CEO Leaving Nonprofit Hospital System after 15 Months over Professional Differences

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February 3, 2015; St. Paul Pioneer Press

Citing “professional differences” with its board, Minneapolis-based Fairview Health System announced yesterday that CEO Rulon Stacey will leave at the end of February. A team of three people will act in the interim CEO role until a successor can be found.

Stacey’s departure from the $3.5 billion healthcare system comes only fifteen months after he was recruited from University of Colorado Health. At that time, Fairview was still recovering from a controversy over collections practices that forced the resignation of the previous CEO in 2012 and the board chair, Charles Mooty, to take over as interim CEO for more than a year.

Modern Healthcare News reports that Fairview Health Services has been financially successful, with a reported $108 million net operating margin (profit) on $2.7 billion in revenue for the first nine months of 2014. Fairview employs more than 21,000 people, has 2,300 “aligned” physicians, and operates seven hospitals, more than 40 clinics, 55 specialty clinics, 53 senior housing locations, and 30 retail pharmacies.

However, its participation in the Pioneer ACO (accountable care organization) program instituted as part of the Affordable Care Act has not resulted in any savings to Fairview, casting doubt on both the health system’s implementation of the ACO model and its continued participation in the Pioneer ACO effort. Fairview has also been unsuccessful in merger attempts, most notably with Sioux Falls-based Sanford Health, as NPQ reported in 2013. Meanwhile, competing Minnesota health systems Allina and Health Partners have been successful in mergers in the Minnesota market.

The interim CEO triumvirate is especially interesting. Three men—board chair David Murphy, former board chair and interim CEO Chuck Mooty, and Dr. Brooks Jackson, a board member and dean of the University of Minnesota medical school—will comprise an “Office of the CEO” while Fairview searches for its fourth leader (counting interim CEOs) in three years. It’s worth noting that the communication by the board of Stacey’s departure came from Mooty, not Murphy as board chair. Mooty’s history with Fairview, including his previous tenure as interim CEO, makes it likely that he will be the “first among equals” in the CEO’s office. His previous leadership experience includes his current role as CEO of Jostens (known for its graduation jewelry and yearbooks for schools and colleges) and past service as CEO of International Dairy Queen.

The Minnesota attorney general, Lori Swanson, will likely be watching events as they continue to unfold at Fairview Health. After the billing and collections controversy in 2012, Fairview agreed to work closely with Swanson and the AG’s office (as regulator of the state’s charities) to implement leadership changes, and especially to keep the state informed about its efforts to hire a new CEO. Swanson’s concerns about the proposed Sanford Health merger in 2013 were instrumental in Sanford’s decision to withdraw its merger offer. With a recent history of headline-making events and changes at Fairview, it’s likely that AG Swanson will be continuing to watch Fairview Health Services for the foreseeable future.—Michael Wyland