Today's health systems grew out of individual hospitals, piloted by community leaders who often held roles that were more advisory than dealing with fiduciary oversight. That, coupled with how healthcare has become less hospital-centric, has required a shift in vision and execution for boards and the management team, Rivers said.
"The industry has been tipped on its side and leadership planning hasn't necessarily kept up," she said.
As more baby boomers eye retirement, healthcare organizations will look to bridge a void of institutional knowledge. Millennials have eclipsed baby boomers as the largest share of the U.S. workforce, but most boomers are in upper management positions, according to the Pew Research Center.
Two-thirds of Korn Ferry's survey respondents are more concerned now about the age of those in their C-suite than they were five years ago. Without a plan of how to fill the ranks, providers can run into serious financial consequences.
"If you get into trouble with regulations and compliance, those have the potential to sink your hospital quicker than anything else," said Michele Mayes, senior vice president of consulting at Quorum Health Resources and interim chief operating officer.
Consolidation is causing more healthcare organizations to survey how the industry is changing and which leaders are best equipped to handle that transition. But there is wide variation on their approach and level of preparation.
Some health systems are prepping their young employees by sending them to other organizations to shadow executives. Others are implementing internal leadership meetings and classes.
About two-thirds of respondents said that C-suite successors would likely come from within the organization. But that often requires an organization to have the resources, infrastructure and foresight to develop candidates internally.
"The more progressive organizations recognize that development from within creates an engaged and empowered workforce that has a series of positive impacts related to patient satisfaction and quality," Rivers said. "But this takes time because not only are the roles shifting based on changing demand, consolidation is changing the nature of the work."
Still, many boards tiptoe around succession planning because they don't want to rock the boat. It implies that something is wrong with the current leadership, Rivers said.
"It may prompt some anxiety," she said. "Whereas if it is baked into the agenda, it doesn't become off-putting."
Much of Quorum's client base consists of rural community hospitals where executives wear many hats, Mayes said. Shifting resources from day-to-day operations to strategic planning can be difficult, she said.
"The other piece is that access to talent outside of the organization is limited," Mayes said.
When considering the next CEO, 87% of executives said he or she must be from within the healthcare industry. Still, when looking to fill relatively new positions like population health executive, chief digital officer or chief experience officer, health systems are increasingly plucking leaders from technology, hospitality, entertainment and other sectors.
While some positions are suited for a fresh perspective, many executive roles are replenished by those who intimately understand healthcare's complexity, staffing experts said.
"There is an advantage when you already understand the industry," Rivers said. "Of course, there is the trade-off that sometimes an external candidate agnostic to the industry can look at things in a different way and break up the dominant logic."
To better prepare for executive turnover, healthcare organizations can hire a management consultant. Mayes encouraged systems to send managers to leadership conferences, implement internal workforce development programs or expose them to different departments. Operations and a management framework that are standardized can get everyone on the same page, she said.
One of Rivers' clients developed an office of the CEO that delegated new responsibilities across the executive team. This established a heightened level of accountability for leaders who had to make difficult decisions, she said.
"They had skin in the game as to what was material to the enterprise," Rivers said. "They got into the mindset of spreading accountability across all business functions."
Health systems must adapt and grow quickly, she said.
"They don't have the luxury of time to build up leadership development," Rivers said.
