Organizations have opportunities to retain their workers who are eyeing an exit.
It’s impossible to stop the flow of employee turnover at your organization completely, but CEOs can cut down on voluntary exits by taking a proactive approach to retention.
By understanding what’s important to workers who may have a wandering gaze or even a foot already out the door, leaders will have a better chance of avoiding the costs associated with turnover and creating an environment that people want to be part of.
Of the employees who left their organization in the past year, 42% said that leadership could have intervened to prevent them from leaving, according a recent study by Gallup that fielded responses from 717 people.
As CEOs know, replacing outgoing workers isn’t cheap. Gallup estimates that the replacement of leaders and managers costs around 200% of their salary, while the replacement of professionals in technical roles and frontline employees is 80% and 40% of their salary, respectively.
Leadership often doesn’t know of an employee’s intention to leave, which is why CEOs need to impart on managers the importance of communication with workers. Nearly half of employees (45%) who voluntarily left report that neither a manager or leader proactively discussed their job satisfaction, performance, or future with them in the final three months before leaving.
So, what conversations should leadership have with employees to get them to reconsider departing?
Unsurprisingly, the most common answer (30%) among respondents was to provide additional compensation and benefits. It may not always be financially viable for organizations to increase pay, but having annual conversations with employees about where their compensation is trending can go a long way to making them feel valued, Gallup highlighted.
Meanwhile, 70% of exiting employees relayed that managers can take actions to address workplace issues to improve retention. These actions include more positive interpersonal interactions with manager (21%), discussing organizational issues (13%), creating opportunities for career advancement (11%), improving staffing/workload/scheduling (9%), and less negative interpersonal interactions manager (8%).
Especially for younger workers who may put greater value on relationships and culture, leaders should be quick to address problems that can result in burnout and exits.
What’s clear is that leadership can’t wait for their employees to open the dialogue, it has to be initiated from the top and it has to be consistent if CEOs want to minimize turnover.
Primary care hasn't been so friendly to some of the biggest companies entering healthcare.
The road to healthcare disruption is being paved with more and more retailers who are struggling to crack the space.
While there's a consumer demand for a retail experience that can make a trip to the doctor's office even more convenient, big-name companies that have tried their hand at the concept are finding primary care is trickier and less profitable than they imagined.
Whether it's Walmart, Walgreens, CVS Health, or Amazon, the challenges with opening and operating a retail primary care model are causing giants to either reconfigure their approach or drop out of the race entirely.
"Everybody who's trying to enter this industry and trying to slice off pieces of the business, every other week we're finding somebody else that says, 'no más. No more,'" newly retired Banner Health CEO Peter Fine told HealthLeaders. "It's not easy to get into this business. It's not easy to manage to get to scale. It's not easy to manage the cost."
The decision to pivot by these companies is coming in bunches.
Walmart just announced the sale of its MeMD virtual care business to telehealth startup Fabric, which comes on the heels of the move to close all 51 of its health centers and virtual care offerings five years after launching.
Walgreens recently announced plans to cut its stake in primary care clinic chain VillageMD to the point its no longer majority owner, CEO Tim Wentworth told investors in an earnings call. This spring, the pharmacy chain operator said it planned to close 160 VillageMD clinics and reported nearly $6 billion in net loss for the second quarter, reflecting the value of its investment in the primary care business.
Meanwhile, CVS Health is reportedly seeking a private equity partner to help fund Oak Street Health, the primary care provider it purchased a year ago for $10.6 billion. The company also continues to operate more than 1,100 MinuteClinics, which have seen the type of services offered evolve over time.
In the case of Amazon, the behemoth has folded its Amazon Clinic telehealth service into its One Medical primary care business and rebranded to Amazon One Medical pay-per-visit telehealth. To expand its presence, Amazon One Medical has been inking partnerships with employers and health systems.
According to Fine, the shortcomings in primary care by these retailers should come as no surprise.
"For primary care practices, when you buy them and then you think you can run them profitably by just being behind the scenes, having a standardized billing system, it's ludicrous," he said. "We're going to see a lot more crashing and burning because they think this is just an easy business to get into and they're not always totally sure of how to handle insurance and not totally sure about really understanding the behaviors of the consumer."
Traditional providers may continue to hold the advantage in those regards, but it's clear some of these retailers want to be involved in the primary care space in one capacity or another.
