Big change coming to hospitals at top
New survey shows new hospital CEOs likely to come from outside healthcare, and bring disruptionDecember 17, 2013
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.