Hospitals Want CEOs without Healthcare Experience
Another knock-on effect of the ACA is that healthcare and hospital systems are struggling to cope with new managerial changes demanded of them. Increasingly, hospital boards want an outside perspective, along with different skill sets—and they are willing to go outside the industry to get it.
February 9 2014 by ChiefExecutive.net
According to US News & World Report, when Carlos Migoya was hired in May 2011 to run Jackson Health System, Miami-Dade County’s safety net hospital system, he had no healthcare experience. A career banker, Migoya took over a system that bled $428 million over the previous four years. “Our cash supply was in the six-to-eight -days range,” Migoya told Christopher Gearon. Migoya came directly to Jackson after a one-year stint as Miami city manager. He found Jackson lacking budget accountability, expense controls and unable to collect on certain revenue streams. “Basically, there was no business plan going forward,” he says.
Today, USN & WR’s reports that Gearon the Jackson health System is in the black—its 2013 bottom line a handsome $45.7 million. The system is on the front end of an $830 million, decade-long renovation and infrastructure upgrade, and has cemented relations with University of Miami—whose doctors the nonprofit academic medical system depends on. Migoya also is revitalizing Jackson Health’s long-neglected community-based urgent care and clinics, a strategy required to survive under changing incentives brought on with the Affordable Care Act (ACA).
“The healthcare industry is going through major changes,” Migoya told US News. “Sometimes, if you’re in the forest, you don’t see the trees.” Migoya is in the vanguard of a trend that appears poised to sweep through the hospital industry. Hospital boards increasingly want that outside perspective, along with some different skill sets – and are willing to hire outside of the industry to get it.
It’s expected that two-thirds of hospital CEOs hired this year will have little to no healthcare experience, according to Black Book Rankings, which last year conducted a poll of 1,404 human resource officers and board members of healthcare organizations. That’s up sharply from 19 percent in 2009.
As ACA ushers in fundamental changes, today’s hospital staffing needs have changed. Hospital demand for radiologists, anesthesiologists and other specialists a decade ago have been replaced by the need for primary care doctors, hospitalists, nurse practitioners and other physician extenders. These professionals are vital to keeping patients out of the hospital, which is essential as outcome-based payment replaces a fee-for-service system. The need for different skills seems to be hitting the C-suite, too.
The average tenure of a hospital CEO runs less than 3.5 years, with a majority of those being involuntary exits, according to Black Book Rankings. When the CEO leaves, it’s common for chief financial officers, chief information officers and other top managers to leave soon after. “The big surprise is the high number of chief medical officers who are replaced (87 percent),” says Brown, adding they are among the senior managers making the quickest exit—most within two months of a departing CEO.
Hospital boards are raising the bar for delivering results. While most newly recruited hospital executives still come with a healthcare background, more are looking at leaders from managed care, the payer side or from finance or banking. For example, Mike Keating, CEO of Christ Hospital in Cincinnati, previously was an investment banker; Robert Meyer, president and CEO of Phoenix Children’s Hospital, came from the consulting world; and before he was appointed to lead Indiana University Health (then Clarian Health) in November 2002, Dan Evans was a law firm partner. Michael Fisher led Premier Manufacturing Support Services before becoming the president and CEO of Cincinnati Children’s four years ago.
A hallmark of outside CEOs is that they are making “transformations from the bottom up,” according to Gearon. They tend to eliminate non-core products lines, buy supplies differently—abandoning costly legacy arrangements—and renegotiate contracts.