HOSPITAL HOT SEATS : Increasing emphasis on the bottom line has made the job of administrator high profile and high risk.

James Quackenbush says he feels “50 going on 20” as he looks out his window and waits for the tourist season to begin at the 10-acre, pine-shaded recreational vehicle park he bought near Glacier Park, Mont.

In moving to Montana last year, Quackenbush left behind his position as president of St. Luke Hospital in Pasadena and a 20-year career in hospital administration. He has no regrets, he said, because “during the year I left the hospital, there was very little joy.”

Like many hospital executives of his generation, Quackenbush said he could not abide the new financial pressures that have made it difficult for hospital administrators to pursue “charitable and altruistic” goals.

“The name of the game today for hospitals is survival,” he said.

Whether self-propelled by burnout or given the boot by dissatisfied governing boards, hospital administrators have been leaving their posts at what industry experts consider an alarming rate over the past four years.

In many cases, a new breed of profit-oriented chief executives are replacing administrators who lack the financial, marketing and political skills required by an increasingly competitive hospital industry.

But in some instances, skilled administrators are being removed as a result of financial troubles that may be attributable to hospital medical staffs, trustees or a shrinking marketplace.

Much like coaches of losing football teams, many hospital executives are being discarded in hopes that new blood will solve problems that may or may not be solvable.

The rapid turnover is most frantic in highly competitive regions such as Southern California, where hospitals are watching profit margins erode or disappear as they scramble to fill surplus beds by offering deep discounts to insurers.

To attract the best talent available, hospitals are upgrading the job descriptions and salaries of their top officers. The traditional title of administrator is giving way to chief executive or president, denoting the increasing similarity of hospitals to profit-driven corporations.

According to the Hospital Council of Southern California, the annual CEO turnover rate at its member hospitals has hovered at about 30% during each of the past three years.

That level is “very high,” said Richard M. Ferry, president of Korn/Ferry International, the nation’s largest executive search firm. Ferry estimated that annual turnover for all U.S. chief executives averages less than 10%.

The greatest turnover is in small and investor-owned hospitals, which tend to react more quickly to declining profits. Last year, according to the hospital council survey, the annual chief executive turnover rate at investor-owned hospitals in Southern California was 37%, compared to 23% for nonprofit and government-run institutions. The turnover rate was 37.5% for hospitals with fewer than 100 beds, dropping to 16.1% for hospitals with 400 or more beds.

Witt Associates, a Chicago-based executive search firm that specializes in the health industry, said its own study shows that turnover among hospital CEOs increased nationwide from 15% in 1984 to 25% in 1986. Witt officials attribute most of the turnover to firings.

“You rarely see CEOs retiring anymore because they are fired before they have a chance to retire,” said James W. Gauss, western regional vice president for Witt in Newport Beach.

“The ones who are not getting fired are leaving anyway,” he said. “They are just opting to get out. Many of them see the writing on the wall. . . . There is a lot of human tragedy going on.”

Not surprisingly, anxiety is rampant among hospital executives. A 1987 study by Russell Reynolds Associates, a Chicago-based executive search firm, found that more than one-third of hospital chief executives feel personally threatened by a rapidly changing health-care environment, considerably more than said they were worried about their jobs in a similar survey two years earlier.

People ‘Pushed Out’

And hospital administrators who are laid off may face more difficulty finding new jobs because the number of hospitals is shrinking as a result of what Jonathan Peck, a health-care strategist in Washington, calls “the most revolutionary changes in 100 years.”

Just as the number of hospitals exploded between 1872 and 1910 in response to the development of antiseptics and new surgical techniques, Peck said, today’s high-tech medical technology and cost-cutting pressures are “pushing people out of the hospitals” and into less expensive outpatient clinics and surgical centers and home-care arrangements.

Stuart Wesbury, president of the American College of Health Care Executives, said 79 hospitals closed last year. The organization anticipates that another 700 of the nation’s remaining 6,800 hospitals will shut their doors by 1995. Meanwhile, hospital CEO turnover is also expected to accelerate. “I see it getting worse for the next four or five years,” said health-care consultant Leland Kaiser.

The need to guide a hospital through the shoals of what Kaiser calls a “white-water period in health care” has made the job of managing hospitals much tougher and riskier.

