To many people, the job of a hospital chief executive looks very attractive-a generous salary, prestige in the community, political clout and the personal satisfaction that comes with helping others.
So why is it that so many relatively young hospital CEOs, most of them in their mid-50s, have opted to hand in the keys to the corner office?
In the last three months or so, at least a half-dozen prominent healthcare executives, citing a wide variety of reasons, have resigned unexpectedly or retired outright from high-profile, high-pressure jobs running some of the biggest and most prestigious hospitals in the nation.
Those departures have prompted renewed concerns at a time when some industry observers wonder if there are enough qualified hospital executives to fill top-level jobs that have been transformed into daily pressure cookers of personnel problems, stagnant reimbursements, mountains of federal regulations and pencil-thin margins.
"With the tight margins we have today, there's almost no margin at all for error," said Max Poll, 57, who announced earlier this year that he will retire in October 2005 as president and chief executive officer of two-hospital Scottsdale (Ariz.) Healthcare Corp. "This year, we might eke out a 3% margin. When your margins are that tight, the pressure is always on to make absolutely the right decision every time."
Though the dream job of a hospital CEO hasn't exactly turned into a nightmare, the daily stress of managing these increasingly complex enterprises appears to have taken a toll on some top-flight executives, as Modern Healthcare first noted earlier this year (April 5, p. 8).
Among them is Benn Greenspan, the 57-year-old president and CEO of Chicago-based Sinai Health System, who announced earlier this month that he would step down this summer after 13 years in the top job.
"It's like being in the front lines in combat, in a way," he said. "You get used to the stress, and you live with the reality that it's always there. The reality is there are no hours in this job-it goes on forever."
Others who have resigned or announced their retirements are Judith Pelham, 58, president and CEO of 45-hospital Trinity Health, Novi, Mich.; Christopher Carney, 57, president and CEO of 24-hospital Bon Secours Health System, Marriottsville, Md.; and Doug-las French, 50, who called it quits in mid-April after three years at the helm of St. Louis-based Ascension Health, the nation's largest Roman Catholic health system with 67 hospitals.
"In my 35 years in healthcare, I can think of no time when the demands on CEOs have been greater," said Thomas Dolan, president and CEO of the American College of Healthcare Executives, which represents about 32,000 hospital executives.
Pointing out that the vast majority of hospital executives leave their jobs at a more traditional retirement age, Dolan said he wasn't surprised or overly concerned about this rash of recent departures. Still, he said, the ACHE will soon launch a yearlong study led by an academic researcher to try to determine what impact turnover has on an industry where the average tenure for a hospital CEO is about four years.
"The study is going to focus on what impact does CEO turnover have on an organization, not on why CEOs leave," Dolan said. "A lot of research says that when a leader leaves in less than five years, the changes he or she made aren't always permanent. In other words, if you make positive changes but leave in three years, the organization may revert back. We want to study that more specifically. It's a big concern."
While these top jobs involve long hours, tough decisions and considerable stress, they feature correspondingly high salaries and generous benefits. The median total cash compensation for presidents and CEOs of free-standing hospitals rose 9.2% to $339,100 in 2003, according to a survey by consulting firm Sullivan, Cotter and Associates.
Several of the best-paid hospital executives earn more than $1 million in salaries and benefits. Ironically, these pay packages have provided executives with the necessary cushion to start considering early retirement.
"Fifty is really a young age, and a lot of these people who are leaving are in their 50s," said Sue Cejka, managing partner of the consulting company Grant Cooper & Associates and an expert in executive searches. "There's a lot of pressure from politics and relationships with boards in these jobs. They're very, very difficult. Combine that with the incomes that give these executives the flexibility to do what they want, and you've got this (spate of early retirements)."
This trend is exacerbating the already intense pressures on big healthcare systems to find top talent. A poll released this year by the ACHE placed the turnover rate of hospital CEOs at 14% in 2002. That percentage is just 1% higher than the all-time low reported in 1983 and 1990, but it translates to an annual churn of hundreds of jobs and a boon to search firms.
"It's helped us, absolutely," Cejka said. "They're great searches, high-profile jobs, definitely. But from the perspective of a search person's eyes, these are tough jobs to fill. How do you replace someone who was successful? In most cases, these people were not in trouble. In some cases, there was no succession plan. So it's tough to replace them."
Cejka said the average hospital CEO tenure of four years is "low" compared to most other industries, attributing that relatively brief job-to-job life span to the political land mines that these executives must navigate. "If you're a corporate executive, you have only one set of constituencies-the board and shareholders," she said. "A hospital executive has many more-the board, doctors, the entire population."
