A combination of the Great Recession and aging baby boomers is being credited by some for driving a huge rate of turnover among CEOs of acute-care hospitals. “Part of the driver is definitely the economy. All the states, and especially the federal governm
A cute-care hospitals saw their CEOs leave their organizations at a rapid clip in 2009, and even skeptics now agree that it was more than just some statistical anomaly. All told, 18% of hospitals saw turnover in their top executive jobs in 2009, tying the record since the American College of Healthcare Executives started tracking the statistic in 1981, according to a new report from the American College of Healthcare Executives.
The reasons offered for the rising tide of departures vary widely, but the most common explanation is some close variation of what Utah Hospitals and Health Systems Association CEO Joe Krella said when asked his thoughts about the trend.
“Part of the driver is definitely the economy. All the states, and especially the federal government, are facing budget issues, and that all trick- les down to hospitals,” he said. “It puts a strain on the bottom line, plus, you’ve got a lot of individuals who are retirement age and are looking to retire or just getting out of the industry.”
Contrary to popular conception, however, demographic data and some insider accounts suggest that the two-year-long recession may have actually held back executive turnover. In effect, this may have helped create a kind of CEO bubble that began deflating in the second half of 2009 to produce the spike in turnover.
Perhaps most concerning, that trend suggests that the CEO turnover will continue to remain higher than average for the next several years, since the theory rests on demographic trends, instead of the yearly or sometimes monthly financial fluctuations of healthcare providers that commonly lead to changes in executive management.
Thomas Dolan, president and CEO of the Chicago-based ACHE, declined to speculate directly on how turnover rates will look in the near future, but he said he believes the high level of executive churn seen in 2009 was because of demographic forces. “The reality is, it’s definitely up,” Dolan said. “There’s clearly something happening, and I believe it’s the retirement of the baby boomers.”
The ACHE’s annual CEO turnover report, which is based on American Hospital Association data and was provided to Modern Healthcare ahead of its March 8 general release, shows that 18% of the 4,582 nonfederal short-term hospitals changed CEOs in 2009.
That was the highest rate in a decade, tying the previous records set in 1987, 1988 and 1999. That compares with a 14% turnover rate in 2008. Several states, such as Arkansas, Oregon and California, saw steep year-to-year increases in turnover, which observers said may be because of intense market competition and increased financial uncertainty stemming from state reimbursements.
Conventional wisdom would hold that financial pressures such as dwindling volumes, lower government reimbursements and negative profit margins seen during the recession would send more top executives packing. Indeed, insiders have been anecdotally reporting elevated levels of turnover for the past year (June 29, 2009, p. 6).
In Arkansas, which had 86 acute-care hospitals in 2009, CEO turnover increased from 13% in 2008 to 32% in 2009, nearly tripling in one year’s time.
Terry Amstutz has been a CEO at several Arkansas hospitals over the years, and in November 2009 was hired to be the top execu-