Big change coming to hospitals at top

New survey shows new hospital CEOs likely to come from outside healthcare, and bring disruption
By Bernie Monegain
06:57 AM
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Disruption coming to hospitals at the top

A Black Book Rankings poll of 1,404 healthcare provider organizations’ human resources officers and board members revealed the developing trend affecting the way headhunters will seek candidates. Black Book estimates that two-thirds of CEOs hired in 2014 will have little to no healthcare sector experience, in favor of other experience and skills in business development and financial management and with heavy technological expertise.

Although transitioning to a hospital operation has its challenges, outsiders’ approaches are ushering in a new movement in hospital administration, according to Black Book findings.

“An outside hire will not have developed hospital management skills from within or understand an organization's unwritten rules at first, but that’s not a bad thing either as more hospitals face fresh ideas to avoid bankruptcy, expedite smoother consolidations, conquer payment reform, and productivity issues,” Doug Brown, managing partner of Black Book, said in a news release.

Historically, when a hospital goes outside for a candidate, Brown explained, either the organization is in crisis or the board recognizes a need for change for some other reason. The external candidate typically has a platform for change and is unburdened by the status quo. Any internal hire often is married to the past or was involved in creating it, perpetuating the operations leading to the decline.

An indication of the trend, according to respondents, showed only 39 percent of CEOs hired in 2013 came from another hospital CEO position, down from 79 percent in a 2009 Black Book survey.

A new CEO’s first decisions are often disruptive to a hospital’s staff, particularly the incumbent management team.

“An outsider's perspective on hospital operations will be controversial but often credited in several facility turnarounds for bolstering organizational financial stability, and ultimately profitability,” noted Brown.

Black Book research also reveals the average tenure of a hospital CEO is now under 3.5 years, and 56 percent of CEO exits are involuntary. Additionally, secondary turnover of other senior managers ripples through most other nonclinical/medical leadership positions after a CEO steps down. Nearly half of CFOs, CIOs, and COOs are terminated within nine months of a new CEO’s hire, as well as 32 percent of chief human resource officers and 24 percent of chief marketing officers.

Eighty-seven percent of chief medical officers are replaced soonest, most within two months, after a new CEO is appointed. Board members responding to the survey expect the turnover of top human resources and marketing executives to follow the trend of non-industry hires as well.

Ninety-four percent of new CEOs without extensive hospital backgrounds indicate they do not believe healthcare expertise is required for replacing other senior leadership team members after a management overhaul.
As more hospitals and clinics face bankruptcy and as payment reform accelerates, digging into the details of how outsiders disrupt the healthcare delivery sector can be eye opening for boards looking for fresh talent.

“Widening an executive search to other industries can help you land someone whose experience and perspective can raise your game to the next level,” said Brown.

Eighty-nine percent of board members hiring outsiders agree that broad business operational expertise and singular vision pays off with fresh perspectives on efficiencies, value, cost savings, and the goodwill to the community.

[See also: Black Book Rankings names top hospital EHRs.]

Successful non-industry placements aren't being limited to hospitals either. Payers, chains, ancillaries, ACOs, support firms, vendors, medical product manufacturers and pharmaceutical firms are tapping other top talent, a major shift from the “healthcare industry experience only” mindset for executive placement that has prevailed since the 1970’s, according to corresponding Black Book 2013 surveys.

As other industries such as automotive and insurance have shown, sometimes it takes an outsider to put a business on the right path.
“From improving processes to identifying new strategic opportunities, hospital and provider companies looking to innovate should also consider seeking talent outside their industries.” said Brown.

“Hospitals facing stalled growth or new competitive challenges need fresh thinking. Hiring internal candidates with the same norms and values as your current team will not meet the long-term strategic growth needs of the hospital organization,” Brown said. “Relevant outside thinking makes a valuable contribution, enhancing business vitality, longevity and sustainability. Staying contemporary, revitalizing your brand, enhancing products and expanding into new markets all begin with the next person you interview and add to your senior leadership team.”

[See also: C-suite views RCM as matter of survival.]

Among survey respondents, the most intriguing new hospital CEO candidates are emerging from the venture capital, private equity industry (according to 42 percent of survey participants), finance and accounting (40 percent), banking (32 percent), technology (22 percent), marketing and sales (19 percent), not-for-profits (14 percent), and pharma/biotech (12 percent).

Ranking the headhunters
The Black Book poll also revealed the most innovative healthcare executive search firms from a field of more than 1,000 search consulting firms, most of which have embraced modern sales and marketing techniques.

From Black Book’s client satisfaction results, these firms intensively compete for market share, but far too many cut corners in order to obtain assignments, fail to maintain high ethical standards of performance, and even mishandle candidates and clients in the race to placement process. In surveying senior human resources executives and board members responsible for securing and managing the services of retained executive search firms, the top 20 high performance healthcare executive search firms were ranked across 18 key performance indicators.

Cejka Search ranked the No. 1 healthcare executive search firm.

Other executive search firms rated highly by client experience surveying are in alphabetical order: B.E. Smith, Baumann & Associates, Buffkin Group, Furst Group, Grant Cooper & Associates, Healthcare Recruitment Specialists, Heidrick & Struggles, Korn/Ferry International, Merrraine Group, MSA Executive Search, Quick Leonard Kieffer, Reaction Stuart International, Russell Reynolds Associates, Solomonpage Group, Spencer Stuart, SSI Search, Tyler & Company, Witt/Kieffer and ZurickDavis.