As long as there is a need by the consumer to get quicker, more affordable access to services—which traditional providers haven't figured out how to offer themselves—disruptors' interest will be piqued.
However, until retailers figure out how to leverage primary care so they can send patients to more profitable services that they make revenue from, investment in that business is not going to benefit the bottom line.
"This is just basic primary and urgent care. You can't make money because that's not where the money is. Money isn't in primary care," Fine said.
"There'll be more that will say they want to move in a different direction."
Here’s what CEOs should keep an eye on when it comes to hospital and health system transactions.
The second quarter saw a dip in hospital dealmaking following a robust start to the year, according to a report by Kaufman Hall.
Though the 11 transactions announced in Q2 represented the lowest figure for the quarter since before 2017, the deals that were made focused on strategic access to capital investments and realignment over scale.
Two of the 11 transactions were considered “mega mergers,” featuring smaller parties that had annual revenues of $1 billion or more. The average seller size for the quarter was near $1 billion, which was growth of 161% over year-end seller size averages since 2017.
While the total transacted revenue for the quarter of $10.8 billion fell short of the previous two Q2s, it remained around past years’ marks.
The 11 deals consisted of three involving religiously affiliated acquiring entities, two involving academic or university-affiliated buyers, and six involving other nonprofit health systems. This was the first time since Kaufman Hall tracked this data that there were no for-profit health system buyers in the second quarter, which followed just a single deal made by a for-profit acquirer in the first quarter of the year.
Here are three M&A trends for CEOs to monitor from the report:
Pursuit of intellectual capital
Risant Health’s addition of Cone Health to its value-based care network that already included Geisinger Health was one of the two mega mergers for the quarter and indicative of a new approach in hospital M&A.
The blueprint by Kaiser Permanente’s subsidiary reflects a model “in which intellectual capital is as—if not more—important than traditional capital,” Kaufman Hall wrote.
By allowing partners the ability to launch new services and products through its systems, Risant is an appealing buyer to operators seeking operational flexibility and financial stability.
Market reorganization and system realignment
The second mega merger of the quarter saw BayCare buy out the interest of Trinity Health to end the joint operating agreement.
The deal “illustrates an ongoing trend in which large regional and national health systems, both for-profit and not-for-profit, are working to realign their systems to focus on markets with significant growth potential, with divestitures in some markets supporting investments and acquisitions in other markets. In turn, these divestitures enable the growth of regional markets,” Kaufman Hall wrote.
Academic health systems expanding regional care networks
Meanwhile, UAB Health System’s purchase of Ascension’s central Alabama hospitals also demonstrates another trend.
Academic health systems are focusing on partnerships with community-based health systems to alleviate occupancy constraints at their flagship campuses and improve patient access, along with creating more opportunities for residency programs and clinical research programs, Kaufman Hall noted.
As hospitals and health systems explore new ways to achieve transformation, these partnerships models are expected to be at the forefront of dealmaking.
"Give us a little help and allow us to keep innovating," says Grande Ronde Hospital CEO Jeremy Davis.
Hospitals everywhere are feeling squeezed, but rural facilities especially are struggling to make ends meet and their mission will be made even more arduous if lawmakers don’t intervene.
Grande Ronde Hospital CEO Jeremy Davis knows that reality better than most as the leader of a nonprofit in rural Oregon, which is why he shared his insight before the Senate Finance Committee in a May hearing called “Rural Health Care: Supporting Lives and Improving Communities.”
Davis’ appearance allowed him advocate for rural hospitals during a time when many facilities are either shutting down or on the brink of closure as provisions from the pandemic run out.
The CARES Act provided rural hospitals with temporary funding and expansion of telehealth, but with capital since drying up and telehealth flexibilities set to expire on December 31, rural health once again needs Congress to take action, Davis told HealthLeaders.
“Now, with that funding having gone, most of these rural hospitals were already struggling heading into the pandemic and the pandemic didn't make them better,” Davis said. “It further challenged vulnerabilities within their operating structure within the reimbursement climate. So now that we're past the pandemic, there's kind of this reckoning and we're starting to see those rural hospitals are picking up steam that are that are vulnerable to closure.”
Since 2020, 37 rural hospitals have closed their doors, according to data compiled by the University of North Carolina’s Cecil G. Sheps Center for Health Services Research.
