COVER STORY

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

Modern Healthcare - - News - Front cover photo by Evan Lewis

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-

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