Now AbilityLab faces a challenge that has confronted companies such as Apple, General Electric and Starbucks: replacing a legendary CEO who personified the organization.
“Whoever steps up into that role has to not only learn the role, but also is going to be in the untenable position of being compared against the successful and long-tenured CEO,” says Bob Deprez, founder of Deprez Leadership, which advises businesses on leadership transitions following the death of a CEO. “That puts them in a very difficult position to succeed.”
AbilityLab's need for a new leader comes amid industry changes that will test the durability of Smith’s operating model, including the independence she guarded staunchly in a consolidating industry. The stand-alone rehabilitation hospital in Chicago's Streeterville would make a ripe merger target for a larger organization, including neighboring Northwestern Medicine.
Competition is increasing, too, as an aging population drives demand for services that help people regain function after life-altering events like strokes and falls. Meanwhile, more patients need care during the pandemic for lingering COVID-19 symptoms, such as brain fog and shortness of breath, or to regain strength after a hospital stay.
Across town, Rush University Medical Center is pairing up with a leading national post-acute care provider to open a facility that would target AbilityLab.
“For too long there was only one facility dedicated to world-class post-acute rehabilitation care, tucked away in the Gold Coast of Chicago,” the group says in its application for state approval, presumably referring to AbilityLab, which sits at the corner of Erie Street and McClurg Court. “This did not provide the access to care Illinoisans deserved.”
Rush and Mechanicsburg, Pennsylvania-based Select Medical aim to invest $109 million in a 100-bed rehabilitation hospital on Rush’s Near West Side campus to “bring a high value to patients, families and employers by affording patients convenient access,” a hospital representative says in an emailed statement.
“At the end of the day, we want to help patients,” AbilityLab board Chairman M. Jude Reyes says in an email. "If there are more hospitals committed to this cause, all the better. Shirley Ryan AbilityLab will continue to be differentiated by decades of experience caring for patients with the most severe, complex conditions, and by its ability to infuse the latest research into clinical care.”
AbilityLab has been ranked No. 1 in its field by U.S. News & World Report every year since 1991.
In addition to its Streeterville building and a network of outpatient clinics, AbilityLab provides care at other hospitals—including University of Chicago Medical Center and Advocate Illinois Masonic Medical Center. Such partnerships generated $16.5 million in revenue last fiscal year, accounting for 5% of AbilityLab’s total.
Its expansive network has helped the rehabilitation hospital maintain its independence over the years, as many stand-alone hospitals have gotten scooped up by large chains.
“We have a strong track record of success as an independent organization, and plan to stay this way,” Reyes says.
Still, AbilityLab would be an attractive acquisition for expanding chains looking to offer an array of services that span the full “continuum of care.”
Northwestern Medicine has shown an appetite for acquisitions, adding 10 hospitals since 2010. In 2016 it bought Marianjoy Rehabilitation Hospital in Wheaton. Adding top-ranked AbilityLab would benefit Northwestern “reputationally and financially,” says Thomas D'Aunno, a management professor at New York University's Wagner Graduate School of Public Service. Northwestern declines to comment.
The institutions already have ties that go beyond their proximity in Streeterville. Many doctors in Northwestern's Department of Physical Medicine & Rehabilitation get training at AbilityLab.
With ample cash reserves and rising revenue, AbilityLab appears to have no immediate need for a deep-pocketed merger partner. And its sterling reputation continues to generate the patient referrals essential to continuing independence, industry observers say.
For now, the most pressing matter is finding a new leader who can execute Smith’s vision while also staying ahead of rivals. AbilityLab didn’t clearly anoint a successor for Smith, who died at 60 after battling cancer for an undisclosed period of time. Chief Operating Officer Peggy Kirk and Chief Administrative Officer Nancy Paridy, who’ve been with the organization for decades, will take the reins on an interim basis.
Reyes declines to discuss succession planning but notes that the next CEO “must deeply understand the vision, and have the expertise and experience to carry it forward.”
That vision includes establishing new alliances with hospitals across the world; commercializing technology that helps people thrive after life-altering injuries; and distributing the Ability Quotient quality assessment tool, which measures patients’ progress to guide doctors and insurers.
A knack for fundraising will also be important. Smith secured a multimillion-dollar donation from Patrick and Shirley Ryan for AbilityLab’s $550 million Streeterville facility. Shirley Ryan serves on the hospital’s board alongside other high-profile members like Reyes, the billionaire co-chairman of beverage distributor Reyes Holdings.
Any new leader will also face the challenge of not being Joanne Smith.
“Dr. Smith was a force of nature,” Reyes says. “She instilled the vision within each of us, and positioned the organization for ongoing success.”