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Modern Healthcare

Hospitals Grapple with a Surge of CEO Exits

A wave of CEO departures is hitting the hospital sector as executives hope the worst of the pandemic has passed. But less than half of hospitals are fully prepared, research shows, portending a range of financial and organizational consequences, industry observers said.

More than 60 hospital CEOs left their roles through the first half of 2022. That turnover rate marks a 48% year-over-year increase, and more departures are expected through 2023.

But only 44% of 260 hospitals surveyed in the 2021 Governance Institute biennial report maintain a written, updated CEO and senior executive succession plan.

A bad executive hire can cost an organization between five and 15-times their base pay, said Bill Dixon, a managing director at executive compensation consultancy Pearl Meyer. Citing a 2018 report from executive search firm Acadia Associates, staff may disengage from the organization if the leadership change isn’t communicated well, he said.

“A poor [CEO] hire leads to additional financial and cultural consequences beyond the transition,” Dixon said. “A systemic approach to leadership planning has paid off for the rare few (health systems) that have a depth chart for each position and view succession planning as a core part of their strategy.”

Succession planning decisions carry more weight amid the tumultuous healthcare environment. Boards are tasked with finding a CEO who can manage the shift to remote care, working with new payment models, waning reimbursement levels, and a workforce in flux.

Those who qualify for the job will get a pay boost, experts say. Hospital executive compensation has increased steadily over the past decade. But the pay increases aren’t necessarily linked to performance. They are often based on competition, said Steve Sullivan, a managing director at Pearl Meyer.

“I don’t think there is a ceiling on what providers will pay to find a CEO that can run a complex healthcare system. Recruiters are getting their asking rate,” he said.

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