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Successfully transitioning to new leadership roles
Leadership changes are more common and important than ever. But most companies don’t get it right.
Every leadership transition creates uncertainty. Will the new leader uncover and seize opportunities and assemble the right team? Will the changes be sustainable? Will a worthy successor be developed? These questions boil down to one: Will the leader be successful?
Why are leadership transitions important?
Hardly anything that happens at a company is more important than a high-level executive transition. By the nature of the role, a new senior leader’s action or inaction will significantly influence the course of the business, for better or for worse. Yet in spite of these high stakes, leaders are typically underprepared for—and undersupported during—the transition to new roles.
The consequences are huge
Executive transitions are typically high-stakes, high-tension events: when asked to rank life’s challenges in order of difficulty, the top one is “making a transition at work”—ahead of bereavement, divorce, and health issues.2 If the transition succeeds, the leader’s company will probably be successful; nine out of ten teams whose leader had a successful transition go on to meet their three-year performance goals (Exhibit 1). Moreover, the attrition risk for such teams is 13 percent lower, their level of discretionary effort is 2 percent higher, and they generate 5 percent more revenue and profit than average. But when leaders struggle through a transition, the performance of their direct reports is 15 percent lower than it would be with high-performing leaders. The direct reports are also 20 percent more likely to be disengaged or to leave the organization.
Successful or not, transitions have direct expenses—typically, for advertising, searches, relocation, sign-on bonuses, referral awards, and the overhead of HR professionals and other leaders involved in the process. For senior-executive roles, these outlays have been estimated at 213 percent of the annual salary.4Yet perhaps the most significant cost is losing six, 12, or 18 months while the competition races ahead.
Nearly half of leadership transitions fail
Studies show that two years after executive transitions, anywhere between 27 and 46 percent of them are regarded as failures or disappointments.5Leaders rank organizational politics as the main challenge: 68 percent of transitions founder on issues related to politics, culture, and people, and 67 percent of leaders wish they had moved faster to change the culture. These matters aren’t problems only for leaders who come in from the outside: 79 percent of external and 69 percent of internal hires report that implementing culture change is difficult. Bear in mind that these are senior leaders who demonstrated success and showed intelligence, initiative, and results in their previous roles. It would seem that Marshall Goldsmith’s advice—“What got you here won’t get you there”6—is fully applicable to executive transitions.
Leadership transitions are more frequent, yet new leaders get little help
The pace and magnitude of change are constantly rising in the business world, so it is no surprise that senior-executive transitions are increasingly common: CEO turnover rates have shot up from 11.6 percent in 2010 to 16.6 percent in 2015.7Since 69 percent of new CEOs reshuffle their management teams within the first two years, transitions then cascade through the senior ranks. Sixty-seven percent of leaders report that their organizations now experience “some or many more” transitions than they did in the previous year.
Viewpoint: Small hospitals should be hopeful and wary of national health systems
With Cleveland Clinic eyeing acquisitions at two locations on Florida’s Treasure Coast — Indian River Medical Center in Vero Beach and Martin Health System in Stuart — residents and hospital workers should be wary but hopeful, according to the local TC Palm.
That a national power in the healthcare industry wants to snap up two independent nonprofit hospitals in Florida is no surprise. The area’s patient population has the trifecta of demographics: aging, wealthy and insured, TC Palm‘s Gil Smart wrote. In an era of increasing expenses, declining reimbursements and growing powers, finding a partner system can give small hospitals more weight in negotiations and help fund capital for investments in growth and change.
Yet as examples have shown, allowing bigger players to come into local markets means change, and not all of it is good, Mr. Smart noted. Unions will have it tougher at the negotiation table and control will change hands.
“Bottom line: There will be a loss of local control. There always is, where the bigger, faraway healthcare system gulps down the local guy,” Mr. Smart wrote. “Yet we shouldn’t let the drawbacks overshadow the potential benefits of having a globally renowned healthcare ‘brand’ set up shop in our backyards.”
The benefits, such as easier, better and more coordinated care, are a lot to be hopeful for. Read the full column here.
Ascension’s latest ad campaign touts online scheduling
St. Louis-based Ascension rolled out a national ad campaign June 4 across television, radio, billboards and direct mail to promote its online scheduling capabilities, which are available in all 22 Ascension markets.
The campaign is aimed at raising brand awareness and communicating patient scheduling options, even for last-minute or same-day appointments.
