GRAND RAPIDS — The next CEO of Spectrum Health will face a decidedly different West Michigan health care industry than what Richard Breon did when he came to the Grand Rapids market 17 years ago.
Since 2000, Spectrum Health has become the largest health system in the region, and health care as an industry has experienced fundamental changes over the last several years.
A shifting economic model now pays more for quality rather than volume, and there’s a greater focus on outpatient care, keeping people well and managing high-cost chronic illness. Additionally, genetic-based precision medicine has become a reality, and consumers and employers now demand more information about the cost and quality of health care.
On top of those dynamics are the changes brought on by the federal Affordable Care Act and lingering uncertainty about what happens with the federal health law in the future.
The next CEO will need the ability to navigate all of those issues that have emerged since the last time Spectrum Health sought a new chief executive.
“There are a series of mega-trends that are happening and I think it will play for the next decade of Spectrum Health,” said Breon, Spectrum’s Health CEO since 2000 who plans to retire by Jan. 1, 2019.
Directors at Spectrum Health plan to hire a consultant to assist in a search for a new CEO that will look internally and externally. Directors have begun to develop a list of core capabilities that the next CEO “needs to embody,” said Dick DeVos, chairman of the Spectrum Health board.
“Frankly, it’s a different list than when Rick was hired because the complexity, scale, size and needs of the organization are substantially different than they were,” DeVos told MiBiz.
DeVos called the nearly 15 months between the public announcement and the date of Breon’s planned departure a “great gift” that will allow directors to conduct a methodical search for a new CEO.
“This is a very complicated search. This is an exceptionally large and important position and we want to make sure we get it right,” he said. “It’s going to take every bit of that time.”
On top of the professional and leadership skills, the next CEO needs to possess a compatibility with the culture of both Spectrum Health and West Michigan, an aspect of the search that DeVos calls “critical.”
BECOMING A CONSOLIDATOR
Breon arrived in Grand Rapids in 2000 from St. Mary’s Hospital and Medical Center in Evansville, Ind., where he was president and CEO. He took over at Spectrum Health just three years after the landmark merger of the former Butterworth Hospital and Blodgett Memorial Medical Center.
At the time, he was hired to lead a health system that had recently gone from two good community hospitals to “one very good community hospital” that grew over the years into “a truly world-class regional medical center, and that’s pretty special,” DeVos said.
“Rick has made a tremendous contribution to West Michigan. His efforts have made a transformational change in our community,” he said.
Spectrum Health in 2000 had about 7,500 employees and a budget of $710 million.
Under Breon’s leadership, Spectrum Health grew into a 12-hospital health system with more than 3,400 physicians and more than 25,000 employees.
The health system expanded clinical services and specialty care — including initiating heart, lung and bone marrow transplant — and acquired a number of community hospitals across West Michigan. The period also saw massive investments to develop new facilities, often with the support of major benefactors who donated millions to each project. The facilities include the Fred and Lena Meijer Heart Center, Lemmen-Holton Cancer Pavilion, and the Helen DeVos Children’s Hospital at the Butterworth campus on Michigan Street.
In its most recent fiscal year, Spectrum Health recorded operating revenues of $5.68 billion and $192 million in net operating income. A budget for the 2018 fiscal year that started July 1 projects operating revenues of $6.1 billion and operating income of $171 million.
The 66-year-old Breon and Spectrum Health’s board of directors have discussed his eventual retirement and succession planning for about two years, he said. He decided to set a departure time while Spectrum Health “is in great shape” and has a balance sheet that’s “as strong as it’s ever been.”
“I think it’s the perfect time to hand the baton off,” Breon said.
Setting a retirement date now provides Spectrum Health directors ample time to seek and hire a new CEO, said Breon, who has made succession planning throughout the health system a high priority in the last few years.
As the board conducts its search for a new CEO over the next 14 months before his departure, Breon doesn’t see any delay ahead for initiatives or projects, nor does he expect decisions will be put on hold for the next leader.
“I don’t think anything’s going to slow down during this transition. The things that we are focusing on are going to continue,” he said. “I don’t see a lull in the action even though we have a transition. Part of it is that this isn’t a one-man shop. We have so many people with so much talent doing things. Whether they’re sitting in the big chair or not, those things are going to continue, and that’s how you want the organization to function.”