Many of the ones that remain open aren’t faring much better. A report by healthcare advisory firm Chartis earlier this year found that 50% of rural hospitals are operating at a loss, up from 43% in 2023.
Making telehealth flexibilities permanent, which Davis and many other rural hospital leaders are asking for, isn’t going to solve all of rural health’s problems, but it will help the situation from getting worse.
“Most importantly with some of these telehealth flexibilities, you look at behavioral health in our country. There's just an unmet need and we found as a result of telehealth that a lot of these patients felt more comfortable accessing these services in the comfort of their home because they weren't coming into a clinic and feeling like they were going to be judged and people thinking why they're there,” Davis said. “So we've been building this capacity. We've been trying to expand broadband. We've been doing this for a purpose. We, in some aspects, met the challenges of COVID head on with having some of that infrastructure in place because we had technology. Let's not go back. Let's go forward.”
Outside of telehealth, Davis unsurprisingly highlighted low reimbursement as the other area lawmakers should consider.
Most hospitals and clinics don’t receive adequate reimbursement when it comes to Medicaid or Medicare, Davis said, and the funding rural providers received during the pandemic went a long way to offsetting that.
While the pandemic is over and leaders aren’t necessarily expecting an infusion of $100 billion into hospitals again, Davis just wants a little aid in making it an even playing field for rural health.
“One of the things that I said in my testimony is, as a rural hospital administrator, we're looking for a help up, we’re not looking for a handout,” he said. “We want to be good stewards of the resources. We recognize funding is complex but trust us, enable us. There's a lot of really good people that are working in rural that are used to doing some great things with limited resources.
“As one of our hospitalists told me when I first arrived here, we fight above our weight class. There are a lot of rural hospitals in this country that fight above their weight class. So give us a little help and allow us to keep innovating, keep trying and see some of the amazing things that we can do.”
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The cross-market deal would extend Sanford's reach into Wisconsin and Michigan.
Sanford Health and Marshfield Clinic Health System are in talks on a merger that would give both operators a partner they’ve been seeking for some time.
The systems announced they’ve reached a nonbinding understanding to create a 56-hopsital system serving the Midwest, with the transaction expected to close by the end of the year, pending regulatory approval.
Under the proposed deal, Marshfield Clinic’s Wisconsin and Michigan facilities would become a region within Sioux Falls, South Dakota-based Sanford while maintaining regional leadership and branding. Sanford president and CEO Bill Gassen would lead the combined system, with Marshfield Clinic interim CEO Brian Hoerneman serving as president and CEO of the Marshfield region.
In addition to the hospitals, the resulting organization would consist of nearly 56,000 employees, 4,300 providers, two fully integrated health plans, speciality pharmacies, and research institutions.
Both sides have tried and failed to complete mergers in recent years. Sanford’s three attempts were with UnityPoint Health in 2019, Intermountain Healthcare in 2020, and Fairview Health Services in 2023. The first pursuit fell apart after UnityPoint’s leaders rejected the move, whereas the breakdown of the Intermountain deal came after former Sanford CEO Kelby Krabbenhoft abruptly resigned. Sanford eventually called off the merger with Fairview due to lack of support in Minnesota.
With Marshfield Clinic, Sanford hopes to write a new narrative.
“We are who we are today because of combinations with care delivery organizations in rural communities across America’s heartland,” Gassen said in the news release. “These opportunities have allowed us to follow through on our promise to deliver world-class health care to every patient we serve no matter their ZIP code, and we are eager to continue building on this track record with Marshfield Clinic Health System.”
For Marshfield Clinic, past failed unions came with Gundersen Health System in 2019 and Essentia Health earlier this year. The latter saw Essentia point to Marshfield’s turbulent financial situation as the primary factor for pulling out.
Marshfield Clinic reported operating losses of $250.8 million and $367.9 million for fiscal years 2023 and 2022, respectively. Combining with Sanford, which raked in $402.2 million in operating income last year, affords Marshfield necessary financial stability.
“Partnering with Sanford Health presents an incredible opportunity for our organizations to unify and establish the premier rural health system in the nation,” Hoerneman said. “Together, we will ensure sustainable access to exceptional care for our communities for years to come.”
The company announced that its reorganization plan received court approval. What's next for the company?
Cano Health has successfully climbed out of bankruptcy months after entering restructuring, the primary care chain announced.
