CEO Turnover Highest at Nevada Hospitals

One-third of hospitals in the state of Nevada experienced turnover of their chief executive officers between 2009 and 2010, the highest percentage of leadership change in the nation, followed by hospitals in Alaska, Oklahoma, Connecticut, Alabama, Massachusetts and the District of Columbia, where between 24% and 29% of the hospitals changed leaders.

That's according to the latest annual survey from the American College of Healthcare Executives (ACHE), which used reports submitted to the American Hospital Association for 4,567 hospitals for this survey.

The states with the least turnover include Delaware, whose hospitals had no new chief executives; Utah, which had 2%; Michigan which had 5% and Vermont, with 7%.

The national turnover rate for all hospitals in the U.S. was 16%, which was down from 18% between 2008 and 2009, the survey said. Prior to that, top hospital executive leadership fluctuated between 14% and 16% between 2001 and 2008.

"While the rate of CEO turnover has decreased somewhat, it is still too high," said Thomas C. Dolan, president and CEO of the ACHE. "Now, more than ever, hospitals need to ensure they have the appropriate succession plans in place to minimize any potential negative impact of unexpected turnover. It is critical that hospital boards and CEOs work together to this end."

Dolan said that according to ACHE surveys, only 20% of hospitals have a CEO succession plan in place, compared with 40% of other kinds of businesses. "What happens with those remaining 80% is that they're scrambling whenever a CEO announces they're leaving, retiring, going to another facility, or gets hit by a bus."

About 58% of hospital CEOs have been with their organizations less than five years. "You should start new succession planning the day the new CEO comes on board," he says.

Dolan said that for smaller states like Nevada, which has only 32 hospitals, turnover statistics may be less meaningful than statistics for larger states, although Nevada in 2009 also had a high turnover compared with 2008, 20%, one of the highest relative to other states in that year too.

In this report, other states considered to have high hospital CEO turnover between 2009 and 2010 include Virginia, New Mexico, West Virginia, Mississippi, Florida, Tennessee, Rhode Island, Texas, Arkansas and Hawaii.

These rates are more meaningful for states with big populations. For example, Florida, which has 180 hospitals, had a 21% CEO turnover and Texas, which has 368 hospitals, had a 20% turnover. Pennsylvania, which has 157 hospitals had an 18% turnover, while Illinois, which has 179, had 13% and New York and California, which each have at least 400 hospitals, had an 11% or 12% change in leadership.

Dolan added that the CEO turnover rate is potentially bad because it disrupts continuity within an organization. "When there's disruption, plans are put on hold, other leaders leave, and the medical staff gets restless," Dolan says. When they come in, new executives launch improvements that take five years "to become part of the fabric of the organization."

"Let's say you go into an organization that's been losing money," Dolan says. "If you're not there to safeguard the changes, often times the hospital will revert back to where they were before."

Dolan says about one-third of CEO departures are considered involuntary, in which the board and the CEO were just not a good fit, or the CEO died, or was terminated for job performance, or ethics violations. But about two-thirds are voluntary, such as the CEO just wanting to retire, a growing trend as baby boomers age, and which some CEOs may have postponed a year or two due to the recession.

According to an ACHE report last year, the average hospital CEO tenure is 5.6 years with a median of 3.6. Only 3.4% had a continuous tenure of 20 or more years. And 57% of first time-CEOS were promoted from within their organizations.

In addition to loss of continuity, the report said, employee morale likely suffers, as does board and community relations and hospital culture.

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