Only 15 years ago, health experts say, it was nearly impossible to fail as a hospital administrator. Medicare and private insurance plans generally absorbed the full cost of operating a hospital, financing new equipment and buildings and providing free indigent care. In addition, donations from private and public charities were available to hospitals.

“If you kept the grass green and smiled, you stayed forever,” Kaiser said. “Staying on a job 10 years was typical. It was a stable and secure job, and everybody liked them. They could be everybody’s friend.”

Deregulation Has Impact

But in 1984, the federal government took steps to contain runaway Medicare costs by specifying levels of reimbursement for particular illnesses. Following suit, state Medicaid programs began cutting back reimbursements for indigent patients. Private insurance companies and health maintenance organizations began negotiating discounted hospital services for their members, refusing to continue subsidizing the cost of indigent care.

In addition, California and a number of other states discontinued their efforts to control the development of new health-care services to prevent unnecessary duplication. Deregulation spurred hospitals to compete head-on by offering similar services in the same geographic areas.

The resulting financial and competitive pressures have required hospital administrators to develop a broader range of skills--from marketing and advertising savvy to knowledge of computer technology and accounting--than was required of their counterparts of a decade ago.

“It is very difficult for people of my generation. We’ve gone through a complete change,” said Ron Harper, 56, who retired from his former job as executive vice president of St. Jude Hospital in Fullerton in November, 1986, because he tired of trying to deal with conflicting demands.

“There is a great deal of talk that hospitals should be more businesslike, and, on the other hand, that everybody should receive care,” he said.

Rather than continue to work under that tension, Harper said he decided to take early retirement and now spends his days carving wooden animals, which he exhibits in Laguna Beach.

Harper once wore $600 tailored suits and had his hair styled every two weeks. Now, he said, “I have a pony tail and run around in Levis with bright red suspenders.”

Former St. Luke administrator Quackenbush recalled, “When I went into hospital administration, the sponsors of hospitals were quite altruistic, and their single-minded purpose was to be beneficial to the community. That’s what drew me into the field, to help people.”

Rules Have Changed

In recent years, he said, “it became a struggle to provide good programs for the community. It got to the point you had to be concerned about making money on every program.” As an example, Quackenbush said, he had to sharply curtail a program that provided religious counseling to patients and their families.

He said that when the Sisters of St. Joseph of Orange, a nonprofit hospital chain, sold St. Luke to Los Angeles-based Summit Health Ltd. in 1986, the hospital was just breaking even financially and lacked funds for a sorely needed renovation.

“The new buyer and I philosophically were not in agreement about the conduct of hospital business,” Quackenbush said of his resignation. “I do not want to generate my profit from ill people.”

Quackenbush said he never even spoke with Summit officials about the possibility of staying after the hospital sale, deciding instead to accept a generous early retirement package offered by the Sisters of St. Joseph.

“The rules have changed,” said Paul Hensler, the recently appointed president at Holy Cross Medical Center in the San Fernando Valley. Today’s hospital administrators, he said, must “decide if they want or are able to play by the new rules,” which inevitably requires closer attention to the bottom line.

Hensler said for the sake of efficiency he has been forced to make some difficult personnel decisions. He said, for instance, he has fired unproductive workers he might have been patient with in the past.

Hospital chief executives are experiencing greater conflicts with staff physicians, in part because doctors and hospitals have begun to compete with each other. Doctors are running their own diagnostic centers--once the exclusive domain of hospitals--while some hospitals have established their own walk-in clinics and outpatient surgery centers, which may compete with private physician offices.

Alienating a doctor can be hazardous to the career of a hospital administrator. Hensler said he has known of cases when “a doctor who rarely practices at a hospital but is ticked off at that hospital will make a few phone calls and show up at a meeting and get elected chief of staff.”

Medicare’s tightened policies, which limit the number of hospital days for which Medicare patients are reimbursed, has contributed to the tension between hospital administrators and staff doctors.

HMOs Have Growing Influence

Quackenbush said administrators today are obliged to “beg and plead and cajole and put a lot of pressure” on physicians to release their patients earlier, although in some cases this places an unfair burden on patients’ families and may even endanger patients’ health.