By converting more than $1 billion of funded debt into common stock and warrants, and receiving a commitment of more than $200 million from existing investors for its business plan going forward, Cano said it emerged from Chapter 11 as a reorganizing private company.
In February, the provider filed for bankruptcy and was delisted from the New York Stock Exchange following a significant stretch of financial trouble that saw it accrue liabilities in the range of $1 billion to $10 billion.
With a “significantly improved capital structure and optimized operations,” Cano will now turn its attention to its Florida market.
"We are taking a disciplined and strategic approach to our growth over the next few years, with the primary goal of improving services for patients within our existing Florida footprint, which now consists of 80 locations,” Cano Health CEO Mark Kent said in the news release.
“We are already seeing encouraging results across our improved platform, and I am immensely proud of our associates for their continued dedication to our patients throughout this process. Despite the challenges we have faced as an organization, we have emerged as a stronger and more focused company with a bright future."
Necessary shake-up
Cano said it is on track to hit its goal of $290 million in annualized cost reductions by the end of this year, with $270 million in cost reductions and productivity improvements already achieved.
The company was forced to make changes after reporting net losses of $270.7 million and $491.7 million in the second and third quarters of last year, respectively.
Liquidity was partly achieved through strategic divestitures of underperforming expansion markets, including the sale of its Texas and Nevada primary care centers for nearly $67 million to Humana’s CenterWell Senior Primary Care business.
Cano also exited operations in California, New Mexico, Illinois, and Puerto Rico, while reducing its workforce in the third quarter of last year by 21%.
Additionally, Cano announced leadership changes to its board of directors to better align with its planned path. Alan Wheatley, a former Humana executive who ran Medicare and Medicaid programs, will join the board as Executive Chariman, serving alongside two other members, Kent and Eric Hsiao of Nut Tree Capital Management.
The longtime leader of Banner Health joins the HealthLeaders Podcast as he heads into retirement.
Few CEOs in healthcare are afforded the perspective Peter Fine has gained after decades of experience in the industry, including 24 at the helm of Banner Health.
As he enters retirement to give way to the nonprofit health system’s new chiefAmy Perry, Fine can look back at a long and successful career that saw him witness firsthand how both healthcare and the CEO role changed over time.
Fine offered his insight on the HealthLeaders Podcast this week, detailing how the leaders of hospitals and health systems have had to evolve to meet the moment, especially after the pandemic.
"The focus before was all we have to do is provide a good clinical product and that satisfies everybody. Well, that's not the case," Fine said. "So that causes you to have to change certain things in your style and your approach and the things that you say and do in front of others become way different.
“Creating that recognition for everybody that you also have to look for opportunities to take away pain points that get in the way of the consumer interacting with us. It's a different approach because how you speak and what you say become way different."
Tune in to the episode to hear more from Fine on disruption in the industry, tackling workforce challenges, and what advice he would give to incoming CEOs.
The health system is forced to go back to the drawing board as it attempts to dig its way out of financial trouble.
Optum is backing out of its pursuit of Steward Health Care’s physician group, according to the Massachusetts Health Policy Commission (HCP).
The development is a blow to Steward’s efforts to financially recover through restructuring after filing for bankruptcy, leaving the beleaguered company without a clear buyer for its assets.
Steward revealed its plan to sell Stewardship Health to UnitedHealth Group-owned Optum in March by filing documents with Massachusetts regulators. However, the HCP said Optum is no longer working to finalize the agreement, which had faced scrutiny from state and federal lawmakers for being anticompetitive.
Optum is already the largest employer of physicians in the country and Steward toldWBUR that a “challenging” review process at the federal Department of Justice kept the deal from moving forward.
The company stated it will continue to search for buyers.
"Stewardship Health remains a valuable asset that provides excellent care for its patients; there are multiple other parties that remain interested in acquiring the business and Steward is in active negotiations," Steward said in a statement to WBUR.
Despite claiming its assets as valuable, Steward last week pushed back deadlines for bidding on its assets, including its physician group and about half of its 31 hospitals.
In May, Steward filed for Chapter 11 bankruptcy and put all of its hospitals up for sale to pay back over $9 billion in total liabilities. Of that, $6.6 billion are long-term rent obligations, $1.2 billion are loans, almost $1 billion are unpaid vendor bills, and $290 million are unpaid wages and benefits, according to court documents.
