Catholic healthcare giant CommonSpirit Health's CEO, Lloyd Dean, announced Tuesday he plans to retire from the organization in the summer of 2022.
The news follows the earlier retirement of CommonSpirit's former co-CEO, Kevin Lofton, in the summer of 2020. Dual CEO models tend to be temporary solutions designed to help newly merged organizations find their footing, so it wasn't surprising when Lofton, who headed Catholic Health Initiatives, stepped down just over a year after the 2019 merger that formed CommonSpirit. But Dean's departure from the 140-hospital system might come as a shock to some who figured he'd be at the helm for some time.
The Chicago-based system's board of stewardship trustees has already begun the process of finding Dean's successor.
In an interview with Modern Healthcare, 71-year-old Dean said CommonSpirit's board has always known about his plan to retire from the health system and be replaced by a more long-term CEO. He said CommonSpirit's leadership had set criteria for when the transition could take place that have now been met.
"While we haven't talked about it publicly up until this point, that was always the plan of the board and always the plan of myself," said Dean, who was the CEO of Dignity Health before CommonSpirit's creation. "I think that we set some criteria for when that would happen and I'm excited that we have met that threshold."
Q&A with Lloyd Dean: 'This is the right time to transition to the next generation of leadership'
The criteria included targets around volumes, earnings, admissions and payer mix, Dean said. Another goal was to expand the balance sheet, which happened through the additions of Virginia Mason Health System and Yavapai Regional Medical Center in Arizona. Dean said CommonSpirit has also grown its infrastructure around virtual care.
"So I feel that this is a good time for the man or woman who will be my successor who I can hand the baton off to the next generation of leadership," he said.
CommonSpirit struggled financially during its first year as a health system. A combination of operating declines, merger costs and impairment charges culminated in a $602 million operating loss in CommonSpirit's first annual financial report as a merged system.
Dean said the system's fiscal 2021, which ended June 30, 2021, has been its strongest year yet. CommonSpirit recorded $998 million in operating income on more than $33 billion in revenue, a 3% margin. He said the health system is halfway toward its cost savings goal of $2 billion over four years, which is where it had hoped to be at this point.
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"I have to mention that we've been able to do that in one of the most difficult environments that this country has ever seen," he said.
Dean is one of the country's highest paid not-for-profit health system CEOs. His total compensation was $16.7 million in fiscal 2019, which ended June 30, 2020, according to the latest tax data available. That includes a base salary of $1.9 million and bonus and incentive pay of $8.2 million.
The legacy health systems that formed CommonSpirit had different management styles, which may have added a layer of complexity to the integration. While CHI had operated more as a collective of local ministries, Dignity had more of a centralized management style, where a senior team oversees all operations.
Rather than decide on one of those operating models, Dean said CommonSpirit's leadership looked for the model that fit best with the future of healthcare. They landed on a fully integrated delivery model that centralizes 15 functions at the national level while also relying on the expertise of divisional leadership, Dean said.
"So we are a fully integrated organization," he said. "We are not just a collection of geographies."
Before the formation of CommonSpirit, Dean was CEO of Dignity—previously Catholic Healthcare West—for 19 years. Prior to that, he was executive vice president of Advocate Health. A first-generation college graduate, Dean grew up in Muskegon, Michigan as the second oldest of nine children.
Dean said CommonSpirit just completed a strategic road map that takes the organization through 2026. He looks forward to adding a leader who will guide the system toward that strategic vision, which prioritizes delivering affordable, high-quality care and being a national leader around health equity and social justice.
"I'm excited," he said. "It's a great time for me. It's not about age why I'm retiring, the organization is ready for that next generation of leadership."
