDERBILT’S OWEN SCHOOL IS SO STRONG IN HEALTHCARE
How come? The school’s location in Nashville, Tenn., plays a big role in Owen’s outcomes. More than half of the private hospital beds in America are managed out of Nashville which boasts hundreds of companies in the city’s metro area involved in the healthcare industry. Many of the school’s alumni hold leadership roles in the industry, from startups and early stage companies to the big managed care concerns. And Owen has on its faculty some of the foremost academic business experts in the field.
Like several other business schools, Owen offers MBA students a concentration in healthcare with more than a dozen electives that range from Healthcare Law & Regulation to Healthcare Analytics. A healthcare immersion allows students to gain the perspectives of physicians, nurses, patients, scientists and administrators in real healthcare settings. MBA students even watch actual surgeries being performed and visit Vanderbilt’s LifeFlight critical care helicopter service, the Mass Spectrometry Research Center and community clinics. But what sets Owen apart is its deep connections to Nashville’s healthcare ecosystem.
That’s why we interviewed Owen Dean Eric Johnson about MBA prospects in healthcare and how he sees the future unfolding. Here’s an edited transcript of our interview in Houston at the CentreCourt MBA Festival.
John A. Byrne: So one of the most intriguing things to me about where you are in Nashville, is the fact that it’s really the epicenter of the healthcare industry. And I’m wondering how that plays out in what you teach and what your students ultimately do in the jobs that they take.
Vanderbilt Owen Dean Eric Johnson
Eric Johnson: Well we certainly have a lot of students who are interested in health care, and as you point out, Nashville. People don’t think about it as a healthcare center, but there are over 400 health care companies in Nashville, 18 publicly traded ones. Over half the privately managed beds in the U.S. are managed out of Nashville. So, that’s a lot of opportunity and something that’s changed a lot over the last couple of decades.
Byrne: Historically, MBAs have not been attracted in a mass way to the healthcare industry. I think when you look at the employment stats at most schools, it’s probably five percent or four percent. Your school is well above the average, something of an outlier.
Johnson: We approach about 20% of every MBA class goes into healthcare.
Byrne: It makes total sense, given the stats that you just reeled off. But I wondered, given the size of this industry, and its importance to the American economy, whether you think we’re going to see far more MBAs take opportunities in this field in the future?
Johnson: Yeah, when you follow the money, right? Americans spend $3.5 trillion in health care a year, nearly 20% of the U.S. GDP and growing at 5% or greater every year, much faster than GDP growth. So, there’s a lot of money there. But, not just a lot of money, but health care is becoming more professionalized. So, if you reel back 20 years ago, there weren’t very many MBAs managing hospitals, managing health care companies or those in insurance. All these things were in many ways, kind of driven by the health care profession itself. And today, that really changes. You see the management structures of these companies looking much more like financial organizations than a health care organizations, where the CEO may no longer have an MD. The CFO clearly doesn’t, and in their place, there are more and more opportunities for MBAs to find really interesting jobs in the healthcare sector.
Byrne: And also in health care start ups because a lot of disruptive biotech and other healthcare delivery companies are getting started by young people.
Johnson: When you start thinking, there’s a huge spectrum here when we talk about health care for MBAs. Certainly a big hunk of our students go into consulting, but it’s healthcare consulting. They’re consulting into healthcare companies, but they’re the familiar sets of names that we would see anywhere. Yet we would still think of them as health care. Likewise, on the other end of the spectrum, lots and lots of start up activity is happening. The U.S. health care system is in a constant state of churn, and it’s creating a lot of opportunities to roll up all kinds of specialties. For example, anesthesiologists, emergency room doctors, whatever, they get bundled up as a service sold back to hospitals. It’s very much a roll up kind of industry right now, and that’s an MBA sweet spot. MBAs love conquering the world, rolling up industry and a very fragmented industry at that.
Vanderbilt’s Owen Graduate School of Management
Byrne: That’s certainly true. I’m struck by the number of doctors, and nurses, and other healthcare professionals who are coming back to business school, outside the mainstream MBA population in executive MBA programs, and in non-degree executive education programs, to get more business know how.
Johnson: Yes, we see it across the board, so our MBA program always has docs in it. Many of them, they’re looking to get into a healthcare business and maybe out of practice. We offer a Masters in Management of Health Care. Again, it’s a mid-career program for docs and nurses, and of course, our regular daytime MBA program attracts a solid number of people who came from healthcare, or people who are doing joint programs in the MD and MBA. We always have four or five,of those students every year doing a joint program.
Byrne: That must be torture, an MD and an MBA at the same time?
