Baylor Scott & White announced Wednesday its CEO, Jim Hinton, will retire at the end of the year.
Hinton has led the Dallas-based not-for-profit system since 2017. Baylor Scott & White's board approved the system's President, Pete McCanna, to take over the top job on Jan. 1, 2022.
Hinton said he joined Baylor Scott & White as a later career CEO and planned on being with the system for roughly five years. He said the decision to step down now was not affected by the COVID-19 pandemic.
"This is really right on plan, right on schedule," Hinton said.
Hinton, 62, got the ball rolling on his succession plan in July 2017, not long after he started in January of that year, by recruiting McCanna, whom he envisioned would eventually become CEO. The two leaders had previously worked together at Presbyterian Healthcare Services in New Mexico, where Hinton spent 33 years, including 21 as CEO.
Ultimately, the decision was made by Baylor Scott & White's board. Board Chair Ross McKnight said in a statement that Hinton has been "transformational" for the health system.
"He raised the bar for what it means to be a successful, faith-based, not-for-profit system and has driven a strategy that is making Baylor Scott & White one of the most consumer-centric health organizations in the country," Knight said.
During his time at the helm, Hinton said he's achieved a list of goals that included uniting the system's brand and culture, investing in a digital platform and tightening up operations.
Under Hinton's leadership, 51-hospital Baylor Scott & White has taken an aggressive stance toward outsourcing, laying off hundreds of employees and sending their jobs to third-party companies. The most recent was in January, when the system cut about 1,700 jobs across five areas it learned could be outsourced: revenue cycle, health information management, information systems, finance and analytics.
A month before that, Baylor Scott & White had laid off 100 accounting and finance employees—a third of its corporate finance department—and offshored the work to India. In May 2020, another 1,200 workers got the boot as part of a broader restructuring.
Outsourcing helps address the single biggest issue facing the healthcare industry: affordability, Hinton said. The cost of delivering medical care has exceeded the means of the federal government, state governments, private employers and individuals, he said.
"Any system that is not focused in some manner on affordability is missing one of the key issues in healthcare," Hinton said. "We have been all about making sure every service we provide is provided at the lowest achievable cost to promote the highest quality of care for people we serve."
Hinton added that affected employees have been able to work for the outsourcing companies, get retraining or find other roles within the health system if they're qualified.
In an interview, McCanna declined to say whether there will be more outsourcing under his watch.
Baylor Scott & White's finances have grown stronger during Hinton's tenure. The system generated $559 million in operating income on $10.5 billion in revenue in its fiscal 2020, which ended June 30, 2020, a 5.3% operating margin. Without federal COVID-19 stimulus grants, the system's margin would have been 3.5%. That's compared with a 7.2% operating margin in fiscal 2019.
In the year ended June 30, 2017, the system's operating margin was 3.2%.
More recently, Baylor Scott & White's operating margin spiked to 12.8% in the nine months ended March 31, 2021. Not including the almost $300 million in stimulus grants recorded in that period, its margin was about 9.5%.
McCanna's focus so far at Baylor Scott & White has been on clinical alignment, safety and digital health strategy. He also helped form academic affiliations to address Texas' clinician shortage.
McCanna, 60, has worked in healthcare management and consulting for more than three decades. He previously served as chief operating officer at Northwestern Memorial Healthcare in Chicago and as chief financial officer for Presbyterian and the University of Colorado Hospital in Denver.
Health systems have announced a flurry of mergers and acquisitions lately, but McCanna said he doesn't view getting bigger as the end goal. However, he's open to partnerships if they help expand a specific service line.
"Our strategy and our mission and ambition is centered around creating value for our patients," McCanna said.
Hinton's total compensation was $4.5 million in fiscal 2019, the most recent year for which salary information is available, making him the top-paid executive. About $2 million of that was bonus and incentive pay. That's up from $3.6 million in total compensation in fiscal 2018.
McCanna was the system's second highest-paid executive in fiscal 2019, making $2.7 million in total compensation. That's up from $2.3 million in 2018.