“Most of us use technology daily to simplify our lives, and the process of getting the care we need, when and where we need it, should be no different. Online scheduling allows consumers to view available appointments at their preferred location and select a time that fits their busy schedules,” Joseph Cacchione, MD, president of Ascension Medical Group, said in a press release. “As we work to improve access to compassionate, personalized care, we must also ensure we are letting consumers know about the new and innovative ways in which we are making the healthcare delivery process easier for them.”
Ascension currently offers online scheduling across 1,200 providers in primary care, urgent care and emergency department care. It has plans to add online scheduling capabilities for specialists and diagnostic and imaging services in the future.
‘No profit, no mission’ — Why this CEO believes every healthcare leader needs a strong understanding of finance
In this special Speaker Series, Becker’s Healthcare caught up with Mark R. Anderson, CEO of AC Group, a healthcare technology and advisory research firm based in Montgomery, Texas.
Mr. Anderson will speak on a panel at Becker’s Hospital Review 7th Annual CEO + CFO Roundtable titled “The CEO paradox: Can you really have volume and value?” at 12:00 p.m. on Monday, Nov. 12. Learn more about the event and register to attend in Chicago.
Question: What keeps you excited and motivated to come to work each day?
Mark Anderson: The knowledge that we are finally moving away from fee-for-service billing to value-based reimbursement. For example, at AC Group, we have been able to cut medical costs for diabetic patients by 38 percent just by tracking blood sugar levels at home. Pay for results — don’t pay for just seeing the patient.
Q: What major challenges, financial or otherwise, are affecting hospitals in the markets you serve? How is your hospital responding?
MA: With hospital bankruptcies on the rise, we need to change how we deliver cost effective care and how we are paid. Because of high deductible health plans, the patient portion of the bill has increased from 9.4 percent in 2019 to 26.9 percent in 2017. How do we collect from the patient? How can we share clinical information about the patient with all providers without hurting our financial position?
Q: What initially piqued your interest in healthcare?
MA: It was my high school graduation present from my father. I wanted a trip to Hawaii and all I got was a letter stating, “Congratulations for finishing in the top 4 percent of your high school class. For your reward, you start work on Monday as the statistician for the hospital CEO.” Forty-five years and 250 hospitals later, I am still in hospital executive management.
Q: What is one of the most interesting healthcare industry changes you’ve observed in recent years?
MA: To name a few: Moving to electronic billing in 1985, moving from spending 2.1 percent on IT in 2005 to over 6.5 percent today (was it worth it?), forcing physicians to become data entry clerks so we can maximize coding with very little improvement in “health,” and moving to value-based reimbursement from fee-for-service so we are finally paid on quality, outcomes and our ability to lower costs through care coordination and remote patient monitoring. The four walls of the hospital are not the only care delivery system. Ninety-five percent of healthcare is delivered in the home.
Q: What is one piece of professional advice you would give to your younger self?
MA: Don’t enter the healthcare market without a strong financial knowledge base. Healthcare is a business. As the nuns told me back in 1976, no profit — no mission to help the poor and disadvantaged.
Healthcare CEO sentenced to 19 years for $18M physical therapy fraud scheme
The former CEO of Team Work Ready, a Houston-based physical therapy chain, was sentenced June 1 to more than 19 years in prison for his role in an $18 million healthcare fraud scheme, according to the Department of Justice.
The sentencing came after a federal jury convicted Jeffrey Eugene Rose Sr. of healthcare fraud, conspiracy, wire fraud and money laundering in October 2016. Mr. Rose was one of three Team Work Ready executives convicted in the scheme.
According to federal prosecutors, Mr. Rose and his co-conspirators submitted $18.3 million in fraudulent claims for physical therapy services that were never provided through Mr. Rose’s 10 Team Work Ready clinics in Texas, Louisiana, Georgia, Tennessee and Alabama. The claims were submitted under the Federal Employees Compensation Act, which is administered by the Department of Labor’s Office of Workers’ Compensation Program.
In addition to the prison term, Mr. Rose was ordered to pay $14.5 million in restitution to the DOL’s Office of Workers’ Compensation Program.
Cartoon – Modern Business Practices
REITs Adopt Novel Approaches to Stay Relevant in Skilled Nursing
REITs Adopt Novel Approaches to Stay Relevant in Skilled Nursing
The shifting skilled nursing landscape has forced the major real estate investment trusts (REITs) to change their game plans — and led some industry-watchers to question whether their time is coming to a close.
But there’s still a role REITs can play in the long-term care space, an industry that might actually be more attractive than the far larger and flashier world of private-pay senior living.
