Chief Executive Officer
A publication of the American College of Healthcare Executives CEO Circle
 
The Future of Hospitals in America
your career
Richard J. Umbdenstock, FACHE
Many have failed at foretelling the future, though not for a lack of trying;
sports and weather pages are filled with predictions and forecasts that don’t
pan out. The same is true with healthcare. For years, “experts” have touted
the demise of hospitals in the United States. Though there are some 400
fewer hospitals now than two decades ago, that hardly qualifies as “demise”
given the challenges hospitals have faced.
What is changing is the definition of a hospital, which has been evolving
for some time and keeps evolving, from entities that offer inpatient and
emergency care to various constellations of entities today across the continuum of care. Hospitals are moving away from the idea of just being a
physical structure to identifying themselves as more of a community outreach network that thinks about care upstream before people need to be
hospitalized and downstream after they are transitioned to another part of
the continuum, a continuum that reaches all the way to self-care.
Based on the trends of the past decade, hospitals will continue to be more
integrated, more at-risk and more accountable. All three tracks have been
laid down in recent years and certainly were spurred on by provisions of the
Affordable Care Act.
More Integrated
Hospitals will become more integrated in several ways: hospital to hospital,
hospital to physician, and acute to post-acute, some with payors and others
with community-based resources. There will be more merger and acquisition activity, more physicians will be employed by or partner with hospitals,
and acute- and post-acute integration will lead to better coordination of care
across the patient care episode.
M&A Activity
Merger and acquisition activity has increased, with 94 announced deals
in 2012, and an increase each year since 2009 when there were 52
announced deals, according to Irving Levin Associates. Though there were
more announced deals in 2012, the dollar value dropped considerably to
$1.9 billion from $8.3 billion in 2011. The number of hospitals that are
(continued on page 6)
Demonstrating a
Diverse Culture
By RDML Eleanor V. Valentin, SHCE,
USN, FACHE
As a Filipino woman in the U.S.
Navy, people are often surprised
when I tell them that I truly cannot
recall any diversity obstacles I experienced in my career. The Navy has a
long history of diversity and inclusion
and even has an office dedicated to
attracting, developing and retaining
a high-quality, diverse workforce that
values a culture of inclusion.
The Navy is consistently dedicated
to creating a team environment in
which everyone is treated with dignity and respect and encouraged to
lead and feel empowered to reach
their full potential. Because of this
environment of diversity and inclusion, I was able to use my talents and
achieve career success. As long as you
are technically proficient, professionally competent and pursue excellence,
you can succeed and advance in this
environment no matter your gender,
race or ethnicity.
I define diversity as differences within
a group. Of course, these differences
(continued on page 5)
ceo research findings
Results provided by ACHE’s Division of Member Services, Research
Chief Executive Employment Contracts and Performance Evaluations
Employment contracts and systematic performance evaluations are two mechanisms hospitals can use to retain qualified CEOs and empower them to take reasonable risks as
needed in the execution of their responsibilities. In May
2012, a three-page survey on this topic was sent to 1,086
community hospital CEO members of ACHE. ACHE
received 527 responses, for a response rate of 49 percent.
Summary results of the survey appeared in the fall 2012
issue of this newsletter; here we present key differences
between system and freestanding hospitals.
Within systems, investor-owned hospitals are the least
likely to offer contracts, with only 20 percent of their
CEOs holding them. By contrast, 33 percent of CEOs in
religiously-affiliated hospitals have contracts, and this figure
is 41 percent for secular nonprofit hospitals. Those CEOs
who manage small hospitals within systems are least likely
to have contracts. Nineteen percent of CEOs who oversee
small system hospitals (1 to 99 beds) have contracts, while
this figure is 43 percent for midsize hospitals (100 to 199
beds) and 40 percent for larger hospitals (200 or more beds).
Prevalence of Contracts
Fifty-six percent of the hospital CEOs surveyed reported
having an employment contract. While 80 percent of freestanding hospital CEOs have a contract, only 32 percent of
their system colleagues do. Twenty-one percent of CEOs
of hospitals in systems with 26 or more hospitals have an
employment contract. In systems with six to 25 hospitals,
30 percent of CEOs have contracts, and in systems with
one to five hospitals, 55 percent of CEOs hold contracts.
