What Can You Do with a Healthcare MBA?
Where do graduates with MBA degrees fit into the world’s largest industry? It would seem reasonable to expect that such a massive industry would offer plenty of opportunities for new MBA graduates. After all, healthcare drives the United States economy, accounting for almost one-fifth of the nation’s gross domestic product.
Healthcare also drives a significant proportion of the nation’s economic growth. This analysis by McKinsey & Company reveals that during the fifteen years through 2016, healthcare furnished 9 percent of the U.S. economy’s $4.2 trillion inflation-adjusted growth. The business is so colossal that a protracted interruption in demand inside a single resource-intensive sector within the industry—like cancer treatment—could trigger a domestic economic collapse.
For the first time in history, healthcare has also taken the lead as the engine driving job growth. By surpassing the retail and manufacturing sectors decimated by the Great Recession, healthcare surged ahead in 2017 as the nation’s largest employer. And during the period covered by McKinsey’s study, healthcare furnished almost a third of the nation’s 14.4 million net new jobs.
Given figures like those, wouldn’t it make sense to assume that this industry provides students graduating with MBA degrees a huge variety of opportunities? Hiring trends appear headed in that direction, especially given the optimistic healthcare industry hiring forecast for MBAs published by the Graduate Management Admission Council in their June 2018 Corporate Recruiters Survey Report.
However, an accurate and complete answer to that question first deserves a broader conceptualization of what the industry encompasses and how one’s role within it might appear. Such an answer also deserves a more sophisticated analysis than readers who are unfamiliar with current MBA hiring trends within the healthcare industry might expect.
Healthcare Industry MBA Hiring: Then and Now
A brief historical perspective on the roles MBAs have played within the healthcare industry seems like a good starting point. For many years, the healthcare industry tended to hire business school graduates into narrowly-defined specialist roles. Many of these jobs supported the marketing of products such as drugs, medical equipment, and healthcare supplies. At many business schools, jobs like these remain the mainstay of healthcare industry recruiting today.
Pharmaceutical Brand Management
The archetypal healthcare industry job for MBAs was working as a pharmaceutical brand manager. The world’s biggest-selling blockbuster drug brands—Pfizer’s Lipitor cholesterol drug, GlaxoSmithKline’s Advair asthma inhaler, Bristol-Myers Squibb’s Plavix blood thinner, etc.—all owe some credit for their market leadership to brand management decisions. In some respects, pharmaceutical brand management isn’t too far removed from Procter & Gamble-style logo and package design, advertising, and promotional strategy.
The University of Virginia’s Jeff McNish, assistant dean of career development at the Darden School of Business, told U.S. News and World Report that working as a brand manager at a pharmaceutical company amounted to the traditional career track for MBA grads starting in the field of healthcare. “And that’s still true,” says McNish.
Pharmaceutical marketing positions in product, project, and program management are all related to such brand management jobs. Project managers tend to analyze competitive and historical market data to envision and develop promotional strategies for new medications. They also organize and supervise marketing campaigns that build demand for drug products. Moreover, they manage relationships with customers, plus write and pitch proposals.
An excellent example of a marketing manager who works in one of these roles is Megan Fisher. Fisher graduated in 2014 with an MBA from the Owen Graduate School of Management at Vanderbilt University in Nashville. She is quite an influential figure within the pharmaceutical and biotechnology industries. That’s because she is the marketing manager for the Southern California biotechnology firm Amgen’s TNF (tumor necrosis factor) inhibitor drug Enbrel (etanercept). In 2017, Enbrel ranked as the fourth largest selling drug in the world, amassing sales of $7.88 billion.
Management of Healthcare Devices and Supplies
Recently, increasing numbers of MBAs’ careers have focused on the marketing and management of other healthcare products besides pharmaceuticals. The Owen School’s Dean Eric Johnson told Poets & Quants, “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.”
An example of a marketing manager who works for a device manufacturer is Medtronic’s Ravyn Miller. Based in Minneapolis, Medtronic is the world’s largest medical device company, with global sales of $5.3 billion in 2017. Like Fisher, Miller also holds an MBA from Vanderbilt, and joined Medtronic after graduation. Today Miller serves as the firm’s director of United States marketing.
Management Consulting in the Healthcare Industry
Another traditional entry point for MBA grads starting in healthcare has always involved management consulting. This is a good example of one of the many healthcare industry careers that are “hidden.” Typically, observers don’t think of healthcare practice jobs with firms like McKinsey & Company as healthcare careers, and some business school career centers don’t even count them as healthcare industry placements.
