The gig economy is back — even for execs

Contract or “temp” employment used to be viewed as a means of supplemental income: a side hustle to an average day job, or a way to pay the bills while searching for full-time work. Now, gig work is back in style, and more workers want in on the flexibility — including C-suite executives, Korn Ferry recently reported.

The gig economy surged when older millennials, born in the 1980s, began rejecting the one-firm careers their parents had, according to Korn Ferry. Although they are currently midcareer, older millennials have switched jobs 7.8 times on average. Baby boomers are also using temporary work to keep busy during retirement, and Generation Z appreciates the flexibility that comes with contract labor. 

As temporary work grows in popularity, its influence is spreading to the C-suite. Interim executives are becoming more likely to be tapped when a leader departs, Korn Ferry reported. This gives organizations like health systems, which urgently need leadership in a rapidly changing industry, more time to conduct their searches for full-time replacements. 

Sixty percent of executives predict that the number of interim workers at their companies will “substantially increase” within the next three years, Korn Ferry reported. In a period of economic instability, temporary labor can mean less commitment and cost than a permanent worker. But there are downsides to contract labor, too. Since they lack benefits, many contract workers demand higher pay — which can trickle down and lead their permanent counterparts to ask for matched salaries. In the healthcare industry, this is visible in travel nurses’ paychecks, and their controversial effects on health systems’ finances. 

For better or for worse, contract labor does not appear to be dying out anytime soon. Fifty-eight million U.S. workers now consider themselves “independent,” Korn Ferry reported — an estimated 36 percent of the total workforce. 

Duke Health credit rating downgraded amid integration and macro concerns

Durham, N.C.-based Duke University Health System was downgraded to an “AA-” credit rating amid concern over its planned integration of the Private Diagnostic Clinic, a for-profit medical group with over 1,800 physicians, Fitch Ratings said Dec. 8.

The rating, declining from “AA,” applies both to specific bonds the group holds and to its overall Issuer Default Rating. In addition to the integration of the PDC, Fitch also cited concern over macro issues such as labor and inflationary pressures, which have helped to drag down operating results for the health group.

“While the transition of the PDC into the Duke Health Integrated Practice will only be effective in July 2023, the uncertainty of the proposed change had already caused some disruption to PDC’s ability to recruit physicians and may have had a negative impact on volumes,” Fitch said.

But while such integration will likely lead to an “extended period of lower operating results,” Duke Health is expected to gradually return to much stronger performance given its robust fundamentals, the ratings group added. Historically, the hospital system had pre-pandemic operating EBITDA margins of over 10 percent, compared with a fiscal year 2022 figure of just 2.1 percent.

The health system, which reported $4.5 billion of total operating revenues in 2022, said its CEO, A. Eugene Washington, MD, will step down in June 2023.

MetroHealth fires CEO over more than $1.9M in unreported bonuses

The board of trustees at Cleveland-based MetroHealth System has fired President and CEO Akram Boutros, MD.

Dr. Boutros was fired Nov. 21 after the board received findings of a probe into compensation issues involving more than $1.9 million in supplemental bonuses, Vanessa Whiting, chair of the board, said in a statement posted on the health system’s website. The probe found that between 2018 and 2022, Dr. Boutros authorized the compensation for himself, without disclosure to the board.

“We have taken these actions mindfully and deliberately but with sadness and disappointment,” Ms. Whiting said. “We all recognize the wonderful things Dr. Boutros has done for our hospital and for the community. However, we know of no organization permitting its CEO to self-evaluate and determine their entitlement to an additional bonus and at what amount, as Dr. Boutros has done.”

Dr. Boutros took the helm of MetroHealth in 2013. Last year, Dr. Boutros announced his plans to retire at the end of 2022. In September, MetroHealth named Airica Steed, EdD, RN, its next president and CEO. Dr. Steed, who is executive vice president and system COO of Sinai Chicago Health System, will take the helm of MetroHealth Dec. 5, according to Ms. Whiting’s statement. Meanwhile, Nabil Chehade, MD, executive vice president and chief clinical transformation officer at MetroHealth, will assume the CEO’s duties on an interim basis.

Ms. Whiting said MetroHealth discovered the compensation issues related to Dr. Boutros while preparing for the CEO transition, and an internal investigation took place, led by the Tucker Ellis law firm.

She said Dr. Boutros admitted to conducting self-assessments of his performance under specific metrics he established and authorizing payment to himself of more than $1.9 million in supplemental bonuses between 2018 and 2022.

According to Ms. Whiting, Dr. Boutros repaid more than $2.1 million in October, representing the supplemental bonus money paid without board approval for performance in calendar years 2017 through 2021, plus more than $124,000 in interest.

She said the board has also implemented immediate CEO spending and hiring limitations through Dec. 31, 2022, and Dr. Boutros has self-reported to the Ohio Ethics Commission.

MetroHealth’s internal investigation is ongoing.

