At the top with nowhere to go

April 5, 2015
Crain’s New York Business

Local hospital consolidations squeeze executives out of their jobs.

When Mount Sinai Hospital took over Continuum Health Partners in 2013, top health care executives and physicians from both systems had one thought: Were their jobs safe?

They had good reason to worry. Once the dust settled over the merger, many senior-level workers were gone as the two systems consolidated operations to save money. Some of those laid off are still job-hunting or have resorted to consulting. Others moved out of state to find equivalent employment. Half of the eight doctors on Crain’s list of top-paid employees who worked at Continuum in 2013 are now gone.

One former executive called the reorganization “a scorched-earth” process and cited eight former colleagues who took out-of-state jobs.

“When you get to this level, there aren’t that many jobs for people who want to go to another institution of similar size,” said the executive, who like several others interviewed for this story asked not to be identified.

In the past three years, at least 17 community hospitals in the New York City area have joined larger systems, and the deals show no sign of abating.

NYU Langone Medical Center last week finalized a partnership with Brooklyn’s Lutheran Hospital; Maimonides Medical Center, also in Brooklyn, is in discussions to become part of the North Shore-LIJ Health System.

As hospitals in the five boroughs join forces or expand their reach into wealthy suburbs through takeovers, there are fewer spots in the C-suite, and in the tiers of middle management and clinical leadership. People once at the pinnacle have found themselves jobless, forced to change fields or to reinvent themselves.

Because economies of scale drive mergers, some job losses are to be expected. When North Shore-LIJ took over Lenox Hill Hospital in 2010, downsizing management was a factor in making the Upper East Side institution profitable again. Within days of the takeover, the system decimated the middle ranks.

“All the management is gone from Lenox Hill” that was in place before the merger, North Shore-LIJ’s chief executive, Michael Dowling, told Crain’s last July. “We’ve gotten people angry, oh yes.”

The culling usually is heavier in the administrative ranks than among clinical staff, said Mark Murray, a senior consultant at Towers Watson, which often advises health care entities on mergers.

“If the hospital is in a good shape, you’re not talking about trying to take out the nursing contingent or specialties,” Mr. Murray said. “It tends to be in the higher-ups where the excess resides: senior executives, a whole host of middle managers, a whole variety of backroom operations.”

Health care jobs are growing nationwide. But most of that expansion is in clinical activities and lower-paid positions; the portion held by top executives is expected to remain at just 0.7% of the sector’s workforce through 2022, according to the Bureau of Labor Statistics. The percentage is forecast to remain stagnant for management jobs overall, which now represent 3.2% of all jobs in health care.

An analysis of the New York-Presbyterian system’s listing of corporate officers shows that eight names have been removed since 2012, during which time the hospital absorbed or affiliated with three smaller institutions. A LinkedIn search shows that only one of them is working in full-time employment in a hospital, in Texas. Two others are consultants.

Since the merger with Mount Sinai, several of Continuum’s former top executives have not updated their LinkedIn profiles with new jobs, have an employment gap of about a year or have became consultants. Most have large severance packages attached to nondisclosure agreements and declined to acknowledge a reporter’s query.

Gail Donovan, who earned more than $1 million as executive vice president and chief operating officer at Continuum, left the merged system in January 2014. Kevin Molloy, formerly the COO of Mount Sinai Beth Israel, departed in November 2014 and is now a consultant and adjunct professor.

Frank Cracolici, who had earned $888,462 at Continuum as president of St. Luke’s-Roosevelt Hospital, went to California and consulted before joining Cardinal Health in February. Kathleen Kearns, at Continuum since 1997 and a senior vice president of development when she left in March 2014, joined the New York Genome Center a year later.

A Mount Sinai spokesman said that post-merger “we have actually increased total headcount, and the great majority of employees (from Continuum) have been retained.”

Ripple effects

Clinicians also are squeezed out by consolidation: There can be only one department head of a merged hospital.

After a series of changes eliminated a program at one Manhattan hospital, a department head said he found himself unable to see the number of patients his contract stipulated. The doctor felt the financial hit when a paycheck came in at one-third less than he had expected. After complaining to his department, he was told his contract wouldn’t be renewed.

“There was no attempt to adjust the goals of my contract. It was all based on previous circumstances,” he recalled. “There’s never been any claim that I wasn’t doing my job.”

Now job hunting, the doctor said he’s “optimistic” about finding work elsewhere—though it may not be in Manhattan or at the same salary.

“I’m mostly concerned with not allowing this to be the final chapter of my career in medicine,” he said. “I’m at the top of my game, and it feels like a terrible waste.”

One former executive at a Manhattan hospital, where he had worked for decades, filled the employment gap after his layoff by briefly working as a cashier at a department store.

“I had no responsibility for the first time in my life. I didn’t have to worry about scheduling, people coming in late, getting work done,” recalled the executive. “For me, it was just a matter of [doing] something to keep me busy.”

System squeeze

Downsized health care administrators may find it even more difficult to land jobs in the future as systems continue their geographic expansion. Candidates who aren’t a good fit for a particular hospital in that system theoretically can be ruled out for the whole network.

“In a giant health system, they have one human resources department,” said Andrew Goold, vice president of the Healthsearch Group. “If an individual isn’t satisfactory to the one HR department, that means 18 hospitals” are effectively out of the running as options.

His employer, based in Ossining, N.Y., has itself felt the reverberations from health care’s taste for mergers.

“Our company at one time had 35 recruiters. Now we’re down to 20,” Mr. Goold said. The decrease has been driven by a number of reasons, “one of which is [institutional] cost-saving,” he added.

A job title that’s particularly at risk: CEO. Stand-alone hospitals that become part of larger systems no longer have a need for that role.

Keith Safian, the longtime leader of Phelps Memorial Hospital in Sleepy Hollow, N.Y., before the Westchester hospital joined the North Shore-LIJ system in January, concluded several years ago it was inevitable that Phelps would lose its independence.

“It became clear we needed to join a bigger organization,” he said. “We were very profitable, so there was no financial pressure, but we saw the writing on the wall.”

Mr. Safian, who said his exit “was as good as I could hope for,” is upbeat about his future. He stays in touch with five other former CEOs of community hospitals and is considering joining a health care consultancy or private-equity group.

“There’s a wealth of opportunity” in health care, he said. “But not for hospital CEOs.”