Insights Blog

By QLK Team
on Sep 6, 2016
  • Healthcare
Hospital CEO Turnover

The rate of turnover at the highest level of hospital administration is, and has historically been, significant, a concern when considering the need for stability and continuity to ensure the success of an organization and that its long-term goals remain on track.

Average hospital CEO tenure has decreased from the 10-15 years it typically was in the past to less than four years today.  In 2014, ACHE reported the average turnover rate as 18%; although this actually represented a decrease from the prior year, during which it was at a record 20% (the highest it had been since 1981, when ACHE began compiling this data), it is still at one of the highest levels of the past 15 years.  Rhode Island had the highest turnover of all states, at an astounding 44%, with 16 other states across the country sitting at rates of 20-27%.

Deborah Bowen, president and CEO of ACHE, attributes this high rate of turnover to factors that are now inherent in the healthcare environment.  She and others cite hospital consolidations as a strong contributing factor, as well as budget constraints that lead to the consolidation or elimination of positions, the retirement of large numbers of baby boomers, and hospitals' desire to place physicians in the top role.  Additionally, as health care has gone through rapid change and increased complexity over the past decade, the difficulty of keeping up has forced some leaders out – it is a demanding and challenging task indeed.  CEOs are accountable to boards that are seeking to remain at the front of the pack in terms of technology, population health, and risk, and are expected to be able to quickly and effectively develop and enact initiatives – an inability to do this may result in termination, and older CEOs may not want to take on the burden of leading such major transformations.

In order for unexpected turnover to cause as little disruption as possible, having a strong succession planning process in place is key – the success of the organization cannot hang on one person.  James Rice, PhD, FACHE, managing director and practice leader at Integrated Healthcare Strategies, a division of Arthur J. Gallagher & Co., suggests that boards consider the following to ease CEO transitions.

1. Understand the factors that lead to turnover (as discussed above)

2. Understand the risks associated with unplanned turnover related to:

  • the morale of other leaders within the organization (possibly precipitating the exit of other c-suite leaders)
  • the confidence of community leaders regarding the organization's strategic direction
  • the ability to negotiate with payers
  • momentum to climb in market share
  • compliance with billing and contracting
  • physicians' motivation related to clinical integration initiatives

3.Spend time discussing the consequences of departures with all stakeholders – board members, physicians, organizational leaders, payers, etc.

4.Simulate responses

  • Have an grasp on the potential timing of changes in leadership
  • Define competencies for all leadership positions
  • Ensure that staff development opportunities are in place
  • Create position descriptions specific to the organization's needs
  • Keep the performance assessment process up-to-date
  • Consider alternative compensation models
  • Consider how to improve onboarding

5.Ensure an up-to-date succession plan that includes:

  • who the immediate (temporary) placement would be (i.e., an existing employee, someone from outside the company, a management company?)
  • expectations of, and restrictions on, the interim CEO
  • how  the next permanent CEO will be chosen (possibly specifying a search firm and/or potential candidates)
  • a crisis communication plan for stakeholders

The new face of health care requires a leadership approach that is more efficient and effective than ever before.  When unplanned changes in the CEO role occur too often, there can be a negative impact on an organization in a number of areas – strategic planning, growth, recruitment, quality improvement, morale, stakeholder relations, competitiveness, and the list goes on.  Therefore, it is crucial that hospitals be proactive in making preparations to deal with unplanned turnover to cause the least amount of disruption to forward momentum possible.