“The spread between the debt and cap rates on nursing homes lend themselves to a triple-net lease scenario, and I think that’s why it’s here to stay,” Jeremy Stroiman, CEO of the Chicago-based Evans Senior Investments, told Skilled Nursing News*.
Committed bedfellows
This year has so far seen one of the most significant commitments by a REIT to the skilled nursing space: Welltower, Inc.’s (NYSE: WELL) move to buy the SNF-heavy Quality Care Properties (NYSE: QCP) in a joint venture with non-profit hospital operator ProMedica.
The move raised eyebrows, as the REIT would be taking on a portfolio dominated by troubled operator HCR ManorCare — which filed for bankruptcy protection in March after nearly a year of missed rent payments and other turmoil with former landlord QCP. Under the terms of the Welltower deal, ProMedica also agreed to purchase ManorCare’s operations.
At the time, Welltower CEO Tom DeRosa blamed private equity for the industry’s woes; ManorCare had been owned since 2007 by the Carlyle Group, a Washington, D.C.-based alternative asset management firm.
“Anybody who knows the ManorCare real estate knows it’s really good-quality real estate in really good markets,” DeRosa told SNN in April. “It was just capital-starved, because the skilled nursing industry had been taken private by private equity firms, and what does a private equity firm do? They over-lever businesses in order to [take] cash out of them. The REITs got left holding the bag here when reimbursements changed.”
The counterpoint, of course, is that publicly traded REITs also played some role in the difficulties facing individual skilled nursing operators: In a world of changing reimbursements, staffing pressures, and regulatory scrutiny, the skilled nursing model has become increasingly difficult to reconcile with annual rent escalators and quarterly scrutiny from shareholders.
That’s why Stroiman sees an opportunity for smaller, private REITs that have a more intimate knowledge of the particular challenges and benefits of investing in the skilled nursing space — without the immediate pressure of needing to deliver returns to investors clamoring for information every three months.
For instance, private REITs would be more receptive to an operator that promised an 18-month turnaround period in exchange for lower up-front rents, Stroiman said.
“The operator says: I have $600,000 of upside within 18 months. I’ll pay you an additional rate [after 18 months], but out of the gates, will you give me a break so I can find the upside?’” he said. “And the privately-owned REITs say: ‘That’s a no-brainer.’”
That spirit of experimentation can also extend to different kinds of partnerships between REITs and facilities, according to Cambridge Realty Capital Companies chairman and CEO Jeffrey Davis.
In his senior housing and health care finance practice, Davis has increasingly seen operators buy back a portion of their real estate from REITs, which still maintain a presence going forward. One recent 10-facility deal saw an operator secure a $26 million acquisition loan to regain a stake in their facilities from a major national REIT, Davis said.
“All of a sudden, the REIT goes from having $40 million invested in those 10 buildings to having only $10 million invested in those buildings,” he said. “I think there’s different ways that the REITs can trim those [portfolios], and that, I think, is a way they can go about trimming their assets.”
Still a place for the smart ones
These new strategies don’t mean there isn’t a place for the major skilled nursing REITs that have an intimate knowledge of the business. Stroiman pointed to Sabra Health Care REIT (Nasdaq: SBRA) and CareTrust REIT (Nasdaq: CTRE) as examples of publicly traded REITs with a strong grounding in the industry, in part due to the skilled nursing experience of CEOs Rick Matros and Greg Stapley, respectively.
“They understand the operations behind the nursing homes, and they structure deals like that all the time because they can, because they understand it,” Stroiman said.
In addition, the favorable ratio of cap rates to lending rates means REITs might be more interested in SNFs than senior housing properties, where the upside isn’t as clear — despite the fact that the assisted and independent living industries come with significantly less regulatory scrutiny and the additional stability of private-pay residents.
“The difference between current debt rates and cap rates, it works,” Stroiman said. “It works so much better than senior housing.”
But Davis also emphasized the growing importance of the regional investor and operator in a landscape torn by local-level reimbursement issues and regulatory changes — especially in a narrow-margin environment where residents and investors want “Four Seasons service for the cost of a Holiday Inn.”
“It’s very difficult to run your business with all these different people’s oversight,” Davis said. “And I think the REITs have found that out, and let’s face it — this kind of environment really puts national players at a huge disadvantage, because you just can’t be as efficient as a national player as a regional [operator] or someone who focuses on one or two states. You just can’t.”
Cartoon – Everybody is a Genius
HENRY KOTULA 