Owen Graduate School of Management
Dean Eric Johnson
– Vanderbilt photo/Daniel Dubois
Johnson: It’s a long haul, but to be honest, it’s a place we’re doubling down. Yesterday, we announced at Vanderbilt a $25 million scholarship program for professional schools: MBA, MD MBA, JD MBA, and it’ll be supporting 40 scholarships in that area, so it’s an area that we are really investing in.
Byrne: Now, Eric, this week happens to be the 10 year anniversary of the demise of Lehman Brothers. And I mention this in the context of health care, because 10 years ago there were a lot more MBAs who were going into finance and many of those people are now going into technology. And I’m thinking that healthcare may well be the next frontier after technology, for the MBA population. Historically, there’s been a reluctance to go into healthcare because the money wasn’t there, and it wasn’t as professionalized an industry as it’s become, right?
Johnson: The early beachheads were pharmaceuticals, some of the biotechs, some of the medical device companies. Certainly those are places that MBAs still very happily march off to. But the delivery side is really the beast. When you think about that $3.5 trillion, just a huge hunk of that is in delivery, which is fragmented, which is professionalizing, but there is a lot of room to go there. And I think you’re right, I think it is a place we’ll see continued MBA interest.
Byrne: Now, what do you do given your location and the importance of this industry in your back yard, to tailor your programs for health care?
Johnson: Well, certainly by virtue of the fact that we have a great medical school, that we have that partnership on campus, we always have natural connection points. And that’s kind of a starting point. But, when you look into our program for example, in the fall of the first year, we’ll stick the students interested in health care into a week long immersion, right in the middle of the fall where they’ll work in the emergency room for several days. Or, they’ll literally go into the operating room and spend a day in an operating room.
Byrne: That can’t be for squeamish people.
Johnson: It is not, and there are a few that find out they really don’t want to get too close to health care delivery. I mean, there’s always students after the week who talk about being there for a birth. There’s always a few that witness a death, and those can be kind of career changing moments, both positive and negative in terms of confirming it’s a place they want to be.
Byrne: And you have several faculty who teach in the business of healthcare, but I know you have one in particular who’s something of a guru, because my conversations with him in the past have been really illuminating. He strongly believes in consumer choice. Because when there’s consumer choice and full transparency on pricing, then you have a real market. He argues that one of the problems with health care is that when people are not actually paying out of pocket for the full expense of their medical care there is no true open market. When that happens, he thinks this thing is really going to explode for professional management.
Johnson: That’s Professor Larry Van Horn, and yes, he’s infamous in that space. He has a center at the Owen School called the Center For Health Care Markets Innovation, and it’s all about that consumer driven choice. But it’s coming fast. Look at where you’re at in the Bay Area, where many of those tech companies now are offering high deductible plans with health savings accounts attached to them, and they’re very popular for lots of reasons, particularly around healthy, younger populations because they’re inexpensive. Imbedded in those programs is the notion that consumers are making choices. Because suddenly when you’re in a high deductible plan, you’re actually making a decision. “Do I really want to go see the doctor today because I got a sniffle? Or, do I just want to suffer through this for another day or two and see what happens?” Or, “Do I really want to have this test when I really don’t need it? I don’t think I need it.” Those kinds of trade offs are very real, because it’s real dollars out of their pocket at that point.
Professor Van Horn will often reference his childhood. I remember my childhood well, when there was something wrong with Eric, my mom would say, “Are you really that sick today, Eric? If you want to go to the doctor, I have to write a $25 check, and it also means you’re going to stay home from school today. Because if you’re sick, it means you’re not going to go outside and play.” You know very quickly as a kid, you kind of make the calculation. “Am I really that sick?” Well, that’s that market effect, right?
Byrne:That’s true.
Johnson: To Larry’s point, it really will drive spending in different ways, and the kind of opportunities companies such s Walmart and CVS, and others are seeing in a lot of that kind of more routine health care space around that is exciting, and it’s going to be changing the world in health care.
Byrne: And on your Board of Advisors, you have a number of people who are entrepreneurs and senior executives in the healthcare industry, right?
Johnson: Absolutely. So everything like the big guys like Cardinal Health to lots and lots of those startups that we were talking about earlier.
Byrne: So, what’s your advice to someone who wants to take advantage of this booming health care market and its newly found professionalism?
Johnson: I think more than anything, you do want to lift the covers up and go take a look, and that’s why we do that immersion piece. It is still an industry, especially if you get onto the delivery side, that you have to have some passion around or it’s probably not going be so much fun. But, if you do have that passion, of course there’s lots of purpose driven stuff there. I think it’s a place where MBAs can not only make a decent return on their investment, but also have a real feeling of satisfaction that they’re impacting their communities and the world. And those two together make it a compelling place to work.
Byrne: And that really is in sync with the goals of this millennial generation.
Johnson: Absolutely.
Byrne: Well, Eric, thank you.
Johnson: Thank you, John.
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