Among Dr. Boutros’ accomplishments at MetroHealth were helping annual revenue increase from $785 million to more than $1.5 billion; growing the health system’s workforce from 6,200 to nearly 8,000 while seeing employee minimum wage increase to $15 per hour; and developing Ohio’s only Ebola treatment center.

Companies mull benefits of interim CFOs

Interim CFOs can cut through politics to help navigate companies through murky waters, experts say.

As they face financial difficulties, leadership crises or other inter-company developments, many firms have ceded their financial reins to interim executives over recent months.

Retailer Bed, Bath & Beyond quickly named their chief accounting officer as interim CFO following the death of their previous financial head earlier in September, for example, while real estate investment trust (REIT) Tanger’s chief accounting officer also recently served a stint as their interim financial head after the REIT ousted their previous CFO, a 28-year company veteran.

One of the reasons to tap an interim CFO is simply to provide peace of mind for the company and its shareholders while the search to find a more permanent candidate is ongoing, said Shawn Cole, president of boutique executive search firm Cowen Partners in a recent interview.

While some searches are as short as 38 days, the majority of executive searches can take between four to six months, a period where remaining without financial leadership is untenable. Firms seeking interims must still consider several key factors when choosing such an executive, however, Cole said.

Companies seeking external candidates, for example — which can be due to inter-company turmoil or, as is often the case, because the company may lack the bench strength to pull forward an internal candidate, Cole noted — should take care to consider “professional interims” for the position as opposed to an unattached CFO, he advised.

“I would just be very cautious that you are not just hiring an unemployed CFO,” Cole said. “There’s plenty of wonderful professional interim CFOs out there that are excellent at consulting. You don’t necessarily want to get yourself into a position where you are engaging just an unemployed CFO, that needs a job.”

Getting a fresh perspective

Bringing in an external interim can also grant companies benefits they may not see with internal candidates, for that matter, explained Mike Harris, CEO of Patina Solutions. Patina, which focuses primarily on placing interim executvies, was acquired by fellow executive search company Korn Ferry this past April.

It can help other executives, notably the CEO, to get “fresh perspectives and viewpoints,” he said.

“If someone is coming in for six months they can tell it like it is, they can come in and make a quick assessment,” he said. “Candidly, it does take out the politics if you’re in there on a limited basis.”

Similar to Cole, Harris pointed to a growing population of what Harris terms as “career interims,” who are working in that capacity because they enjoy the flexibility of movement — they get to go in and get critical projects done for the company, he said.

Turning to an external interim can also help companies execute on particular goals such as a restructuring, said Harris, nothing that what companies need from someone taking on the position for six months could be “very different” than what firms may be looking for out of a permanent CFO. Their short tenure means interims can be “very objective” and have a “big impact” at a company in a short period of time, he said.

“The reason [interims are] usually coming in there is because they have something in their background that’s going to be very helpful for the situation that company is facing,” he said.

Companies may also take advantage of an interim CFOs’ skills as a sort of mentorship for their existing CFO — the executive in the permanent seat may lack M&A or other key experience, for example, that an interim may be able to provide during their short-term tenure.

Tapping insider knowledge

Pulling forward internal candidates to fill the CFO gap can also have benefits for firms if possible, as such candidates have intimate knowledge of the companies’ status and needs that outside executives may lack.  

This may be the case for struggling payment processor PayPal, another example of a firm who recently appointed an interim CFO — moving Gabrielle Rabinovitch, their SVP of capital markets into the seat for a second time after the newly-minted CFO departed for medical leave.

In PayPal’s case, the company needs “stability” in its financial chair, which has been lacking since the departure of its previous CFO John Rainey to retailer Walmart, said Josh Crist, managing director for Crist|Kolder Associates.

“It may be time to think about a young internal player as an interim,” Crist wrote in an email regarding PayPal’s CFO woes. “Institutional knowledge should be key given strategic issues the company faces.”

Such a candidate may prove to be a permanent fit at the company, for that matter, he said.

“I believe the current interim might actually be correct for the full time gig! I believe they need an internal player who has seen the nuts and bolts/knows the operating and strategic plan and can help execute,” Crist wrote in an email. “I don’t believe they need a high-level strategist.”

The future of the CFO seat

While companies must carefully consider what it is they are seeking out of an interim — or even a permanent — CFO candidate, qualified executives also have their pick of potential options as the market for executive talent grows more competitive.

CFOs who would have potentially retired or left their current roles years earlier, but were stymied by the pandemic, have now begun to do so, contributing to a narrowing of the potential talent pool. For that matter, the list of responsibilities handed to modern CFOs has grown over recent years, but companies may not have fully adjusted their leadership structure accordingly, Cole said.   

“The CFO is no longer the chief accounting officer,” Cole said. “They really effectively should be the right hand to the CEO. While many companies have increased demands of the CFO, they haven’t necessarily brought the CFO into that light. And so I think companies that can show a CFO candidate that they will have a position of significance of their organization, be that strategic business partner to the CEO, I think that goes a long way.”

