"The pressures have just gotten overwhelming," says one health system CEO.
Healthcare in a post-COVID world has been susceptible to workforce turnover and burnout, but that reality is also hitting those at the CEO level.
For hospitals and health systems, gradually improving but still tight margins are causing organizations to alter their strategy, resulting in churning over of leadership. Meanwhile, longtime CEOs are choosing to step aside and either enter a new chapter of their career or head into retirement.
Whether it's through consolidation, elimination, replacement, or resignation, the faces at the helm of hospitals and health systems are changing.
Through the first nine months of this year, 125 CEO changes took place at hospitals, according to a report from executive coaching firm Challenger, Gray & Christmas. That mark is a 67% increase from the 75 changes that happened over the same period in 2022.
In September alone, hospitals had 24 CEO changes—the second-highest number across the 29 industries and sectors measured in the report, trailing only government/non-profit (28).
What's causing these levels of CEO turnover in healthcare? The steady stream of economic and operational hurdles, said Michael Charlton, new president and CEO of AtlantiCare Health System, on the HealthLeaders podcast.
"I think there's intrinsic factors when it comes to the CEO level," Charlton said. "Obviously you have the regulatory burden, you have the price pressures, you have the denials and the pre-authorization… there's a multitude of challenges."
Charlton is stepping into the role vacated by Lori Herndon, who retired in June to end a 40-year career at AtlantiCare. As both an incoming CEO and one that replaced a retiring veteran, Charlton is aware of how the current stressors are affecting entrenched leaders and creating opportunities for new ones.
The Challenger, Gray & Christmas report found that 318 CEOs across all industries retired this year, which made up 22% of all exits—slightly down from the 24% of CEO retirements last year.
"Sometimes when the deck is stacked against you in such a continuous manner, it gets hard to remember the purpose of why you're doing what you're doing every day," Charlton said.
"With all the pressures that the CEO faces, if there's an opportunity to transition out because we've had a very successful career over a long period of time and you feel that somebody is in a better position to serve the organization, that's a lot of it. The pressures have just gotten overwhelming."
How hospitals can respond
Refreshing leadership can often be beneficial for organizations, but having stability and continuity, especially at a time when turnover is high, can be a steadying force.
For example, Tampa General Hospital recently agreed to a 10-year contract extension with president and CEO John Couris after six years of service. The agreement created one of the only 10-year CEO contracts in healthcare.
"What they were thinking is how do we lock down a CEO that is probably at the apex of his career?" Couris said. "How do we create consistency, continuity, and stability in the organization? How do we create as much stability for the next decade as possible, given the fact that there's a lot of movement in the industry?"
Not every hospital can necessarily offer that kind of commitment, but there’s no reason why organizations can’t have a succession plan in place, whether that’s in preparation for a planned exit or to mitigate an unexpected change.
Identifying and developing leaders early can pay dividends later when an opportunity arises to advance in-house talent. Hospitals can evaluate not just the CEO position, but the entire C-suite annually to find out which executives have the potential to step up into the CEO role if the current CEO departs.
In the case of an upcoming retirement, tab a leader and have them work closely with the outgoing CEO to ensure a similar vision and approach is maintained in the new regime. In some cases, multiple C-suite executives may be nearing retirement at the same time. To deal with that, hospitals should get ahead of a massive changeover by attempting to stagger exits.
As for the CEO turnover that hospitals choose to create, organizations should be aware that a change in strategy may require a runway and allow their CEO the time and resources to see it through. Putting a CEO in the best position to succeed by surrounding them with the right leadership team and instilling confidence can mutually benefit both the CEO and the company.
Of course, even as the CEO position experiences change, other areas of the healthcare workforce remain in flux and that's something Charlton doesn't want to lose sight of.
Nurses and other clinicians continue to be vulnerable, which is why CEOs have had to manage the effects on their workforce while also dealing with it personally.
"We're all facing it," Charlton said. "It's just more magnified at the CEO level."
Jay Asser is the contributing editor for strategy at HealthLeaders.
The names and faces at the CEO level across hospitals and health systems continue to change as leaders feel the burden of financial and operational challenges.
Through September, 125 CEO changes took place at hospitals, an increase of 67% from last year, according to a report by Challenger, Gray & Christmas.
Not only are CEOs being replaced for strategic reasons, but many longtime CEOs are stepping aside in the midst of a gruelling climate.