When Dennis Barry announced plans to retire after 25 years as president and chief executive officer of Moses Cone Health System, the healthcare veteran became one of a growing number of CEOs who have recently decided to step down before reaching the traditional retirement age.
Following in his footsteps were Judith Pelham, 57, president and CEO of Trinity Health, Novi, Mich., and Max Poll, 57, president and CEO of Scottsdale (Ariz.) Healthcare Corp. who both said recently that they planned to retire.
"There is a tendency for people to retire earlier, especially if they have high-stress and well-compensated jobs," said Barry, 64. "I don't think that is unusual in the hospital field. A lot of it is individually driven."
The practice of early retirement is one challenge healthcare executive recruiters and hospital boards will be watching as they tackle the broader issue of hospital CEO turnover. An annual survey released last week by the American College of Healthcare Executives reported that hospital CEO turnover remained stable in 2003 at 14%, the same level as 2002.
The 14% turnover rate in 2002 was the lowest since 1994, when it also was 14%, according to the ACHE. The ACHE has been tracking CEO turnover since 1980 based on information hospitals report to the American Hospital Association. The turnover rates during the last two years were slightly above the all-time low of 13% reported in 1983 and 1990.
"More managers are performing at a level that is pleasing their trustees," said Thomas Dolan, the ACHE's president and CEO. "Trustees are realizing that not everything is in the control of the CEO."
Despite the stable turnover rate, Dolan and executive recruiters said that early retirements by CEOs may soon become a bigger concern for hospital boards. Chief executives are increasingly seeing more job-related stress at the same time that their salaries make it possible for them to retire early, Dolan said.
CEOs also tend to find other interests, such as healthcare consulting or writing about the industry, he added. "The line between work and retirement is a little grayer," Dolan said.
Jordan Hadelman, chairman and CEO of executive search firm Witt/Kieffer, said job-related stress, such as working to increase Medicare reimbursement rates and battling rising malpractice insurance premiums, has led to more early retirements. Hadelman and Dolan also point out that some CEOs remain in the top post until their late 60s.
"The stresses of the job are real," Hadelman said. "We are seeing it more and more. Maybe there are other things they want to do."
Barry, who will retire later this year, said that with three acute-care hospitals, a psychiatric hospital, a nursing home and 48-member physician practice, the job at the Greensboro, N.C., system can be challenging. "You can't help but have a lot of stress professionally," he said. "It is time for me to back away and pursue some of the things I haven't been able to do."
Poll, who said he will retire in October 2005 at 59, said he is considering his next move. "The word retirement is a funny word," Poll said. "I am not going to golf seven days a week."
Some former CEOs don't stay in retirement for long. Last year, Northern Arizona Healthcare, a not-for-profit three-hospital system in Flagstaff, hired Fred Brown, the retired CEO of BJC Healthcare; and MedCath Corp. recruited one of its board members, retired healthcare executive John Casey, to be its president and CEO (Sept. 15, 2003, p. 6).
Overall, the turnover rate has room for improvement, said Dolan, who aims to reduce turnover to roughly 10%. The rate peaked at 18% in 1999 before dropping to 17% in 2000 and 15% the following year, according to the ACHE.
"We are pleased that CEO turnover has not increased nationally, but we still believe it is too high," he said. "The ACHE is working to reduce turnover every year."
The ACHE has met with hospital board trustees to educate them about relationships between CEOs and boards and the business pressures CEOs face, Dolan said. The more boards know about workforce shortages and reimbursement challenges, the more they will realize that CEOs cannot control those factors.
While the nationwide turnover rate was stagnant, some states in the ACHE study reported turnover ranging from 2% to 30%.
New Mexico recorded one of the lower rates at 10%, just one year after the state had the third-highest turnover at 23%. The high rate in 2002 was attributed to several mergers and acquisitions in the state, said Maureen Boshier, president and CEO of the New Mexico Hospitals and Health Systems Association, which represents 35 hospitals.
New CEOs were installed after Catholic Health Initiatives sold five hospitals to Ardent Health Services. Banner Health System also sold Los Alamos (N.M.) Medical Center to Province Healthcare Corp. In 2003, only three CEOs resigned at New Mexico hospitals, she said. "I am always relieved when it slows because it gives the association an opportunity to move forward with the development of health policy," Boshier said.