Nonprofit 100: Big health care players see change at top

Hospitals and health insurers are coping with a wave of leadership changes, including new CEOs for seven of the 12 largest nonprofit groups in Minnesota.

It's happening across the country, too, with turnover last year for hospital CEOs hitting a 30-year peak.

The changes are largely generational. As baby boomer leaders hit retirement age, more nonprofits are trying to compete for a scarce supply of CEO talent to replace them.

Some health care groups are benefiting from an increased focus on succession planning in recent years that has produced strong internal candidates. Others are finding they must pay more to attract outsiders, consultants say, although the pay-stub details aren't yet available.

"There is intense competition for top leadership — especially leaders that have an appetite for all of the change that's occurring in the health care industry right now," said Jim King, senior partner with Witt/Kieffer, an executive search firm in suburban Chicago.

Health care groups continue to dominate the top of this year's Star Tribune survey of the 100 largest nonprofits in Minnesota. The latest report tracks financial data during fiscal 2013, the most recent year available, and nonprofits are ranked according to total revenue.

CEO changes include Ken Paulus of Minneapolis-based Allina Health System (ranked No. 5) and Nancy Feldman of the Minneapolis-based health insurer UCare (No. 7). Paulus is retiring this month, while Feldman plans to leave next year.

The seven nonprofits generated about one-fourth of the combined $52.64 billion in revenue for all 100 nonprofits on the Star Tribune's list.

The tally for CEO changes doesn't include retirements by hospital chiefs who work within larger health systems, such as HealthPartners, which has seen leaders at three hospitals exit.

"I note how many retirement parties I'm going to, and there are a lot of them," said Mary Brainerd, CEO at the Bloomington-based insurer and hospital operator.

Hospital CEO turnover in 2013 was 20 percent, the highest mark since the American College of Healthcare Executives started reporting in 1981. The median tenure for a hospital chief executive is just 3.4 years.

"Minnesota is a little different from the rest of the country," said Dr. Alan Goldbloom, who retired this month as the Children's CEO after 12 years. "Although there's a lot of turnover this year, many of those people have been in place a long time."

Goldbloom signaled his intent to retire two or three years ago. To find a new CEO, the Children's board formed a search committee in January and hired an outside firm to conduct a national search.

The committee identified desired characteristics — everything from vision and strategy to fundraising skills — and the search firm developed a list of candidates. In the late stages, some completed an online assessment so the committee could analyze their leadership behaviors.

This summer, five candidates visited the hospital for interviews. Applicants would fly in for a late meal with the search committee, said board chairman Russell Becker, and sit for about 10 hours of interviews the next day.

"If I couldn't be at an interview when they were going to be in Minneapolis, then I got on an airplane and I flew to meet with them on my own," Becker said.

Becker is chief executive of APi Group Inc., a holding company with 42 independent construction and construction-related businesses that generate about $2 billion in annual sales. When he's looking for an executive to run one of his businesses, Becker is focused on finding someone who can turn a profit.

In October, Children's announced that Robert Bonar, a hospital executive from Texas, would become CEO. The search shows how changes in the nonprofit and for-profit worlds are more similar than different, said Samantha Hanson, the chief human resources officer at Children's.

"The difference really is the attention to mission and the ability to build relationships with the community, because of the philanthropic aspect of the role," said Hanson, who previously worked at a division of Minnetonka-based UnitedHealth Group.

At Essentia Health, longtime chief executive Dr. Peter Person told board members in January that he was ready to retire after leading the organization since 1997. During his tenure, Person oversaw the system's expansion far beyond Duluth, to include operations in Idaho, Minnesota, North Dakota and Wisconsin.

The growth created a challenge in finding a new CEO, because there weren't many executives within Essentia Health who had much experience running such a large organization, said Dick Blair, chairman of the health system's board.

There were other challenges. The health system wanted another physician to serve as CEO, but consultants say the credential narrows the field of applicants. Plus, "our winters don't appeal to people," Blair said.

At HealthPartners, national searches weren't required because the health system identified strong internal candidates, Brainerd said. The nonprofit's board has put a priority on being prepared for succession, she said.

At 5 p.m. on New Year's Eve, Brock Nelson expects to end his 12-year term as chief executive at Regions. He'll be succeeded next year by Megan Remark, a HealthPartners specialty care leader who has been with the organization for nearly 20 years.

By announcing his retirement this summer at the same time as his successor was named, the hospital "avoided speculation," he said. "It avoided people promenading for the position."

Remark added that her history with staff, leaders and physicians at the hospital means "we don't have to spend a lot of time orienting someone from the outside to all those relationships."

Christopher Snowbeck • 612-673-4744