The wave of CEO retirements is upon us

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 In just the first half of this year, more than 60 hospital CEOs have retired or left their roles, according to search firm Challenger, Gray and Christmas. Retirements are up 48 percent from the same time last year. Part of this is generational, as many Baby Boomer leaders are at retirement age, but the latest wave comes after many delayed planned exits during the pandemic to guide their organizations through the crisis. 2

Now, after two-plus grueling years of leading through COVID, executives are ready to pass the baton. The latest high-profile announcement came this week, with Salt Lake City-based Intermountain Healthcare’s CEO Marc Harrison announcing his plans to leave the system for a role at venture firm General Catalyst. 

The Gist: As a recent piece from Modern Healthcare points out, many systems have known their CEOs were exiting well in advance, but the significant cultural and financial consequences associated with choosing a new leader, especially during a period of industry-wide change, are presenting boards with hiring decisions as difficult as they are important.

Astute organizations have been planning ahead for these transitions, developing a bench of next-generation leaders, and providing them exposure to the board. COVID also served as a helpful stress test to identify talent who rose to the occasion to lead confidently and calmly through the crisis, while simultaneously weeding others out who floundered under uncertainty. 

The next generation of leaders will need different skills to navigate current and future challenges, including rethinking the role of the health system in response to a new class of disruptors, and managing through a workforce crisis that will require evolving the labor model while meeting new demands for workforce diversity and engagement.   

Will choosing a “white coat CEO” advance physician alignment?

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Physician Advocates Docs Ditch The White Coat - Too Germy | WUKY

We recently got a call from a health system board chair seeking our perspective on the system’s ongoing search for a new CEO. At the top of his list: trying to understand how important it will be for the next CEO to be a physician. “We’ve never had a doctor in the role,” he mused. “But now we employ hundreds of doctors. And you’d have to imagine that having a physician as CEO would help with physician alignment.” 

While choosing a physician CEO brings great signal value to the medical staff, we cautioned that it’s far from a panacea. 

Of course, there are advantages in having walked in a frontline clinician’s shoes, being able to personally identify with their challenges and speak their language. But over the years, working with hundreds of health system CEOs, we’ve found that the most important characteristic of a CEO who will advance physician strategy is the desire to form strong personal relationships with doctors and draw on their counsel.

Does the CEO build a “kitchen cabinet” of physician leaders whom he can consult? Are physicians viewed as something to be managed, a problem to solve, or seen as true partners in strategy? Even more simply, does she like spending time with physicians, or groan every time a meeting with doctors pops up on the calendar? We’ve seen many non-physician CEOs excel at building strong, strategic ties with doctors, and some physician executives, who become jaded by never-ending physician alignment struggles, fail to advance partnerships with their colleagues.

One retiring physician CEO, reflecting on his replacement by a nonclinical executive, summed it up well: “I have a feeling he’ll do well with our doctors. He counts several physicians among his closest friends, which is a great sign.”

Kansas Heart Hospital accuses former CFO, COO of stealing funds

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The Kansas Heart Hospital in Wichita filed a lawsuit against two former executives, claiming they stole money from the facility and improperly used CARES Act funds, according to ABC affiliate KAKE and court documents.  

The lawsuit, filed April 29 in the U.S. District Court in Kansas, accuses the hospital’s former COO Joyce Heismeyer and former CFO Steve Smith of stealing funds between 2015 and 2020. During that time, Kansas Heart Hospital lost more than $31 million, according to the lawsuit.

Ms. Heismeyer and Mr. Smith abruptly stepped down from their roles in fall 2020. The hospital claims the former executives set up large severance payments for themselves before their departures, which prompted an internal investigation.

In its complaint, Kansas Heart Hospital alleges that Ms. Heismeyer and Mr. Smith conspired with the hospital’s former president, Gregory Duick, MD, to divert more than $6 million in hospital funds for undisclosed bonuses and benefits during the five-year period. Additionally, the hospital claims all three sent millions in hospital dollars to an investment account that Dr. Duick owned. 

Kansas Heart Hospital also claims the three caused it to lose out on $4.4 million in CARES Act payments. The funds were returned to avoid a federal audit, the lawsuit alleges, but the former executives said the funds were returned because the hospital hadn’t treated any COVID-19 patients.

Dr. Duick also retired from his role in fall 2020. He is named in the lawsuit but is not a defendant, and did not immediately return KAKE‘s request for comment.

In a statement to KAKE, an attorney for Ms. Heismeyer and Mr. Smith said, “Joyce and Steve vehemently deny the allegations and will aggressively defend themselves and expect to clear their names in court.” Additionally, the statement said, “We are disappointed by the Kansas Heart Hospital’s plan to sue and tarnish the reputations of two long time employees.”