There's room at the top: 3 area CEOs call it quits

Wanted: Three hospital CEOs.

Another unexpected resignation of a chief executive officer leaves the area’s three major hospital systems lacking top senior administrators.

Four months after Pikes Peak Regional Hospital opened west of Woodland Park, CEO Harley Smith has quit, saying the position was not a good fit, Lynn Lambert, interim CEO, said Tuesday.

Smith held the job for nine months. He previously served eight years as CEO of a hospital and nursing home in Colquitt, Ga., and was credited with reversing annual deficits and increasing revenue there by 350 percent.

Lambert, who also is chief financial officer for the hospital’s management firm, Brim Healthcare, based in Brentwood, Tenn., said Brim plans to hire a replacement here in 30 to 60 days.

Last week, Penrose-St. Francis Health Services’ CEO of eight years, Rick O’Connell, resigned suddenly after meeting with Arlen Reynolds, interim CEO of the hospital system’s management company, Centura Health. O’Connell cited unnamed personal reasons for his departure.

Jim Hertel, a publisher of managed care newsletters for Colorado and Arizona, said he heard O’Connell “wasn’t hitting his numbers” in terms of financial performance.

Last month, city-owned Memorial Health System’s CEO Dick Eitel announced a retirement date of March 31, after informing the hospital board in December he planned to retire this year.

Eitel had said he would serve in the post for three to five years when he was recruited for the position in 2003. He’d faced recent disputes with the City Council over cost overruns on construction projects and allocating $250,000 to be a sponsor for this year’s U.S. Senior Open, to be held in Colorado Springs.

Still, a common thread stands out in the three departures, Lambert said: “Every one of these has a new facility, and that’s a tough time.”

For a position already marked by long hours and dealing with onerous regulations and fierce competition, a building project can be the tipping point on the CEO stress scale, Lambert said.

While upgrading or building new facilities is necessary to stay competitive, it intensifies pressures of the job, agreed Thomas Dolan, president and chief executive officer of the American College of Healthcare Executives. The Chicagobased professional society of 30,000 health care executives offers credentialing and educational programs.

“There are so many different stakeholders to please, and major construction projects add another stressor because they’re time consuming and a financial strain,” Dolan said.

The $25 million Pikes Peak Regional Hospital opened in October after nine years in the making and is owned by the nonprofit Pikes Peak Regional Medical Center Association. Brim Healthcare, which manages 38 community hospitals around the nation, leases the 15-bed facility and operates it.

Patient volume and revenue, Lambert said, are “right on budget for the first four months of operation, which is phenomenal for a start-up.”

That wasn’t the case for Colorado Springs’ Memorial Health System, which opened a $146 million hospital last April in Briargate and faced several months of financial losses and fewer-than-expected patients. The city-owned system also opened a seven-story expansion at its main campus in December.

Penrose-St. Francis Health Services, managed by Centura Health, is gearing up to open a new, $207 million hospital in August, near Memorial’s new hospital in the northeast part of Colorado Springs. Penrose-St. Francis will close a smaller hospital building it owns on North Academy Boulevard and transfer all services to the new location.

Strategic planning, employee morale and relationships with medical staff can initially falter with the loss of a hospital CEO and then improve under a new leader, according to a recent report on hospital CEO turnover by the American College of Healthcare Executives.

Turnover of senior management, budget revisions and erosion of market share also are typical results of leadership change, the report says.

With all three local hospital systems lacking senior leaders, Dolan said, potential negative effects may not be as noticeable.

The average tenure of a hospital CEO is 5.6 years, the report says. It also cites CEO turnover as 15 percent nationally in 2006, and 20 percent in Colorado. But hospitals appear to have little difficulty in finding replacements. About 75 percent fill the post within six months after the CEO leaves, Dolan said.

“If you can do a good job, you’re in constant demand,” he said.

Memorial and Penrose-St. Francis have started searching for replacements.

On a national average, CEOs of smaller hospitals earn a base salary of $275,000 and cash bonuses that bring total compensation to $312,000 annually, Dolan said. CEOs of larger hospital systems, on average, have a base salary of $576,000, with bonuses that bring the total to $672,000 a year.

CONTACT THE WRITER: 636-0235 or debbie.kelley@gazette.com