Contract Duration
Of those with a contract, the most common type of contract was rolling or evergreen, where the contract runs for a
specific time into the future (usually 1 to 2 years) with no
formal termination date. CEOs of freestanding hospitals
are most likely to have three-year contracts (with 25 percent
selecting this response), followed by rolling or evergreen
contracts (20 percent), followed by five-year contracts (17
percent). CEOs of system hospitals are most likely to have
rolling or evergreen contracts (28 percent), followed by
indefinite contracts that continue until they are terminated
(22 percent), followed by one-year contracts (16 percent).
Elements of an Executive
Employment Contract
The following are a sampling of items to be raised in
negotiating a contract and added to the contract as
agreed:
• A description of the CEO’s duties in general terms
• Financial arrangements, including salary, policies for
compensation for time the CEO spends away from the
office (travel, vacation time, sick time, etc.) and dues
for professional association memberships, clubs, etc.
• Insurance benefits
• Termination provisions, including terms of severance
• Noncompete information
• Information regarding amendments to the contract and
provisions for changes in hospital corporate structure
Adapted from: Foundation of the American College of
Healthcare Executives. (2010). Employment Contracts for
Evaluation Criteria
In the list of 19 factors that might contribute to the CEO’s
evaluation, the largest single contributor for both freestanding and system hospitals was “net operating margin (bottom line).” The next most frequently mentioned factor was
“quality of care,” followed by “patient satisfaction.”
Even though the criteria used to evaluate CEOs in freestanding and system hospitals are similar, there are two
areas where differences are noted. First, net operating margin contributed less to the evaluation of CEOs of freestanding hospitals (with freestanding hospital CEOs estimating
that this factor made up 23 percent of their evaluation)
than system hospital CEOs (26 percent). Second, planning
contributed more to the evaluation of CEOs of freestanding
hospitals (8 percent) than system hospital CEOs (5 percent).
Healthcare Executives: Rationale, Trends, and Samples
(5th ed.). Chicago, IL: Health Administration Press.
Chief Executive Officer Excerpted from the CEO white paper Chief Executive
Employment Contracts and Performance Evaluations,
published by the Foundation of ACHE, winter 2012.
spring 2013
2
ceo q & a
Planning for the Future
Olas A. “Chip”
Hubbs III, FACHE,
became president
and CEO of Memorial
Hospital, Marysville,
Ohio, in March 2004.
Previously, Hubbs
served for four years
as CEO of Community Memorial
Hospital in Hicksville, Ohio.
In addition, Hubbs’ management experience spans various senior management positions at the Lutheran Health
Network in Fort Wayne, Ind., and he has
worked as the evening administrator for
the University of Chicago Hospitals.
A graduate of Indiana University with
a master’s degree in health administration and a bachelor’s degree in public
health, Hubbs earned a fellowship at
the Sinai Health System in Chicago.
After Memorial Hospital’s board completed a self-assessment, board members learned there were opportunities
for improvement, one of which was
organizational and CEO succession planning. They enlisted the help of a succession planning expert, which resulted
in some difficult questions and discussions, but ultimately culminated in a
written succession plan. Hubbs says the
process has made Memorial Hospital
more focused on developing its leaders
and retaining them.
What steps are involved in creating an effective succession plan?
Succession planning can be an uncomfortable process for many people. For
that reason, it is helpful to bring in an unbiased, outside industry expert to
assist with the process. Ours met one-on-one with every member of the board
of trustees, elected medical staff officers, senior leadership team and me. Then,
he brought us together for discussions where we talked about what was important to us, addressed some uncomfortable questions and reached consensus.
That culminated in a written plan that was approved by our board and is now
used as a resource to help grow and mentor leaders within our organization.
What is the CEO’s role in succession planning?
The CEO’s role is to be supportive and not try to control the situation. The
best group outcomes occur when people participate in the process, rather than
have the process “happen to them.” CEOs need to understand that they have
not done their jobs if their organization solely relies upon them for success. We
need to know what is best for our organization, plan for the day when we are
no longer there and put processes in place that allow our leaders to develop the
skills necessary to assume increasingly greater levels of responsibility.