Nevertheless, under brands like Healthcare Systems and Services, consulting firms like McKinsey operate vast global healthcare industry practices, as do many of the advisory services divisions affiliated with public accounting firms. And the associates at all these firms work closely with healthcare clients.
MBA grads who work for one of these consulting practices will likely receive much better compensation packages than they ever would from client companies or many other healthcare employers. Data from sources like TransparentCareer demonstrate that most healthcare employers tend to offer less compensation than consulting firms like McKinsey. In exchange for the additional salary and bonuses, associates’ work-life balance suffers because the consulting firms expect them to work much longer hours. And even in an age when professionals routinely use online video applications like Apple’s FaceTime and Microsoft’s Skype, most engagements still require frequent flights by consultants to client facilities.
Not all healthcare consultants work for firms like McKinsey. Some work as internal consultants within healthcare organizations. For example, Yi-An Huang works as the director of strategy at the Boston Medical Center, reporting to BMC’s chief operating officer. Huang graduated with an MBA in 2013 from the Harvard Business School.
Care Delivery Careers
Now we’ve arrived at one of the more interesting parts of our story: care delivery. Inconsequential as an MBA hiring category not many years ago, these days care delivery has assumed more significance. Amanda Fend, senior associate director of the Career Management Center at Owen, considers care delivery to now amount to one of the three main categories of MBA hiring.
Fend should know. In 2016, Owen may have set a record for the highest proportion of healthcare job offer acceptances by any MBA program’s graduating class; a quarter of the class accepted offers from the industry upon graduation.
Even more surprising, at a time when the vast majority of MBA graduates still don’t care about careers in healthcare, funneling high proportions of graduates into the industry seems typical of Vanderbilt. Each year since 2009, on average about 17 percent of Owen’s MBAs went to work for a healthcare employer upon graduation. To put that in perspective, that’s roughly double as many from Harvard, Carnegie Mellon, and Northwestern; triple the percentages from Stanford, Wharton, Yale, and Cornell; and five times the proportions from Columbia, Chicago, Michigan, Virginia, and UCLA.
However, Owen’s Dean Johnson told Poets & Quants, “that doesn’t mean they’re necessarily working for a hospital.”
So how could that be? The dean draws a subtle yet crucial distinction between hospitals and providers: “Very few of them are actually in hospitals, but more and more are ending up in providers.”
So we checked his business school’s employment report for 2018-2019. We counted 31 employers from the healthcare industry—vastly more than at most other business schools. And sure enough, only two hospitals made the list: the Vanderbilt University Medical Center and the Monroe Carell Jr. Children’s Hospital at Vanderbilt.
Care Delivery: Historical Trends and Market Dynamics
Understanding why MBAs now receive job offers from non-hospital care providers requires a somewhat longer explanation for what might at first seem like a paradoxical and curious situation. Nevertheless, any MBA contemplating healthcare career options needs to understand the historical trends and market dynamics that make their skills appear increasingly attractive to care providers.
The way this confusing situation developed focuses on the precedent set by the explosive growth of the Nashville-based firm HCA Healthcare since the company’s founding in 1969. Formerly known as the Hospital Corporation of America, this healthcare behemoth operates 185 hospitals and approximately 1,800 care facilities like surgery centers, free-standing emergency departments, urgent care centers, and doctors’ offices. HCA’s facilities operate in 21 states, mostly in the Deep South region of the United States; the firm also operates in the United Kingdom. HCA employs almost 250,000, ranks at #63 on the Fortune 100, and earned nearly $47 billion in 2018.
The business model that ignited HCA’s growth is known as a roll-up merger model. That’s investment banking and private equity lingo for a holding company that acquires and merges with (or “rolls up”) many small independent firms in the same market into a single, consolidated business entity. Many people interact daily with firms like these without realizing how investment bankers artificially created them. For example, Waste Management started out in the late 1960s as a roll-up of 100 independent trash haulers, and in only ten years became the largest business of that kind in the United States.
The purpose of a roll-up is to create a large company that operates with greater cost savings than any of the former independent firms were able to exploit, while simultaneously benefiting from higher stock market valuations and capitalizations. In this way, the resulting consolidated firm enjoys cost-saving efficiencies through economies of scale, like volume discounts that reward buying large quantities.
The firm further saves costs by eliminating wasteful and duplicated redundant services—many of which typically comprise back-office functions. For example, a roll-up of about 200 hospitals like that which formed HCA might only need a single centralized information services group, or purchasing department, or payroll department—but not 200 of them. Once relieved of the costly burdens of all these redundant functions, the hospitals should be better able to concentrate resources on delivering excellent care to patients.