Steward had said it finalized debtor-in-possession financing from Medical Properties Trust for initial funding of $75 million and up to an additional $225 million upon the satisfaction of certain conditions.
The health system was hoping to keep its hospitals open as the bankruptcy process plays out, but it’s unclear how the disintegration of the sale of Stewardship to Optum will affect its plans.
A completed transaction would result in two Rhode Island safety net hospitals transferring to The Centurion Foundation.
Los Angeles-based Prospect Medial Holdings has been given the go-ahead by Rhode Island Attorney General Peter Neronha to sell two safety net hospitals to The Centurion Foundation, but only if the organization jumps through a number of hoops.
Specifically, Neronha has outlined 40 conditions for Prospect to meet to close the deal, which include the paying of all the hospitals’ unpaid bills and investing in repairs that allow the facilities to comply with regulatory standards. The significant caveats put private equity-backed Prospect under pressure to leave the hospitals in an acceptable state before it exits Rhode Island.
The hospitals, Our Lady of Fatima and Roger Williams Medical Center, are owned and operated by Prospect’s subsidiary, CharterCARE Health Partners, and are being bought by Atlanta-based nonprofit The Centurion Foundation.
Neronha toldThe Boston Globe that Prospect is “an owner that doesn’t want to own hospitals.”
“I wouldn’t lose any sleep if, under the right circumstances, they were gone,” he said of Prospect. “In fact, I would cheer it.”
After Prospect acquired full ownership of the hospitals in 2021, Neronha required the organization to satisfy a set of conditions and put $80 million in escrow to keep the facilities running.
However, Prospect has since racked up $24 million in unpaid bills, according to Neronha. On June 12, before Neronha approved Prospect’s sale application, Rhode Island Superior Court Judge Brian Stern ordered Prospect to pay $17.3 million of its unpaid bills within 10 days.
Jeffrey Liebman, the CEO of CharterCARE Health Partners, told the Globe: “I think we’re doing fine. I think the hospitals are doing OK.” Liebman did call the sale to Centurion “a better way.”
Neronha said to the Globe: “I just have no confidence in Liebman’s leadership at all. The truth is, we’re fighting for a better future for these hospitals than he is. That says a lot to me.”
The situation marks the latest tug-of-war over hospitals owned by private equity.
A recent report by the Private Equity Stakeholder Project revealed more bankruptcies in healthcare are involving private equity-owned companies, with 17 such instances in 2023, accounting for 21% of all bankruptcies in the industry.
A new survey underscores the importance of technology investments to address the workforce.
As providers grapple with workforce shortages, automation has quickly become a sought-after solution for leaders seeking to lessen the workload on their staff.
Organizations recognize the value of investing in automation to reduce burnout and human error to make it easier for clinicians to deliver care, according to a report by technology company Royal Philips.
Nearly 3,000 surveyed leaders worldwide expressed optimism about the future of automation in the industry. Around nine in 10 respondents (88%) said the use of technology to automate repetitive tasks or processes is critical for addressing staff shortages, while 84% indicated automation will save staff time by reducing their day-to-day administrative tasks and 76% reported automation will allow workers to perform at their highest skill level.
The areas where the most leaders have already implemented automation are billing processes (47%), clinical documentation/notetaking (44%), and clinical data entry (43%).
Despite only 25% of respondents having implemented automation in workflow prioritization, that is seen as the biggest opportunity for investment going forward, with 44% of leaders planning to implement automation there within the next three years.
However, many are still cautious about diving head-first into automation. Nearly two-thirds of respondents (65%) reported skepticism among their staff about the use of automation, while 79% of leaders themselves said they are concerned about the possibility of data bias in AI applications exacerbating disparities in health outcomes.
When implementing automation or AI, organizations must properly train and educate their workers to understand how those solutions should and shouldn’t be used. By creating more transparency around solutions and having effective data collection in place to quantify its impact, leaders can combat the risks associated with the technology.
What’s clear, though, is that providers’ labor strategies must include investments in automation to lift the administrative burden off clinicians’ shoulders, resulting in a more engaged, sustainable workforce for the future.
“It's critical that we change our processes and we add the technology that can facilitate a different kind of work stream,” Banner Health CEO Amy Perry recently told HealthLeaders. “We talk a lot at Banner about the fact that we just can't ask people to do more with the same number of people without changing the process. It's absolutely impossible. It's not sustainable.”
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