Hospital Leaders Stampede the Exits. Why?
Ted L Ramirez
Practicing Attorney/Author | Corporate Governance and Business Transactions | Counsel and Coach to Leaders, Business Owners and Boards of Directors Dayton, Ohio USA
"See how they ruuuuuun!"?
?Becker’ Hospital Review reports that a hospital CEO leaves every 72 hours.[1] Thousands of hospital and systems administrators, from finance to HR, continue to serve their institutions and communities. We thank you for your service! But, clearly, the C-Suites are clearing out at record rates.
?Is it just another dimension of “The Great Resignation/Retirement?” As the exit pace accelerated, it first appeared to stem from the maelstrom and aftermath of “The Pandemic.” Or the Great March of the Boomers? The conspiratorial healthcare media[2] have yet to touch the really raw nerves of other factors surely at work. And there are some yet to be noticed.?
??Several years ago, the administration of a small hospital group (we shall call it “Our Lady”)[3] recognized the coming imperative to “grow or go.” The pace of consolidation was gathering speed everywhere, driven in part by run-amok politicians with myriad recipes for “fixing U.S. healthcare.” Also a vast chorus of consultants held conferences at five-star hotels worldwide – especially convincing and edifying in places like Hawaii, Bahamas, etc. Some of these transactions ended up stopped by DOJ, state attorneys general, or by boards choosing to reverse a dysfunctional merger –?back when healthcare boards of directors actually stayed involved in statutory fiduciary duty.
?But, back to Our Lady. Its visionary CEO consulted with the medical staff. . . back when administrators still did so with men and women who went to college, medical school, residencies, fellowships, i.e., people with straight A’s in math and physics. In short, bright Hippocratic-oath-taking people with scientific, analytical minds, albeit assaulted and confused with alphabet soup: CMS, BCBS, HMO, PPO, PHA, OIG, DOJ, AG, yadda, yadda.
?The Our Lady brain trust pondered its options among the several emerging systems and successful hospital candidates for an affiliation. It saw itself as strong enough to invite merger discussions as the senior party, the one that would “acquire” control over the combined enterprise. But the administrators of the potential “targets” went to the same MHA programs and glitzy consultant convocations. “Why should WE transfer control to YOU?”
?Interest by the potential target hospital in a transaction would rise and fall in tandem with its perceived financial strength. “Can we survive as a ‘stand-alone’?” When the interim statements looked good, the board would encourage administration to hang tough and plan for continued independence; heck, even build something new. But some on the board could analyze financial statements and other metrics. Getting bond ratings to build and grow became dicey. “We face tough questions….” Then “Days Cash on Hand,” healthcare’s simplest perennial vital sign, started to slip and to cause whispers in the parking lot after board meetings.
?There was one other key “financial indicator” that administrators ?watched outside the board room. The growing number of “exit package” arrangements developed by those brilliant lawyers, actuaries, and “executive compensation” specialists; yes, those brightest and best retained and paid by the C-Suite to “study the issues of compensation in a rapidly shifting, competitive hospital environment.”
??Rarely would any board member have read those documents. They were lucky to get a five-minute show at a board meeting, by attractive speakers from marquis consulting firms, armed with powerful slides and sobering admonition about “retaining talent.” Perhaps less rarely would the board chairman and CFO have explained them to the board in plain English. Did “SERP” come from Canadian maple trees and go on French toast? How many years after leaving office would the executive get paid, plus benefits? Was a Rabbi Trust some sort of Kosher religious commitment? How do you spell U-N-F-U- N-D-E-D and N-O-N-Q-U-A-L-I-F-I-E-D? “What do they mean?” And do these come on top of, or as part of, severance pay, 403(b)’s and 401(k)’s?
?Board members wondered as the numbers spun. Well, not all of them. The chairman and those hospital officers in the room understood them from private briefings, failing to disclose and recuse themselves as conflicted voting members when the perfunctory board approvals were voted. The same ones who paid the consultants to design the wizardry that would sustain them in health insurance, cars, lake homes, vacations, college tuition for the kids. To reward those deserving leaders who served so faithfully for so long, so they would not be left to Social Security. Yes, the same ones who enjoyed the many treats the consultants showered upon them.
?Back to Our Lady’s negotiations. Wonder of wonders. As the target’s financial condition deteriorated, its C-Suite started get it. “Who will fund our packages!! With what money? For how long?” ??Our Lady’s affiliation discussion partners recognized that there was only one way their “packages” would get funded. They grew increasingly amenable to relinquishing control. With the customary “change of control” trigger, they would be paid and. . . GONzo.
??Is any of this going on now? Other considerations in the C-Suite as they rush for the exits may involve other issues, each of which might merit an article of its own:
How about that “brilliant” MBA-move to hire all physicians, PA’s, APA’s, and other providers, reducing them to contract employees… easier to control, fire, intimidate, bully, etc. Well, guess what, Geniuses! You converted millions of professionals into collective bargaining units under the protection of the National Labor Relations Board. Good luck with that. How about Our Lady Physicians Teamsters Local 666? What a cool Union Hall they would have!
领英推荐
???Well, yeah! If you were in the C-Suite, wouldn’t you be packing backs and booking cruises? (Or ARE you already?) As this little piece came together, the old great line from the Beatles in the song “Lady Madonna” kept ringing. See how they RUN!!?Enjoy this clip! Just a bunch of young kids having a blast making music in the studio.
Yours for Better Governance,
Ted ?2022
Ted L. Ramirez | Attorney | www.ketteringlaw.net
Phone/Text: 937.609.3330 | Fax: 937.298.7768
Email & Zoom:?[email protected]?| M/S Teams: Ted Ramirez
P.O. Box 365 | Dayton 45409 | USA
Admitted to practice:
Ohio |?Registration?0018240
District of Columbia |?Registration?493972
Supreme Court |?SCOTUS Journal May 21, 1989
For more articles on Governance, see https://www.dhirubhai.net/in/TedLRamirezLaw
[1] See Becker’s, April 29, 2022 | https://www.beckershospitalreview.com/hospital-management-administration/hospital-ceo-exits-nearly-double-this-year.html?origin=BHRE&utm_source=BHRE&utm_medium=email&utm_content=newsletter
[2] To be fair, how blunt can healthcare media be and still sustain subscription rates and get hospital administrators to answer the phone for interviews and snappy soundbites?
[3] A thoroughly fictionalized name, although the story is true. One no longer remembers the speaker. But at a continuing education conference some thirty years ago, he opened with a war story about exhausting negotiations between two systems, one controlled by an order of Catholic sisters and the other by a Jewish medical foundation. They argued for months how to brand the new system, until they settled on. . . and here came the punchline: Our Lady of Perpetual Guilt.