What is the first thing to do if you're thrust into the chief executive officer position when the previous executive has been ousted by a medical staff revolt and the organization is bleeding money?The same thing you should do if you're hired under calmer circumstances: Meet one-on-one with each board member.That's the advice of Chris Van Gorder, who was named interim CEO of Scripps Health in San Diego just a few months after he joined the six-hospital system as chief operating officer. "I needed to find out whether the board wanted me to be a babysitter for the organization or they wanted me to try to make the organizational changes that would be required for a long-term turnaround," he says.Board members wanted a turnaround, and they got it. Last year, Scripps Health generated an operating margin of more than $100 million compared to a $20 million loss in 1999, the year Van Gorder was hired.Like many hospitals, Scripps Health did not have a CEO succession plan when it needed one. Although turnover among hospital CEOs is fairly high-between 14 and 18 percent each year for the decade ending in 2005-succession planning is rare. Indeed, an American College of Healthcare Executives survey shows that just 15 percent of 722 hospital CEOs assumed their position as part of a planned succession process. That means the ability to assess situations and make decisions quickly is essential for hospital CEOs.Van Gorder's "interim" status was removed after 30 days because the board liked what it saw. Here's what he did in that first month:
- Established a physician leadership cabinet. Designed as a mechanism for ongoing communication between administrators and medical staff, this group is advisory-only, but membership is weighted toward elected leadership of the medical staff. Trust between physicians and hospital management is Van Gorder's top priority; he earns it by sharing information with physicians and seeking their advice on how to proceed.
- Started decentralizing the organization. Many functions-legal services, for example-are centralized, but "decisions that could be made closer to the patient were pushed out of the corporate office," Van Gorder says.
- Replaced contract consultants with an in-house project management office. "That gave me a team I could deploy across the organization when I had challenges, to work on business plans that needed to be developed," Van Gorder says.
- Initiated a leadership academy that helps mid-level managers move up in the organization. The yearlong program helps retain employees as they build skills; the academy also gives Van Gorder a chance to get acquainted with up-and-comers he might otherwise never meet.
Turnover Begets Turnover
People, plans and protocols get disrupted when a hospital changes its CEO. A survey of CEOs conducted by the American College of Healthcare Executives in 2005 found high turnover among top-level managers within one year of a CEO change:
- Vice president, 97 percent turnover
- Chief medical officer, 77 percent
- Chief operating officer, 52 percent
- Chief financial officer, 42 percent
Other side effects of a CEO change, according to the survey, include:
- Competitors frequently (39 percent to 45 percent of the time) tried to recruit physicians, patients and key employees from the hospital with a new CEO.
- 30 percent of respondents reported that strategic planning was halted or postponed.
- 29 percent reported development of new services was stalled or nixed entirely.