Changing landscape drives higher turnover of health care CEOs

In the course of two days earlier this week, five health care organizations in St. Louis and Kansas City announced changes to their top leadership.

The organizations said the timing was a coincidence. Occasionally, multiple health care executives switching jobs at once is to be expected, since there are more than 150 hospitals in Missouri, said Jason Turner, a professor of health management and policy at St. Louis University. “Changes at the top of hospitals are not entirely uncommon,” he said.

But in the last couple of years, such changes have been more common than at any time in at least three decades. In 2013, 20 percent of hospital CEOs left their positions, which was the highest rate in at least 34 years, according to American College of Healthcare Executives. The rate in 2014 was 18 percent, tied for the second-highest level of turnover in that same period.

Especially in Missouri, “that’s a trend that probably didn’t exist 20 years ago, but it definitely does now,” said Dave Dallon, spokesman for the Missouri Hospital Association.

The health care CEO carousel has been driven by hospitals facing financial challenges, baby boomers retiring and the American economy recovering.

Health Care CEOs

B.E. Smith, a health care executive recruiting firm based in Lenexa, Kan., has seen increased requests for interim and executive search services in Missouri and across the country, said Mark Madden, the company’s senior vice president of executive search.

Tighter finances for many hospitals are one of the reasons for the high turnover. “Every hospital is a little bit different, because it reflects the people living in the area that the hospital is providing services to,” Dallon said. “Hopefully, if you are in a system, that’s all balanced out. If you are an independent hospital, it’s little harder to figure out how to work in the negative balance sheet situation for a long time.”

For example, St. Anthony’s Medical Center in St. Louis, which is an independent hospital, has seen decreases in revenue in recent years. According to the hospital’s most recent publicly available filings with the Internal Revenue Service, St. Anthony’s generated $425 million in revenue in 2012, down from $429 million in 2011, and down 5 percent from $447 million in 2010.

David Sindelar, the new CEO of St. Anthony’s, brings a background in accounting and years of executive experience to his new job. He told the St. Louis Post-Dispatch that one of the areas that the hospital needs to address is the “the administration and the business side.”

Affordable Care Act brings new challenges

Some recent financial challenges for hospitals in Missouri, Madden said, are due to the fact that the state has resisted Medicaid expansion, which was a provision of President Barack Obama’s Affordable Care Act. The president’s health care law is one of the external forces causing the health care industry to evolve, Madden said, and that evolution demands different skills from executives.

In 2014, states that expanded Medicaid coverage saved $5 billion in uncompensated care costs, according to a report from the U.S. Department of Health and Human Services.

For some hospitals, Medicaid expansion means fewer uninsured patients and an increase in revenue from new Medicaid patients. However, expansion also moves some patients who had private coverage to Medicaid, which pays health care providers at a lower rate for hospital care, Madden said.

“Hospitals need health care leaders who understand these nuances and position the organization to capitalize on the advantages while minimizing any potential risk,” he said

Aging boomers, stronger economy push change

The retirement of baby boomers also has increased the turnover rate. “We’ve had hospital leaders that have been there for 20 or 30 years in some cases,” Dallon said. “It was time for them to move on with their lives.”

The improving economy is another driver of the CEO carousel, giving executives a greater sense of security about stepping away from well-paying jobs.

“Many executives are choosing to retire after putting the move off during the struggling economy,” Madden said. “Additionally, some experienced executives are choosing to step down instead of learning these new skills, giving new leadership opportunities to up-and-coming executives.”

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