Healthcare CEO exits marked by fresh faces, empty tanks

Last year, hospital CEO turnover hit a record high, placing additional strain on many health systems' unstable foundations

In March, Becker's connected with healthcare leaders at prominent executive search and consulting firms to learn where this trend stands.

When CEOs are leaving

Although CEO turnover appears to have slowed since 2023 — last January Becker's recorded 25 CEO exits, and this January, we tracked only 11 — there still has been "a lot of activity," according to Jena Abernathy

Ms. Abernathy is a senior client partner specializing in executive search at Korn Ferry. She is also the firm's sector lead for board services in its healthcare practice and serves as a member of its global board and CEO practice. 

According to Ms. Abernathy, planned CEO exits tend to move in cycles. Churn picks up in June and July as the fiscal year draws to a close, and it often surges again in December, allowing systems to ring in the new year with a new chief executive. 

"You saw a lot of individuals starting in January, and I think we're going to continue to see this," she said. 

But there also has been an uptick in unexpected exits — or at least, in exits that appear unexpected, Donna Padilla, executive partner and healthcare market leader at WittKieffer, told Becker's

"Sometimes they feel abrupt to the market, and they aren't to those from inside," Ms. Padilla said. "You can certainly tell where some of the abrupt exits are. Usually there's a little bit of noise, a little bit more noise and then, all of a sudden, the CEO is leaving. But some of these have honestly been planned a little more than perhaps the market or the news picks up on."

Why CEOs leave suddenly 

One reason CEO exits might seem abrupt is that planned exits are getting pushed up. Ms. Padilla describes this as a "lame duck" phenomenon, in which a leader anounces they will be retiring at the year's end but soon realizes that nine months is a long time to wait.

"Especially if it's an internal successor and they know it, some organizations will really keep a lid on it and wait until they have the whole plan figured out," Ms. Padilla said. Then, an exit and interim or permanent successor might be announced simultaneously, which can feel abrupt to those unfamiliar with the health system's inner mechanics.

However, there are cases in which exits truly are abrupt. There are certain crisis circumstances that no one can anticipate — illness, family matters — but burnout plays a role, too. CEOs are trained to be calm under pressure, so sometimes the realization that they are not at their best is a sudden one. 

"The CEO isn't always asked [how they're doing], and they'll immediately respond with, 'The organization's doing great, we're putting ourselves out and here's all the great things we're doing from a service perspective,'" Ms. Padilla said. "They don't often have a place of comfort where they can say, 'Gosh, I need a little more time. I'm starting to feel it.'"

Sometimes families will sit down and have that heart-to-heart over the holidays — another reason CEO exits might climb during January. Other times, this reflection occurs at the inflection point of a new strategic plan or a merger; CEOs see themselves becoming architects of plans they might not be able to see through. Rather than stay for two more years or lead the whole way through half-hearted exhaustion, they might call in a new leader. 

"I think there's still a COVID element to that," Ms. Padilla said. "People just spent the gas in the tank faster than they thought they would have. And they are now having a chance to reflect to go, 'Am I the right leader to move this the next five years?'"

In these cases, it is common to see a CEO back an internal successor, according to Ms. Padilla. It can be comforting for them to feel that they are leaving the organization in trusted hands — especially for longtime leaders who are extremely devoted to their organizations. "Most often I hear an outgoing CEO [say], 'We just want to make sure we have the right person taking the helm,'" she said. 

Some CEOs are also leaving their roles to prevent burnout, choosing to take a sabbatical or move to a private equity firm, start-up or nonprofit organization. The time away from a health system environment can allow a CEO to renew their energy and build a new perspective. 

"It's sort of an actualization of the person to say, 'I may need to do something different to fill my tank. I'm running a $2 billion health system; I'm not just going to do that running a $4 billion health system,'" Ms. Padilla said. 

How CEO experience influences exits

Another reason CEOs are leaving: They are new to the role and it just was not a good fit, according to Ms. Abernathy. 

"We've seen an uptick in first-time CEOs. Anytime you start to see that, there are potential risks involved, especially with an industry that's going through transformation like what we're seeing in healthcare," Ms. Abernathy said. "So you're seeing some of these [first-time CEOs exiting] that, unfortunately, were not successful." 

It does not help that they might be filling seats left by longtime CEOs who postponed their retirements due to COVID-19, and have finally found an opening to step back. 

That is not to say that newcomers cannot be successful. In fact, they often bring fresh perspectives to organizations in need of a refresh. But there is a certain kind of successor who is best poised for success, according to Korn Ferry's research. 

"When you look at the financial challenges of many of these health systems, it calls for a different type of leader. That's something that we've spent a lot of time studying, and we call it the 'enterprise leader,'" Ms. Abernathy said. "It has to be an individual that can perform and transform at the same time, because that's exactly what's happening in healthcare. They cannot remain static." 

An enterprise leader is defined more by capability than experience, according to Ms. Abernathy. They need to be both decisive and a strong communicator, driven by purpose and impact. Those qualities are not built solely from tenure; in fact, in today's ever-changing industry, it can be important not to stick in one's ways. 

"The number one competency that we're looking for right now in candidates is agility," Ms. Abernathy said. "They've got to be able to move between strategy and operations. They've got to really be able to know how to inspire large teams, they've got to be able to identify and retain talent, and they've got to be able to engage not only with the board, but with the communities that they serve, and also with, in particular, their team members."

According to Ms. Abernathy, "Those are important hallmarks for truly this forward-thinking CEO of the future."

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