Practice Notes

The most dangerous pitfalls of executive turnover

Anthony D'Eredita, Executive Vice President of Advisory Board Consulting and Management, is an expert in short- and long-term executive project management, as well as strategic and operational services. His team routinely serves health care organizations in the midst of executive-level turnovers.

We’ve all seen the recent reports about high CEO turnover in hospitals, but did you know there’s more CEO turnover in health care than in any other industry—by nearly 50%?

In light of these concerning reports, I assembled several of our most experienced interim CEO/CAOs to see if there were any broad lessons we could draw from their experiences of leadership transitions, and we identified three major pitfalls that we’ve seen at organizations across the country.

Lost momentum on strategic initiatives

Without a medical practice leader, the group will almost certainly drift away from its strategic goals. Senior managers who are supposed to be dedicated to advancing key strategies instead become occupied with merely maintaining day-to-day activities. When losing their leadership’s focus and accountability, they get pulled into taking on larger operational workloads and stalling progress on important strategic initiatives.

The most detrimental result we’ve seen from this is the rise of informal leaders who are not aligned with system objectives

It’s often these informal leaders who are the most vocal against important strategies. At worst, they become disruptive and move the medical group backwards, requiring a newly hired leader to step in and undo sometimes significant damage.

Costly 'misbehavior' across the medical group

Conflict arises in even the most well-aligned organizations, and what happens when there’s no one available to resolve it? Individuals will do as they please. The longer it takes to fill that leadership void, the more that “do-as-you-please” culture disrupts all of the areas that make for a successful, integrated medical group.

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One large multi-hospital system in the Southeast we worked with had a medical group of over 150 physician—and a six-month leadership void. When we arrived, the health system was losing $17 million on the integrated medical group practice. The regional managers managed as best they could, but they had no single point of leadership to provide guidance in cases of discord.

Those who had a tendency to go their own way did. Although some physicians and staff continued working productively, those who had a natural tendency to go their own way did. There were seemingly minor occurrences, such as physicians taking off on Fridays, staff postponing days in A/R reconciliation, and overall practice costs increasing. Those piled up and resulted in poor patient access and declining financial performance.

After we reestablished strong central leadership, misbehavior curbed and the health system’s annualized medical practice loss went from $17 million to $9 million.

Protracted vacancies

Health systems often plan for their executive hiring process to take about four to six months, from sourcing candidates to the new hire’s start date. Unfortunately, it can take as long as nine months.

The number of candidates who have managed an integrated medical group is nominal, so the experience and skillset needed are difficult to find. Integrated medical group leaders must understand the strategic and operational aspects of practice management within a broader health system delivery model; identify with the physician mindset to effectively communicate with physicians; and comprehend health system strategy to construct the most effective business model to achieve it.

It’s important, though, to take the time to recruit the right replacement leader.

For example, we worked with a small medical group in the Northeast that was restructuring its leadership team, and progress stalled for over three years because they turned over two executive in two years. Instead of focusing on hiring the right candidate and working with seasoned interim management to fill the temporary leadership void, they rushed the recruiting process. Not only did it delay their ability to drive implementation of strategic objectives and improve practice performance, but they had difficulty recruiting physicians and executives into the medical group given the high turnover.

Make sure you have enough stability in the interim. With medical group CEO recruiting, we advise clients to hope for a four-to-six-month process, expect a six-to-nine-month process, and make sure you have enough stability in the interim to sustain momentum throughout. That's why providing interim leadership has become such an important part of our practice: even under the best of circumstances, filling a CEO position with the right candidate can take much longer than health systems can afford.

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