Yet another sore point between hospital CEOs and staff doctors has been the growing role of health maintenance organizations in influencing hospital finances.

While some doctors are eager to affiliate with HMOs to provide a stream of new patients, others oppose the idea of letting HMOs specify fees and enforce other policies affecting patient care. It is difficult to please one group without alienating the other.

“You will find that some chief executive officers have lost their jobs because they did not pursue and obtain discount contracts with health maintenance organizations and other insurance carriers. And you will also find examples of CEOs who lost their jobs because they got the contracts,” said one former hospital administrator who lost his job for the latter reason.

Leslie R. Smith, another former administrator who now recruits health-care professionals for the executive search firm of McCormick & Farrow, recalled that an HMO contract led to his divorce by “mutual understanding” from San Pedro Peninsula Hospital in July, 1986.

Smith, who had been president and chief executive at San Pedro for 13 years, said the hospital canceled a contract with an HMO when it became apparent that it would lose money under the arrangement. But it was a no-win decision. The HMO contracted with another hospital about five miles away, Smith said, and thus drew patients away from San Pedro.

Hospital CEOs who want to try new survival strategies may be hamstrung by their own board of trustees. In nonprofit hospitals, the board usually consists of business and community leaders who join for social or altruistic reasons. Critics complain that board members often do not run a hospital as aggressively as they do their own companies and tend to resist changes in hospital practices, especially if they will irritate the medical staffs.

When profits begin to decline, the knee-jerk reaction of such boards may be to replace the administrator. “Certainly there are instances when a hospital administrator becomes a scapegoat in an environment where the board or medical staff is unwilling to face up to the issue of a competitive environment,” said Wesbury of the American College of Health Care Executives.

Burnouts Increasingly Common

Martin B. Ross, vice president of the health-care division of Korn/Ferry International, an executive search firm, said hospitals “are looking to replace C-plus players with As, in some cases rightfully. And in some cases, people are losing their jobs because they are doing their jobs.”

In the case of South Coast Medical Center in South Laguna, new management may have helped turn the hospital’s finances around.

Forest Owen, a retired advertising executive and chairman of the hospital’s 15-member board of trustees, said the hospital’s former president left of his own accord a year ago when the hospital was slipping into the red because of reductions in Medicare reimbursements. Owen said the president told him he was “burned out” and wanted to leave the industry.

Eight months ago, his vacated position was filled by Michael Murray, who had been regional vice president in charge of five hospitals for Summit Health Ltd.

Murray said he continued a cost-cutting campaign that the board had launched after the former administrator left. As a result, about 80 workers were laid off. Murray said he also eliminated less profitable programs such as pain management and sports medicine and expanded the hospital’s successful psychiatric and chemical dependency programs.

Owen said the board is impressed by Murray’s efforts. After sustaining a $2-million operating loss in the fiscal year ended June 30, 1987, the hospital has returned to profitability and “will have a very favorable year this year,” he said.

As the hospital CEO shakeout continues, those with the best track records are in high demand.

“There is a dramatic shortage of talented and qualified executives in the health-care field,” said Gauss of Witt Associates.

To attract and retain top-flight CEO, hospitals have increased salaries. Gauss said annual salaries for CEOs of 300-bed hospitals in Southern California have climbed since 1983 from an average of about $100,000 to about $150,000.

In January, Craig Myers was wooed away from Fountain Valley Regional Hospital to become administrator of the much smaller Coastal Communities Hospital in Santa Ana. He said he was lured in part by the opportunity to earn more money and enjoy greater autonomy in decision making.

Myers also said he relishes challenge. While Fountain Valley’s beds are 82% full, Coastal Communities’ are only 40% occupied. “I like the competitive era,” he said. “It is scary and risky, but fun, too.”

But James Ludlam, a health-care attorney and partner with the Los Angeles law firm of Musick Peller & Garrett, said he believes that hospital CEOs need some insulation from trigger-happy trustees who may believe in “change for change’s sake.”

Ludlam said he advocates having hospitals offer employment contracts to their CEOs. Such contracts, among other things, guarantee compensation for a specified period if administrators are fired.

“I advise hospital governing boards that if the CEO has protection, he is in a better position to make tough decisions,” Ludlam said.