Care Delivery: Repackaging Medical Labor as Services
As 200 hospitals, the maximum purchasing power that each hospital enjoyed was relatively small. But now, the consolidated mega-company wields so much purchasing power that it can afford to contract with large-scale medical talent providers that independently manage the deployment and practices of their own specialists. Such specialties might encompass critical care nurses, radiologists, or anesthesiologists.
Following the pattern of corporate roll-ups, a contractor like this can roll up a group of specialists. Then, the contractor repackages their aggregated labor as a service and sells the service back to other providers like HCA who operate hospitals. In other words, in the private healthcare industry’s brave new world of 2019, roll-ups sell to other roll-ups—meaning that providers now sell to other providers as well as patients.
To patients, in many cases, the hospital professionals employed by these firms appear identical to the facility’s employees. They wear the same surgical scrubs as the employees and might even display similar security credentials. But legally, they’re employed by separate companies who are third-party contractors. And patients won’t recognize their employers’ names because they’re strictly business-to-business organizations who don’t brand their corporate identities for recognition by consumers.
Care Delivery: Why These Providers Need MBAs
Finally, at last, it should become evident why these providers are hiring MBAs.
Each one of these medical talent service firms amounts to a care delivery provider. There are now many such care delivery providers headquartered in greater Nashville alone. Each one of these subcontractors maintains independent responsibility for the management of their employees and the marketing of the medical services they sell to other providers like HCA.
Moreover, each one of these providers competes against other providers in one or more of these lucrative care delivery markets. Providers that sell critical care nursing services, as an example, compete to win business from potential customers like HCA against other critical care nursing providers who also bid for HCA’s business.
Here’s what all this boils down to: in such new, competitive markets for specialized medical labor services, providers like these now need MBAs to provide the more skillful caliber of marketing and management required to win market share from their competitors and grow their businesses. According to Johnson:
“What’s interesting, of course, is that those providers—like HCA and so forth—have really matured in their own business practices, so their demand for MBA-level talent is growing. Historically that wasn’t true. Twenty years ago they hired very few MBAs, and many times if an MBA went there they likely weren’t gonna get paid an MBA-level salary, particularly starting straight out of school. Today that’s not true—and if you look at the executive ranks of a lot of those companies, they are becoming much more MBA-centric.”
For MBA grads who want to work for healthcare startups, opportunity knocks. More precisely, it’s banging the door down.
That’s because more startups are suddenly raising more capital in initial public offerings (IPOs) than at any time since the dot-com bubble two decades ago. And the one industry driving all this IPO activity is healthcare—especially the new breed of digital health or “healthtech” startups that leverage technology to improve wellness.
Indeed, the year 2018 marked a banner year for healthcare IPOs. More than 70 companies from the industry went public in 2018, constituting about 40 percent of all IPOs carried out during the year. Technology—usually the industry that spawns the most startups—finished a distant second, accounting for about 22 percent.
During 2018, healthtech startups raised over $8 billion. Some startups morphed into huge unicorn subsidiaries overnight, like Roche’s Flatiron Health acquisition for almost $2 billion and Amazon’s $1 billion buyout of PillPack, an online drugstore.
As of May 2019, healthcare continues to comprise the IPO market’s most active industry segment—one that is leapfrogging technology yet once again. Of the IPOs so far this year, 60 percent have already emanated from healthcare. Of the 21 new public firms that debuted between February and April, a dozen are healthcare companies.
Working for a startup can be risky, and in general, typical startups don’t have a reputation for always paying particularly well in terms of salaries. And in the labor market—as with sales transactions in any industry—professionals don’t necessarily earn what they’re “worth;” they earn what they negotiate. However, MBAs who negotiate compensation plans with startups that include shares of the firm’s stock could become rich overnight if the firm stages a successful IPO or acquisition.
Consider Laura Mackay, who graduated from the Harvard Business School in 2014. She is an MBA who joined a late-stage startup that appears to be positioning itself for an IPO or a buyout. Since this interview, Mackay went to work as a senior business development vice president for higi—and yes, that’s how the Chicago startup spells and capitalizes their name.
higi operates a network of 11,000 self-screening biometric stations in retail outlets. The firm’s diagnostics enable consumers to “measure, track, and act” on metrics like their blood pressure, pulse, weight, and even hydration. Apparently there must be a lot of money to be made from such readings, because this mature Series C venture has raised $61 million since 2012 and already bought out three other companies.