Advocate Aurora Health scraps co-CEO model
Advocate Aurora Health pared back its CEO office from two to one, with Jim Skogsbergh emerging as the not-for-profit health system’s top executive. The change means Dr. Nick Turkal will leave the system, which operates in Illinois and Wisconsin, to pursue other interests.
Although this wasn’t the original plan, Skogsbergh said he still believes the co-CEO model was “absolutely necessary” to launch the Downers Grove, Ill.- and Milwaukee-based organization.
“I think that was the right decision then,” he added. “I think today as I sit here it was the right decision.”
Advocate Health Care and Aurora Health Care finalized their merger in April 2018. The co-CEO setup followed similar arrangements across the industry, which typically last less than three years.
Skogsbergh said he and Turkal realized about a year into the merger that the leadership structure necessary to launch the health system might not be what’s needed going forward.
The two encountered a number of redundancies they felt could be eliminated by moving to a single CEO, he said.
“I know you want a salacious story about how we didn’t get along and disagreed on major things,” Skogsbergh said. “That is simply not the case. We partnered very effectively. But we also have a sense of what’s needed for the organization going forward.”
The board decided to make the change after a thorough review with the help of an independent adviser, board Chairwoman Joanne Disch said in a statement.
Governance experts have largely been skeptical of health systems led by dual CEOs over the long term, arguing that the model can inflate costs and slow decisionmaking. But over the short term, it can be a bridge for mergers and acquisitions.
The change will give Advocate Aurora a leg up in its ongoing work to cut labor costs. Turkal made $11.4 million in 2017, a 187% raise from 2016. Skogsbergh made $11.7 million in 2017. Last month, Advocate Aurora offered early retirement buyouts to about 300 employees. It also eliminated some employee bonuses.
The 28-hospital system drew $12.2 billion in revenue in 2018, up 3.5% from $11.7 billion in 2017. Expenses rose 4.2% in that time to $11.6 billion. The system’s operating income fell to $472.4 million in 2018—a 4.5% operating margin—from $554.7 million in 2017, a 5.2% margin.