Last year was a record year for carnage in the C-suite. In fact, according to the American College of Healthcare Executives, the hospital CEO turnover rate was an eye-popping 20%, the highest since the ACHE began monitoring turnover in 1981.
According to ACHE president and CEO Deborah J. Bowen, the reasons for this turnover could be due to any number of factors, including retirement by baby boomers, the complexity and amount of change going on in health care today and the trend towards consolidation.
While that all makes sense, up to a point, I’d suggest this is a sign of sickness in the industry, not just the inevitable shakeup that occurs during periods of transition. I'd argue that any industry in which annual CEO turnover hits 20%, and it's not seen as an emergency, is suffering from some form of cultural blindness.
Now, it should be noted that the CEO turnover rate for the past decade has been 18%, almost as bad as 2013's results. That suggests to me that the hospital industry has taken it for granted for quite some time that the job of CEO is one with a questionable tenure — so accepted, in fact, that you very seldom see industry publications like this one discuss the problem.
But it's more than time to think about what effect this kind of turnover has an institution, and at least in cases where the CEO is neither incompetent nor careless, how to protect him or her from temporary winds of change that blow through and destabilize the leadership of a health care organization.
True, hospital CEOs generally make high salaries and get lots of perks to accomplish results, which might explain why the ax comes down so brutally and so often. After, one might say that the CEO knew the risk when she took it. But that doesn't mean it's a good idea to carry out a royal assassination or encourage retirement when things get really difficult.
Here's some (preventable) factors I believe are contributing to be inordinately high CEO turnover rate.
- Private capital involvement: When venture capitalists are involved in an acquisition, it's not uncommon for them to bring in what they regard as their ‘A’ players and sweep out those of the past regime. While the remaining hospital execs may not have much choice in the matter, they should speak up against random change-out if they can.
- New health plan partners: While hospitals have had to negotiate with health plans for decades, joining them in ACOs is a new thing. I have no data to back this up, but I suspect some CEOs' heads are rolling because they question the wisdom of getting that deeply under the covers with health plans (a concern I would share). CEOs do need to be forward-looking and flexible, but they don't necessarily need to jump on every bandwagon, and they certainly shouldn't be punished for not doing so,
- Changing role of IT: Though the CIO handles IT management, the CEO is obviously responsible for IT operations' success or failure as the top dog. And as the IT requirements of hospitals have grown more complex, I'm sure some hospitals have felt that their CEO wasn't up to the task of managing IT at the highest level. I understand their concerns. But while some CEOs aren't as tech savvy as others, they should be given plenty of chances to bring their institutional knowledge to bear before they're given the sack. In other words, a CEO who has performed well in every other respect until now shouldn't be shown the door over IT unless they simply refuse to learn.
The bottom line, here, is that I'm arguing for stable organizations whose leadership doesn't rotate like a carousel. Anything a hospital can do to support and sustain its existing CEO should be done.