What difference has succession planning made at your organization?
Succession planning has helped change our culture and allowed us to think creatively about what we can do to help our leaders become as diverse and experienced across a broad array of disciplines as possible. Doing so has enabled us
to retain effective, talented leaders because they see that our organization cares
about their growth as well as the organization’s performance and future.
Succession planning is often not a priority for hospitals and health
systems. How must succession planning be brought to the forefront?
Succession planning is something that most people agree needs to be done, but
very few organizations do. At Memorial Hospital, our board completed a board
self-assessment. We learned that the board did a lot of things very well, but had
some opportunities for improvement—one of which was CEO and organizational succession planning. We decided as a group to address our deficiencies and
looked for an expert to help us turn them into strengths. We want to be the best
organization we can be. And to do that, we need to follow best practices.
What advice do you have for CEOs who want to implement or improve
succession planning at their organization?
My advice is to use succession planning as a best practice for board governance and CEO performance. Too often, it is only considered for a pending
retirement. The best run organizations are those that can lose a key leader
and not miss a beat. Organizations that plan successions well will be better
able to recruit and retain top talent and, ultimately, create stronger teams and
corresponding performance. Don’t let ego or fear stand in the way of doing
what is best for your organization.
Chief Executive Officer spring 2013
3
recommended reading
Hospitals and Community Benefit: New Demands, New Approaches
Hospitals have always been dedicated to community health, but
new laws on how hospitals interact
with their communities must now
also be taken into consideration.
This new book provides a concise
overview of the Affordable Care
Act and Internal Revenue Service
requirements for community
involvement with specific recommendations for compliance. Learn
how to build on your hospital’s
existing programs, services and
activities to ensure that your organization is at the forefront of meeting community expectations and
federal legal requirements.
Author Connie J. Evashwick, ScD,
LFACHE, an independent healthcare
consultant, explains the ACA and
IRS requirements for communitybenefit programs, needs assessments
and improvement plans; how to
identify new community partners
and opportunities for win-win community engagement; and how to
develop a sophisticated communications initiative to reach both internal
and external audiences.
consumers. While mergers and acquisitions are often conducted to share
resources and reduce costs, consumers are skeptical. Forty-seven percent
said they believe costs would increase
if their local hospital was acquired
and 56 percent expect quality to
remain stagnant, up from 31 and 22
percent, respectively, in 2011.
www.pwc.com
Hospital Association. More than
4,500 short-term, general medical
and surgical, and nonfederal hospitals were included in the study.
“As the retirement of baby boomers continues, the CEO turnover
rate—which is already too high—
may continue to increase,” says
Thomas C. Dolan, PhD, FACHE,
CAE, president and CEO of ACHE.
“Now more than ever, hospitals
must ensure they have the appropriate succession plans in place to avert
any potentially negative impact of
leadership changes. Hospital boards
and CEOs must work together to
achieve this.” The turnover rate
in 2011 and 2010 was 16 percent,
and the annual rate has fluctuated
Softbound, 88 pp, $50, 2013
ISBN 13: 978-1-56793-592-9
Order code: WWW1-2241
An AUPHA/HAP Book
trend tracker
Behind politics (50 percent),
costs (33 percent) are seen as
the biggest obstacle to making the U.S. health system better, according to a new survey of
1,000 healthcare consumers from
PricewaterhouseCoopers’ Health
Research Institute. Forty percent of
consumers said they postponed care
in the past year because of the high
expense. Consumers shared their
ideas on how to reduce costs: Fifty
percent said payments to physicians
and hospitals should be trimmed
and 42 percent said to lower investment in health information technology. PwC’s researchers say these
numbers illustrate that the push
for value is coming directly from
Chief Executive Officer Hospital CEO turnover increased
slightly in 2012, tracking at 17
percent compared to 16 percent
in 2011, according to a recent
report from the American College
of Healthcare Executives based
on changes in an organization’s
CEO as reported to the American
spring 2013
4
Trend Tracker (continued)
between 14 and 18 percent in the
last decade.
www.ache.org/PUBS/releases/index.cfm
The Affordable Care Act’s reduced
reimbursement rates are slowing, or in some cases preventing,
the planned construction of new
healthcare facilities, according to
an annual survey by Health Facilities
Management and the American
Society for Healthcare Engineering.
