NRHA Policy Paper: Rural Hospital CEO Turnover

Mellie Bridewell and Matt Shahan

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I. Introduction

Rural hospital closures across the United States have become a growing public

concern. The 2016 iVantage “Rural Relevance – Vulnerability Value” study

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effect that leads to a lack of capital, which reduces investment in new infrastructure and

results in lowered standards of care or hospital closures. Growing behind the crisis of

health care provider and nursing shortages is the shortage of qualified leaders to

oversee their operations.

Executive leadership is critical to the success of any organization — particularly for

hospitals and health systems facing new regulatory and financial challenges. The need

for strong and steady leadership has never been greater, yet turnover rates for top

executives in America’s hospitals are high. CEO turnover rates average 18 to 20

“Leadership is the single highest predictor of rural hospital success, and today’s CEOs

in many of these communities are leaving their positions too often,” says NRHA CEO

Alan Morgan. “With CEO turnover rates exceeding 20 percent in many communities,

this means that one in five CEOs are leaving their positions regularly.”

Morgan adds that along with other pressures inherent in today’s changing health care

environment, these same hospitals can be at further risk of closing. Compounding the

issue is the ever-changing health care delivery models that make it hard for small rural

hospitals to properly maintain qualified staff who can navigate all the variables required

hospitals, and requiring continuing education is often a reason to not join or maintain

memberships on rural boards. Other factors that may be relevant to a rural hospital

CEO’s strained relationships with the hospital’s board include cultural misalignment,

burnout, and non-competitive compensation.

Factors associated with turnover in this position nationally include organizational

restructuring, movement of CEOs to different positions within health systems, and CEO

retirements.

movement of CEOs to different positions within health systems, and the fact that many

CEOs are reaching retirement age all contribute to this high level of turnover in hospital

CEO positions. Succession planning for C-suite positions, along with a focus on

developing the next generation of leaders, is key to organizational success.”

Succession planning in rural areas is made even more difficult by the size of the

organization. Rural facilities require their employees to “wear multiple hats”, sometimes

even the CEO. Attempts of succession planning to train a replacement are limited by

workforce numbers. As rural hospitals move towards requiring a master’s degree or 7 to

the survey findings uncovered the following causes:

• Challenges with helping board members understand their roles. The Bureau of

Labor and Statistics defines a chief executive officer (CEO) as a professional

hospital. The board is responsible for oversight of the hospital but should not be

involved in the day-to-day operations.

According to the Yaffee study, many rural hospital CEOs have difficulties working

with their board of directors because 1) the board does not understand their role

and tries to get too involved in the day-to-day operations of the hospital, 2) board

members do not understand the challenges rural hospitals are facing, and/or 3)

board members are not educated about rural health challenges.

Boards that

become too involved in operations run the risk of creating a relationship of

distrust with their administrative team. Boards need to maintain confidence in

their appointed leaders so they can focus on strategy and policy rather than

operations. Often board members are appointed by local elected entities without

proper training and onboarding. These issues result in the board of directors

blaming the hospital CEO for the financial situation of the hospital, often resulting

in the firing of the hospital CEO.

Affordable Care Act (ACA) mandated annual payment cuts that have totaled 8.95

percent, including CAHs, which saw a reduction in payment from 101 percent to

99 percent of allowable costs.

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Hospitals in states that did not expand Medicaid

under the ACA are seeing negative impacts with higher uncompensated care,

resulting in a higher number of hospital closures in those states.

Often a board will look at financial performance as the sole responsibility of the

CEO, while there are many factors outside the control of the CEO, administrative

team, or physicians. Reimbursement changes are often brought forth by state

and federal entities without proper input by those who will be impacted directly.

From value-based payment to other alternative payment models, hospitals are

● Inability to maintain competitive compensation for rural hospital CEOs. Hospital

administrators are a vital part of the health care industry and will always be

needed. Hospital CEOs in highly populous cities tend to receive greater pay than

those in rural areas, as larger hospitals can afford to pay higher salaries. While a

larger hospital may have several levels of administrative positions to support a

hospital administrator, a rural health care administrator often must be a jack of all

trades and be proficient in all aspects of health care administration. This results

in more work for less pay, making it hard to compete with urban counterparts.

● Difficult relationships between the CEO and the board. As mentioned earlier,

often the hospital CEO can have problems with their board of directors.

Sometimes it might be an issue with just one or two individuals, but one bad

relationship can result in intolerable circumstances for the CEO, causing them to

● Geography and lack of community resources. Rural communities lack the same

resources as urban areas, such as quality shopping, healthy food options, quality

education, a variety of community and athletic activities, peer support, etc. While

many people who are not from a rural community think living small-town life

might be a “change of pace,” often folks cannot adjust and feel the need to return

to an urban area. Sometimes it can simply be a lack of familiarity with “the way

we do things here” that can be a barrier for the CEO.

