5 reasons hospital CEOs leave their post unexpectedly

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Most hospital CEO contract terms today are for five years and include provisions for renewal. 

While the average tenure of a CEO is slightly greater than five years, turnover in the C-suite remains a significant issue for hospitals and health systems. At times, a CEO makes an unexpected departure, which can leave the organization rudderless and the employees dispirited.

For instance, Arkansas State Rep. Joe Farrer (R-Austin) recently resigned in protest from his job as interim CEO of Jacksonville, Ark.-based North Metro Medical Center.  Victoria Alexander-Lane, CEO of Bishop, Calif.-based Northern Inyo Healthcare District, suddenly departed earlier this month. Tom Thompson resigned  Sept. 12 from his post as president and CEO of Moses Lake, Wash.-based Samaritan Healthcare to take on a new role as president of ReginaHospital in Hastings, Minn.

There are a number of reasons CEOs leave before their contract term has expired.

Here, Sue Cejka, managing partner with executive search firm Grant Cooper HealthCare, and Dennis J. Kain, president of retained executive search firm Tyler & Company, talked with Becker's Hospital Review about the most common reasons CEOs unexpectedly leave the organization.

1. Recruited to a new position. Many times, a CEO is recruited to a more attractive position at another organization. In this case, the departing CEO normally gives his current organization 60 days or 90 days notice so that there is a smooth leadership transition. "I usually see about 90 days because most CEOs care deeply about the organization so they want to see an orderly transition," Ms. Cejka says.

Sometimes the organization allows the CEO to leave immediately. This happens for one of two reasons. First: The organization believes it is better to have a clean break. Once the decision to leave is made, the board may believe it is better to move forward quickly. The second reason: There is a logical successor already in place. In either of these instances, the organization will allow the departing CEO to leave at once.

2. Termination. Termination will of course cause an abrupt departure. When a CEO has been terminated, the organization will typically just state that the person has left the position. Usually no reason is given to the public or employees. According to Ms. Cejka, a CEO may be terminated because she made a decision that is unpopular with the hospital board. However, she "rarely to never" sees a CEO terminated due to competency issues.

3. Personal tragedy. There are times when the unexpected occurs. Maybe a spouse is diagnosed with an illness or another personal tragedy comes to light. This is a common reason why an incoming CEO may not begin work at a new position, but it is also a legitimate reason for a CEO to resign. If a child does not adjust well to the new location, the CEO/parent must make the difficult choice to vacate the position. Ideally in the case of illness the CEO will be allowed to take a leave of absence rather than resign, according to Ms. Cejka. However, when the family doesn't adjust, the CEO is often left with no choice but to leave.

4. Change in job duties. A CEO might abruptly leave if a large health system undergoes a reorganization that causes the CEO to lose much of his or her authority. As many large systems acquire independent hospitals, they operate those hospitals under an operating model rather than a holding company model. This causes many of the functions previously overseen by the hospital CEO to be centralized. In instances like this, the CEO's job duties and authorities are lessened to where certain colleagues, such as the CFO and chief human resources officer, are removed from the purview of the CEO. When that occurs, the CEO may legitimately believe his ability to guide the organization is lessened. "If I was a CEO that would be really problematic for me, and I could foresee that a CEO would leave fairly suddenly," Ms. Cejka says.

5. The retirement of a colleague. Baby boomers are retiring, which creates job openings that may be attractive to CEOs because of location, size or the organization's reputation. "All of a sudden that starts a movement based on the desirability of the area where the person retired," Mr. Kain says. "That kind of sets a chain of dominoes."

 

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