Of the 612 hospitals surveyed, most
organizations considering building
new hospitals said they would not
proceed or were reevaluating plans:
Only 17 percent said they would
proceed as planned, and 9 percent
said they would proceed but with
modifications. While new facilities largely have been placed on the
backburner, hospital renovation and
expansion projects have fared better. About two-thirds of respondents
said they would proceed or are likely
to proceed with those combined
projects. The majority of hospitals planning renovations without
expansion or infrastructure upgrades
said they will proceed as planned or
with modifications.
www.hfmmagazine.com
New Seminar
Leadership Approaches
to Patient-Centered Care
Discover practical methods for building
an exceptional patient-centered-care
(PCC) culture in your organization.
This timely, experiential seminar will
introduce the business case for PCC
in the context of the current reform
environment and examine the PCC
impact on patient and employee
satisfaction, value-based purchasing
and clinical outcomes.
• Understand the 10 components of a
PCC model of delivery
Demonstrating a Diverse Culture (continued from page 1)
go far beyond gender, race and ethnicity. ACHE’s Statement on Diversity
also includes national origin, religion,
age, marital status, sexual orientation,
gender identity and disability.
I believe diversity also encompasses
education, skillset, socioeconomic
background, generation and personality. While it is essential to have
a workforce diverse in experiences,
backgrounds and ideas, it is equally
critical for healthcare executives to
focus on the optic of diversity.
For example, if the executive board is
composed solely of Caucasian males,
a diverse applicant may think: “I do
not look like the board. What chance
do I, or others like me, have for a successful career in this organization?” It
is not that the board isn’t competent,
but the homogeneity of the board
may lead to a community perception
that the organization is not committed to servicing all beneficiaries.
In addition a patient may feel uncomfortable having a frank conversation
if the provider is perceived as not
understanding or respecting his or
her culture. When this happens,
patient compliance, patient management and, ultimately, healthcare
outcomes suffer.
Patients who look like their healthcare providers—leaders, physicians
and management staff—will feel
that their healthcare team is like
them and is more inclined to listen, understand and respect them.
Confidence and trust in the healthcare system will result. The optic of
diversity is very important in healthcare because it is truly the only outward sign to the patient population
that the hospital or health system
reflects the community it serves.
Building a Diverse Workforce
CEOs must take deliberate steps
to ensure that their organization’s
workforce is diverse at every level:
from the frontline medical staff to
the board of trustees. While this
is a difficult undertaking for some
hospitals due to a lack of diverse
• Discuss the senior leaders’ role in
PCC implementation
Through simulations, case studies,
interactive exercises and discussions,
seminar leaders Mary-Ellen Piché,
FACHE, consultant for outpatient
clinic services, STG International, and
Jeanette Michalak, RN, vice president,
consultation services, Planetree Inc., will
help you to experience healthcare from
the patient’s perspective.
Dates and Locations:
June 24–25
Cape Cod Cluster
November 4–5
San Antonio Cluster
For more information and to
register, visit ache.org/Education
or call ACHE’s Customer Service
Center at (312) 424-9400.
This program has been approved for 12
ACHE Face-to-Face Education credits.
(continued on page 7)
spring 2013
• Identify the competencies, skills and
tools needed to effect this cultural
change
5
Why do CEOs like you
work so hard?
Because you care that much.
Share your passion
Encourage your management
team to join ACHE.
Together, we can foster a culture of
healthcare leaders who care as much
as you do. We have the resources to
help your team excel in healthcare
management. Your team can also
begin to earn the distinction of
being board certified in healthcare
management as an ACHE Fellow.
Limited-Time Board of
Governors Exam Fee Waiver
When your staff joins and submits a completed FACHE® application and $250 fee by
June 30, we’ll waive the $200 fee for
the Board of Governors Examination.
Start sharing your passion today.
Send your team ACHE membership
information using the Tell a Colleague
feature on the home page of ache.org.
Questions?
Contact us at (312) 424-9400,
[email protected] or via Live Chat.