Richard Gustafson, chairman of the healthcare practice at search giant Heidrick & Struggles, estimated that only about 20 to 30 of these kinds of high-profile hospital CEO jobs become available each year. About 80% of those, he said, are placed in the hands of search firms. The recent spate of departures might "tax the system" as executive recruiters search for replacements, Gustafson said, but hospitals and health systems are far more prepared these days to deal with succession.
"I think it's the natural maturity of the system," he said. "Of course, anytime you have major changes, you're going to have more executive searches. But if you look at many of these organizations, they're doing a lot more to train (future leaders) and to talk about succession planning than they did five or 10 years ago."
Hospital CEOs aren't the only high-pressure positions in corporate America. But the long list of recent retirements, Cejka said, tends to underscore the fact that healthcare, where the relative number of top jobs available each year is higher than most other industries, remains "an unusually volatile field."
Michael Corey, a consultant with Spencer Stuart, another worldwide management- consulting company and search firm, said this outbreak of early retirements is somewhat rare in healthcare despite the difficulties of the jobs. "We see retirements in the early to mid-50s, so this is not unusual in the industry in general," Corey said. "It's a bit unusual in healthcare, though. I think you're seeing this as a time when people are making quality-of-life decisions."
Poll, the Scottsdale executive who has spent three decades in healthcare, said he simply decided it was time to retire "from this kind of work" and look for different career challenges. It wasn't the pressure of the job so much as it was a desire for a change of pace, Poll said. He plans to continue to work in some capacity for many more years, he added.
While the long lead time provides Poll's board of directors with the opportunity to plot a smooth succession, many hospitals and healthcare systems remain unprepared to replace the top job, according to Corey.
French, the Ascension executive who was replaced by 54-year-old Anthony Tersigni as interim CEO, stepped down after temporarily relinquishing his duties during a four-month professional sabbatical. Though he had said he expected to return, French instead submitted his resignation in an April 20 letter to board Chairman John Mudd. System officials said French left voluntarily. French, who declined to comment, said in a news release that he decided against returning after extensive personal and spiritual reflection.
At the time French announced his departure, it marked the fourth resignation within two months at a Catholic health system. Joining French and Pelham were Richard Statuto, 45, who resigned from the top job at 14-hospital St. Joseph Health System in Orange, Calif., after nine years; and Michael Collins, the longtime president and CEO of six-hospital Caritas Christi Health Care in Boston, who left after a decade in that role at the age of 48.
Pelham, Trinity's top official since 2000, noted that a "variety of personal reasons" went into these decisions. "None of us is going to sit back and do nothing," she said.
Since that executive quartet left, the list of exiles from faith-based systems has been appended to include Carney, the Bon Secours chief who announced several weeks ago that he would retire in March 2005 from the nation's fifth-largest Roman Catholic health system.
His departure was announced amid a U.S. Securities and Exchange Commission investigation of accounting irregularities at the system's division in Grosse Pointe, Mich., but top officials said the probe had nothing to do with Carney's departure. One system official said his resignation actually was delayed in order to help guide Bon Secours through a troubling period. Carney, the hospital's top official since 1997, declined to comment.
"To his credit, he was gracious enough to delay announcing his retirement," said Peggy Moseley, a system vice president and spokeswoman at Bon Secours. "He intended to announce it a year ago, and when the accounting issues hit in Michigan, the sisters asked him to help them get through this. He's retiring. That is his career plan."
Other comparative youngsters who have announced their exits recently include: Hank Walker, 57, president and CEO of 15-hospital Providence Health System in Seattle, another Roman Catholic network; Richard Turan, 57, president and CEO of the single-hospital Nassau Health Care Corp. in East Meadow, N.Y, who left June 4 in the wake of calls from a county legislator that he return part of a recent $125,000 raise that increased his salary to $325,000; and Frank Murphy, who was 56 when he revealed last summer that he intended to retire this year as president and CEO of seven-hospital BayCare Health System, Clearwater, Fla., one of the biggest hospital networks in the Tampa-St. Petersburg area. He will officially step aside June 30 after six years in the top job.
Murphy said his life plan was "to do this for about 25 years and then move on." BayCare considered about 100 candidates for the top job and interviewed half that many before settling on Stephen Mason, who at 56 was the chief operating officer of 13-hospital Texas Health Resources, Arlington.
Asked about the strength of the U.S.' bench of future chief executives, Murphy said, "I can tell you that good people are always hard to find. But when you have an organization that is attractive, it's a reasonable talent pool."
Is it a coincidence that so many of these retiring healthcare expatriates are 57 years old? Not really, said Greenspan, who half-jokingly referred to the baby-boomer executives as "children of the '60s. ... I think what you're seeing is that a lot of us came in (to the healthcare field) at a particular time, and we've been on the job for a long time," he said. "Actually, I'm surprised I stayed this long. I expected to be retired when I was 55."
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