Last month when ACHE released its annual statistics on CEO turnover, everyone took note. The rate for hospital administration has been fluctuating but generally creeping upward for several years, but 20 percent last year felt like a tipping point. Based on the notices I see daily, I was surprised — surprised the rate wasn't higher. The obvious suspects were called out to explain the hike: CEO retirements, fewer CEO slots due to reconfigured system management structures, and last, but certainly not the least, changes in the health care system.
When the business model for an entire industry is rapidly turned on its head, yes, stuff happens, and executives question their roles in the new norm. This issue's cover story profiles two systems that, as part of an overall business strategy, reduced hospital admissions by 40 and 30 percent, respectively. Even a few years ago, such a move would have seemed startling and counterintuitive, but today others would agree that lowering admission numbers is the prevailing wind and build a business case for why it's the right thing to do.
The Outsider CEO. Who is filling these newly vacated CEO slots is also of interest. If the numbers are accurate, boards apparently are looking for someone with a different and new vantage point. A survey of 1,404 human resource officers and board members by Black Book Rankings estimates that two-thirds of the CEOs hired this year will have little to no health care sector experience but they will come with backgrounds in productivity, business development and financial management, with a heavy expertise in technology. And this trend has been building over time. Only 39 percent of the CEOs hired in 2013 came from another hospital CEO position, down from 79 percent in a 2009 Black Book survey.
Perhaps the trustees who are making these decisions are harkening back to their own professional experience in industries hit by volatility and deep change or they believe that real innovation can only come from outside rather than within organizations with too much vested history. Or maybe they just don't know what to do since system transformation may have disrupted the traditional relationship dynamics between boards and CEOs. But the survey showed that 89 percent of the trustees hiring outsiders agreed that "broad business operational expertise and singular vision pays off with fresh perspectives on efficiencies, value, cost savings and the goodwill of the community."
C-SUITE TURNOVER. All this activity at the top has a ripple effect downstream. Once the CEO exits, other terminations begin. The same survey found that nearly half of the CFOs, CIOs and COOs are let go within nine months of a new CEO takeover. And it's not safe to be the head of human resources or marketing. They're likely out the door soon after their colleagues.
Not surprisingly, a new CEO without health care sector experience is likely to think that the C-suite leadership team members do not need to be replaced with people with health care backgrounds, either. And boards who have embarked on this path seem to agree.
In what is arguably the most innovative time in health care delivery, it will be interesting to see what innovations these "fresh eyes" bring to the process. Let's hope that the boards have clear measures in mind of what constitutes success.
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