The Future of Hospitals in America (continued from page 1)
integrated into a health system has
increased, with 2,941 now part of
a larger system in 2011, up from
2,524 in 1999 when numbers were
first tracked.
Physician Integration
More effective healthcare delivery will require a team approach
to care. No one practitioner or
provider can deliver everything a
patient requires. As such, hospitalphysician relationships will continue
to strengthen. We have to partner
and coordinate our efforts; patients
won’t tolerate our inability to communicate. The opportunity for more
physician integration will exist
because younger physicians want
to practice medicine in a way that
improves care and doesn’t require
more activities to generate revenue.
In another generation or two, those
who are in a private practice model
will be in the minority. In addition,
physicians will play a larger role in
the strategic direction of the organization, as more integrated organizations have clinicians serving in top
leadership roles.
Better Community Coordination
We are quickly realizing the importance of the relationship between
the medical and population health
models. To keep people well and
think about being responsible for
their health, a strong population
health component that focuses on
total community health is needed.
The formal structure, public health,
is the farthest upstream component
in the community continuum and
the one that deals directly with the
population at large. That isn’t something hospitals have had to bridge or
partner with in the past, but a medical/population health combination
is becoming more important.
In addition, we are seeing integration picking up significantly
between hospitals and payors as
organizations try to become better
positioned and more adept at
caring for covered populations
Hospitals are moving
away from the
idea of just being a
physical structure
to identifying
themselves as more of
a community outreach
network that thinks
about care upstream
before people need to
be hospitalized and
downstream after
they are transitioned
to another part of the
continuum.
and taking some sort of fixed
payment. Accountable care organizations of all shapes and sizes have
sprung up, and some variation of
these models is what experts expect
the delivery system will move to
over time. Many hospitals are considering starting (or even restarting)
insurance components or partnering with insurers because providers
realize they need insurers to manage actuarial and financial risk and
because insurers realize they need
providers in order to manage care.
(continued on page 8)
spring 2013
6
Demonstrating a Diverse Culture (continued from page 5)
employee candidates, don’t let this
obstacle stop you.
A 2011 Witt/Kieffer national survey of 464 healthcare leaders found
that for Caucasian respondents, the
No. 1 barrier to success in achieving their diversity goals was a lack
of access to diverse candidates. For
minority respondents, the No. 1
barrier was a lack of commitment
by top management. Both of these
barriers can be addressed and conquered with strategic action by top
management.
If the pool of qualified candidates
is not big enough to match the
demographics of the patient population, then a strategic action plan
should be developed to expand that
pool. Healthcare executives should
develop incentives to attract, train
and retain a diverse workforce that
reflects the patient population, as
well as use assessments and metrics
to measure progress.
Expanding the pool of qualified
candidates may include creating outreach programs for schools of higher
education, technical and vocational
schools, high schools and even middle and grade schools.
Also, consider offering opportunities
for students to learn about healthcare careers through school visits,
volunteerism, internships and fellowships. It is vital to start with children, usually the younger the better.
Once children reach high school, it
becomes harder to open their minds
to careers in healthcare.
Retaining a Diverse Workforce
Once the organization has hired
more diverse candidates and the
Chief Executive Officer workforce makeup begins to more
closely match the patient population, the second phase of the strategic
action plan can be implemented:
efforts to retain those employees.
Healthcare executives
should develop incentives
to attract, train
and retain a diverse
workforce that reflects
the patient population,
as well as use assessments
and metrics to measure
progress.
There should be programs to identify diverse, talented, hardworking
employees within the organization,
nurture their professional development and consider them for promotions when opportunities arise.
Mentorships are also an effective
and often underused tool. Senior
executives can be paired with
recent hires to help them interpret
work situations and give seasoned
career advice.
There also must be a focus on creating a culture of diversity, which
can take years to achieve and
absolutely requires top management commitment. Everyone in
the organization should be trained
to develop cultural competencies
to improve interactions within the
institution and with patients. It is
important to not only respect but
to embrace differences.
spring 2013
Self-assessments are another method
for employees to use in understanding their own differences. Because
people are born with different personalities, it becomes important for
them to know their natural talents
and preferences. This enables them
to better detect and appreciate others’ differences and learn to work
with them. Leveraging differences
in the workforce is a powerful way
leadership can build highly effective
teams to get the mission done.