● Opportunity for professional growth and development. As a CEO of a rural

III. Outcomes

Rural hospitals have limited infrastructure, resources, and leadership compared to

urban hospitals. Therefore, losing a rural hospital CEO can have a negative effect on

the entire operation of a hospital. If there is a shakeup at the leadership level, the

community questions the viability of the hospital. Personal experiences from rural

hospital CEOs include:

● Recruitment time is lengthy and expensive. Losing a hospital administrator can

one rural hospital CEO, “We just hired a CNO at the cost of $50,000 for a firm to

recruit for because of the lack of qualified candidates in the state of North

Dakota. To recruit a CEO would be higher. Our CNO position was open for

almost a year while we were paying locum wages for an interim CNO.”

● Community partnerships and alliances can change. It is very common for a

leader to bring on his/her own team when hired. Sometimes this is immediate

and sometimes it happens over time. When this leader is removed or leaves

there is always uncertainty about what will happen next, who will remain, and

or not doing well. Administrators are rarely asked to leave if the hospital they are

According to a study performed by Yaffee & Company, most hospitals do not go through

and maintain a formal and documented succession planning process. The departure of

a rural hospital CEO can cause cost cutting, service closures, and staff reductions,

which are common after a CEO’s departure.

CEO turnover has affected growth and

development activities, such as construction projects, the purchase of new equipment,

and strategic planning. Often competing hospitals have used CEO turnover to increase

their own market shares by enhancing marketing, opening new clinics, and attracting

key employees and physicians from the target hospital.

IV. Solutions/Recommendations

Rural hospitals can implement procedures and processes that can help with preventing

future CEO turnover. Potential solutions and recommendations for rural hospital board

of directors include:

upon being appointed and/or on an ongoing basis.

● Improve the vetting process. Create a CEO and board member profile that

hospital board should know what kind of leader they need and what qualities they

are looking for before starting a search. By knowing and recognizing the specific

gaps and needs of the hospital and board, search committees would be better

informed of what kind of leader/board member they need to hire/appoint.

● Set clear expectations. In many cases, CEOs are looking for compensation, clear

expectations, and opportunities to grow the organization. “Provide a quality

annual performance review and touchpoints throughout the year,” suggests says

Larry Unroe, Rural/Critical Access Practice Lead for Yaffe & Company and

party data and consultations are necessary to provide a buffer between the board

from the beginning.

continuing opportunities for growth and education. Much like physicians need

continuing education to stay on top of new and emerging methods of care, CEOs

need time with their peers to discuss what others have found successful and

what pitfalls they might encounter within their own organization. Boards should

encourage CEO participation in community boards and organizations, as well as

state hospital associations, regional health-related boards, and national

organizations such as the American College of Healthcare Executives, the

Medical Group Management Association, and the National Rural Health

Association.

● Review the compensation process. The board should have a formal

compensation committee to ensure compensation is tied into a performance

evaluation processes so the CEO knows what’s expected. “Whether it’s variable

pay or merit pay, it’s important to tie that into performance as a way to measure

progress and success,” Unroe says.

and who served for 15 years as CEO of not-for-profit hospitals and health

difficult as the pool of potential leaders is shrinking. Finding individuals willing to

take on the stresses and potential risk of such a high-profile position is difficult at

face value. Finding an individual who is also willing to live in a rural and

potentially remote location makes the search even harder. Growing leaders from

within an organization can be promising, but rural areas often run into issues with

nepotism that can erode the corporate culture and confidence in leadership.

● Utilize third-party data sources. Remove any potential for either side to lose faith

in the other when it comes to metrics or compensation. Bringing in a third party

each other.

thinking, nor will they be willing to make decisions necessary to move the

● Encourage mentorship. CEOs don’t receive any outside advice on their

leadership skills and might be receptive to suggestions from a coach or mentor to

improve their leadership and overcome challenges. Rural CEO can equip

themselves with a mentor for support and prevention of turnover and burnout.

Outside resources (state hospital associations, American Hospital Association,

National Rural Health Association) can prevent rural hospital CEO burnout and

provide support through mentors and roundtables with other rural CEOs.

● Provide board training. While this may be viewed as an unnecessary expense or

something an organization cannot afford in a given year, refusal to have an

educated board that understands the CEO’s struggle will only lead to increased

friction. Just as the CEO needs to be equipped with the tools to do their job, it is

also essential that the board is equipped with the tools and knowledge to perform

their duty in the limited time commitment they are tasked with.

● Providing board education opportunities

● Providing hospital CEO education opportunities

● Facilitating a mentoring program

● Facilitating rural hospital CEO and board roundtables

While there is currently not a lot of information on this topic, it is obvious there is a need

to address the problem of rural hospital CEO turnover. Several recommendations and

potential policies and initiatives to alleviate this issue could include: