The face of Chicago healthcare is getting a few nips and tucks with the recent departures of several high-profile hospital executives. Those changes could temporarily diminish the clout of the Windy City in healthcare circles and portend a loss of national prestige, healthcare observers predicted -- but not for long.
The retirement of longtime Northwestern Memorial HealthCare President and Chief Executive Officer Gary Mecklenburg, past chairman of the American Hospital Association, becomes effective Sept. 1. On July 1 the resignation of Michael Riordan, president and CEO of the University of Chicago Hospitals, became effective. In recent weeks Anthony Barbato, longtime president and CEO of Loyola University Health System, and Wayne Lerner, who had led the renowned Rehabilitation Institute of Chicago as its president and CEO, also announced their departures.
Illinois Hospital Association President Kenneth Robbins characterized the departures as "a changing of the guard." Robbins said Chicago hospitals are still well-represented on national lobbying and trade associations such as the AHA and the Joint Commission on the Accreditation of Healthcare Organizations. "If history provides any lessons, when giants leave, giants take their places," Robbins said. "Each of these will be missed and will be difficult to replace, but in time they will be replaced."
The 59-year-old Mecklenburg's replacement, Dean Harrison, 51, had been groomed for years in a carefully planned succession. Harrison followed Mecklenburg as president and CEO of 744-bed Northwestern Memorial Hospital in Chicago and will replace him as president and CEO of the hospital's parent company, Northwestern Memorial HealthCare. Harrison will hold both titles and the position of hospital CEO will not be filled.
Riordan's successor as hospital CEO has not yet been named, although the University of Chicago formalized a board restructuring that now requires whoever replaces Riordan to report to the CEO of the University of Chicago Medical Center, which includes the school of medicine and allied and biological sciences, as well as the hospitals. Neither Loyola nor the Rehabilitation Institute have named replacements for Barbato or Lerner.
The departures have little in common. Most of the hospitals are on solid financial footing. Barbato is in his early 60s, and Mecklenburg is approaching 60. Both have spent decades with their organizations. Mecklenburg had planned on retiring sometime in the next year or two and chose to leave sooner rather than later, with the luxury of having a planned successor. Sources close to Northwestern said Mecklenburg's outside board positions and large salary and compensation drew some unwanted attention and may have accelerated his departure date.
Riordan , 47, who spent five years at the University of Chicago Hospitals, struggled with a problem common to academic medical centers: a hospital board that frequently clashed with the boards of the university and the medical school. Riordan faced either further infighting or loss of power under the university's governance restructuring, so he chose to leave, local sources said. On July 11, Riordan was named president and CEO of Greenville (S.C.) Hospital System, a three-hospital, 846-bed system, effective Aug. 15. Riordan replaced Frank Pinckney, who retired after nearly 44 years at the Greenville system.
James Madara, 55, a physician who served as dean of the medical school, university vice president of medical affairs and dean of the division of biological sciences, was named to the newly created position of CEO of the University of Chicago Medical Center, which includes the 587-bed system's three hospitals, medical school and biological sciences division. The university said the next leader of the University of Chicago Hospitals will report to Madara and not hold a CEO title.
Chicago healthcare consultant Don Hamilton, managing director of the national health practice for Jones Lang LaSalle, calls the tension between the medical school and the hospital typical for academic medical centers. "I think Mike Riordan spent a lot of time putting out fires and smoothing out these battles and recognized it would never work out until those were resolved," Hamilton says. "The board has struggled with this for a long time. Dr. Madara, as head of the medical school, is a logical choice as successor."
Barbato, 62, is retiring after a long career spent at Loyola as dean of the Loyola Stritch School of Medicine and chief administrative officer of the 505-bed Loyola University Medical Center. He also served as past chairman of the Association of American Medical Colleges and Catholic Healthcare Partners. But Barbato, who did not return Modern Healthcare phone calls seeking comment, did not indicate any future plans, except in a news release saying it was the right time for Loyola to transition to new leadership. He leaves without a planned successor.
Loyola has lost money for five consecutive years on operations, including $26.6 million in the fiscal year ended June 30, but in each of the past three years, the academic medical center has recorded increased bottom line profits and booked $14.8 million in net income on net patient revenue of $636.9 million.
Lerner's abrupt departure after 14 years with the prestigious 155-bed Rehabilitation Institute remains a mystery. Lerner, 56, a past board chairman of the Illinois Hospital Association, will be replaced on an interim basis by Joanne Smith, 45, president of the RIC National Division, until a permanent successor can be found. His resignation becomes effective Aug. 31, a spokesman for the institute said Lerner did not announce his future plans but would leave the institute in "solid shape" after nine years. Lerner was not available for an interview.
The Rehabilitation Institute also lost money on operations for five straight years, including the fiscal year ended Aug. 31, 2005, when it lost $26.1 million on total patient revenue of $98.6 million. But it recorded net income of $645,014.
Several other top executives with other Chicago area hospitals and health systems also departed recently and counted more than 20 in the past two years.
So who's next?
Local observers speculated that Joseph Toomey, longtime president and CEO of Chicago-based Resurrection Health Care Corp., now in his mid-60s, and Daniel Winship, past 70, the chief of three-hospital Cook County Bureau of Health Services, could retire in the coming years. But local observers declined to speculate publicly about any forced departures of CEOs, however, noting that if the Evanston Northwestern Healthcare merger with Highland Park Hospital comes unglued in its Federal Trade Commission trial, ENH President and CEO Mark Neaman could become a casualty. Neaman, who has not announced any departure plans, is himself a nationally influential healthcare executive.
How does a spate of high-ranking executive departures affect the influence of a city's healthcare organizations? "Washington is the largest association city in the country," said Thomas Dolan, president and CEO of the ACHE. "And Chicago is the second largest. But Chicago is the largest healthcare association city and a large urban center. It carries a disproportionate amount of clout in healthcare circles."
"And anytime any longstanding healthcare leaders leave, any city loses some clout," Dolan said. AHA spokesman Richard Wade said he's seen examples of periodic CEO turnover in other markets every few years. "The issue becomes what is the stability of leadership," Wade said. "We tend to look at these hospitals in terms of who these CEOs are. So the perception may be of a loss. But no hospital rises or falls based solely on their CEOs. ... I don't think it affects their (Chicago's) clout in hospital associations."
New York Hospital Association President and CEO Daniel Sisto said executive turnover is endemic in the hospital industry. It is becoming quite common around the country, Sisto said. "What we're seeing in Chicago, we've seen in our state, a few years ago in Long Island and Buffalo."
Sisto attributed the national executive turnover to the transformation of healthcare from a "cottage industry" to a competitive business model in an era lacking a coherent national healthcare policy.
He said that deteriorating relationships between hospital executives, boards and physicians are also driving the movement in the C-suites. But Sisto conceded that the CEOs replacing some of the nationally prominent departing executives may not have developed the loyalty to hospital associations as their predecessors did.
Jordan Hadelman, chairman and CEO of Oak Brook, Ill.-based executive search firm, Witt/Kiefer, said Chicago's lobbying clout won't be diminished by the departures and that what's happening in Chicago is part of a national trend.
"A number of large systems around the country are in transition," he said. "A big part of it is an age thing. Many of these guys are getting into their 60s. It's a tough business and many of them are ready to go."