Once these diversity initiatives
begin to catch on, top management
will begin to see a chain reaction
that improves the quality of care.
Diversity in the workforce and an
institutionwide appreciation for
diversity will enhance relationships
of trust between patient and provider and among staff.
Trust that results in better partnerships and improvement in perceived
and real quality of health outcomes
enables the organization to more
effectively promote and deliver
healthcare.
The healthcare field has recognized
the importance of diversity and has
been proactive in shaping a diverse
workforce. With a continued focus
on diversity and strategic action by
healthcare leaders, one day we will
have an industry workforce that
mirrors the population it serves.
RDML Eleanor V. Valentin,
SHCE, USN, FACHE, is director,
Military Health System Governance
Implementation Planning Executive
Secretariat in the Office of the
Assistant Secretary of Defense for
Health Affairs. She can be reached at
[email protected].
7
The Future of Hospitals in America (continued from page 6)
More at Risk
The ability to manage some level of
financial risk will be a significant
component of future success. Some
of the payment penalty programs,
such as those for hospital associated conditions or for preventable
readmissions, put hospitals at risk
to be sure that we get care right the
first time. But managing risk isn’t
just a revenue preservation strategy.
Revenue at some point and in some
way is likely to be fixed, so risk
management will become a cost and
quality strategy in which hospitals
aren’t trying to do more with less
but are actually trying to do the
most appropriate and least expensive intervention while getting the
best results. That is a very different
mindset for healthcare leaders than
we’ve ever had before.
Bundled payments per episode,
across the post-acute sector or
between hospitals and physicians,
are likely to emerge. We must
determine how to get the best
results while living on that fixed
amount. The ultimate population
risk is capitation, where you get
a fixed amount per member per
month, spread risk over a high volume of patients and manage that
population’s health and utilization
within the total sum. I don’t think
we are close to seeing the entire
payment system go there, but many
hospitals are committed to forging
ahead into this realm.
To keep people well
and think about
being responsible for
their health, a strong
population health
component that focuses
on total community
health is needed.
Hospitals will need to think about
how to identify and connect with
large populations and how to position their integrated systems such
that the public sees benefit in joining
a coordinated system. Capitation is
the essence of the traditional pre-paid
group practice HMO and today’s
Medicare Advantage program.
Questions to consider are at what
point will our world move beyond a
primarily fee-for-service system into a
more fixed-rate structure? And when
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© 2013
members who are chief executive officers or
Editor
the equivalent.
will we move beyond a fixed rate per
item to a fixed rate per person, per
month or per year?
More Accountable
The push for transparency and
reporting of outcomes, continuous
improvement and patient satisfaction and safety will increase and
result in hospitals offering simplified
and meaningful data that patients
can use to make decisions on where
to get care. Thus far, the U.S. is a
bit away from a fully informed and
engaged consumer; providers, payors
and consumers don’t yet know or
agree on what those measures are or
how to display them so that patients
can clearly understand and use them
most effectively. The health system
clearly is being pushed in that direction, though.
In addition, organizations need to
address disparities in care and show
their communities the efforts being
undertaken. Gathering and using
standardized patient demographic
and language preference information at admission will help hospitals analyze and determine where
opportunities lie to strengthen care
for patients of all ethnicities, races
and other diversity characteristics.
It’s in the patient’s best interest
for hospitals to explain why this
information is being requested and
how it will be used. Once the community sees that health outcomes
improve when equity of care is
addressed, we can end disparities
in care and outcomes and improve
quality and costs for all.
John M. Buell
Designer
To learn more about the benefits of becoming
Carla Nessa
a CEO Circle member or to subscribe to Chief
American College of Healthcare Executives
Spring 2013: Volume 18, Issue 2
ask for a CEO Circle representative, or visit
Executive Officer, call (312) 424-2800 and
Chief Executive Officer ache.org/CEOCircle for more information.
spring 2013
Richard J. Umbdenstock, FACHE, is
president and CEO of the American
Hospital Association, Washington, D.C.
He can be reached at [email protected].
8