When Hospitals Merge, CEOs Often Pay the Price

NEW YORK, N.Y. — The brisk pace of mergers and acquisitions in the healthcare industry has had one major casualty — hospital executives, according to Crain’s New York Business.

When two or more large health systems combine, it’s highly likely that the newly merged organization will downsize its management structure to remove redundancy and cut costs, Crain’s reported. Furthermore, the administrative ranks typically feel the effects more than their clinical counterparts because, as one consultant told the publication, “it tends to be the higher-ups where the excess resides.”

Amid what can sometimes be a mass management exodus, a position in particular risk is that of CEO at a formerly standalone hospital, noted Crain’s. One example is Keith Safian, the longtime head of Phelps Memorial Hospital in Sleepy Hollow, N.Y., who exited his role when the hospital joined the larger North Shore-Long Island Jewish Health System in January. Though he remains positive about his future, Safian told the magazine, “there’s a wealth of opportunity [in healthcare]. But not for hospital CEOs.”

CEO turnover was 18{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} in 2014, down slightly from 2013’s all-time high of 20{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5}, FierceHealthcare previously reported. In a statement about those findings, the American College of Healthcare Executives said, “the continuing trend of consolidation among organizations, the increasing demands on chief executives to lead in a complex and rapidly changing environment, and retirement of leaders from the Baby Boomer era” all have contributed to a high level of turnover that the organization predicts is the new status quo.

The onrush of industry consolidation also can work against healthcare executives who are job hunting, since failing to impress one human-resources department can take a candidate out of the running for a large number of jobs, noted Crain’s. Thus, many must take large pay cuts, move out of state, reinvent themselves, or even follow the example of a former Manhattan hospital executive who briefly worked as a cashier at a department store to keep himself busy after losing his job.

It’s not all bad news for hospital CEOs, though — at least for those who can hold on to their jobs. CEO base pay is not only higher than doctors’, but it has grown faster than the salaries of other C-suite positions, FierceHealthcare reported.