Servant CEO

Servant CEO

By Sean Roth

Real Estate Editor

As chief operating officer of the Detroit Medical Center, Gwen MacKenzie was responsible for the operations and results at nine hospitals - a $1.7 billion (revenues) business. MacKenzie, 50, reached that position after 25 years of being a leader who brought health-care professionals together to accomplish missions, including saving deeply troubled hospitals from shuttering their doors.

When a headhunter approached MacKenzie about becoming chief executive officer of Sarasota Memorial Hospital and its half-dozen other operating divisions, she at first rejected it without much thought. She admits she had the stereotypical vision of a public hospital - that they're usually the worst-run hospitals in a market, poorly equipped and on the verge of going broke. But the headhunter persisted, and MacKenzie relented. She decided to visit Sarasota Memorial.

The results were surprising - for both parties. MacKenzie says she "was floored" by the quality of SMH's physicians, the passion of the hospital's employees and the community's pride in the hospital. Likewise, the dozens of people who interviewed her learned that her experience as a turnaround specialist, as a leader of a multi-hospital health-care system and her servant-style of leadership would suit SMH well as it moved from the post-Duncan Finlay era to the next phase of the hospital's life.

MacKenzie last week took her first steps toward executing her plan to make SMH financially healthy and among the top 10 hospitals in the nation. She announced the elimination of 60 management and staff jobs and 30 vacant positions. Other changes are in store.

To learn more about MacKenzie, her plans and strategic vision for Sarasota Memorial, Review's editors Matt Walsh and Sean Roth interviewed MacKenzie in a conference room at the hospital.

The following is the first of two parts of the interview and focuses on her history at DMC and how it shaped her management philosophy.

You made the transition from nursing to high-level health-care management, how did that happen? Was this your plan when you went into health care?

No, like most clinicians - and I say clinicians because I think the same is true for physician administrators - you don't plan that you want to be a manager. I very much enjoyed patient care. I was in the oncology field so that was very team oriented. Trying to create cures for cancer was invigorating.

I was asked to assume an interim management position while someone was in graduate school. I wasn't really interested in doing it but got talked into it. And then I found I really enjoyed it. I enjoyed it because I knew that I personally was never going to cure cancer. But I felt if I could be part of creating an environment where other talented people could do that - scientists, physicians and others - that maybe after all we could speed along things that are happening. I really felt like a manager's job was to create the best environment for other people to practice and be able make those advances.

Where were you in your career to this point?

I had graduated from the University of Michigan in '76. Then I went to UCLA in '77 to get my master's in oncology nursing. I was a nurse practitioner from '79 to '82 when I entered management.

Your reputation is as a turnaround specialist. What did you turn around at DMC?

The first one was probably the ambulatory division. We were losing $75 million a year at the time. I was in that position for a little under two years, and left when we were losing $25 million.

The next position was in one of our hospitals where we had merged two hospitals we acquired - Sinai Hospital, a Jewish hospital in Detroit that was a block away from a hospital called Grace Hospital. The two were losing about $4 million a month together.

So we had the Hunter Group, which is a national turnaround firm, with us at the time. They put the two hospitals together in about six months, so it was a very, very accelerated, difficult merger. When I arrived, it was just after an audited loss of about $72 million of the single hospital (Sinai-Grace).

I was secretly told by the CEO at the time that if I didn't start improving the losses that the system was going to have to close the newly merged hospital. That was about three months into my tenure as the president.

What did you do?

I wasn't told that when I took the job. I didn't take the job, per say. It was sort of like GM, where you were assigned. The interesting part of that was there were two disparate medical staffs. The medical staff of a Jewish hospital is not the same as the medical staff of the community hospital, which was largely African American.

So you had two very disparate cultures. (At the same time) part of creating a positive movement in the ambulatory division was privatizing physicians. We had 300 some employees at one point. When I left, we had 120. It turned out that the very physicians that I had to (let go) were on the medical staff of the hospital I was now president of. So if there had been a vote for who would have been president, it would not have been me.

So it was a little bit of an upward climb in a very distrusting community ... The community was very upset...

Where did you start to fix things?

I think you start by taking a big difficult problem and trying to make it as simple as possible and trying to figure out if you do a few simple straightforward things, you are going to see your way to improvement. One (answer) was to engage the physicians in leadership. Now everybody says that, and physicians would be the first to tell you that they can identify token leadership and real leadership in about a millisecond.

So the first thing was really getting all the physician leaders organized and involved so that they were part of the executive management team.

You (also) really need to get down to the mid-level managers, the people on the units, the people who are taking care of the patients, and find out what is the real story. So we involved that level in the management as well as the physicians, and then we said, "OK, what are the first few things we can do to turn this situation around?"

You don't start with the financial equation, because no one understands it. If you have good patient care, then the financials will turn themselves around. So we didn't start with "we are losing $4 million a month," we started with what are the ways we can bring more patients to the institution? How can we get over this post-merger disorganization? We started with patient satisfaction. We started with simple things that were important to the doctors, like answering a patient's call lights. That turned out to be the thing they were most concerned about - good patient care.

Had the hospitals' public reputation been hurt?

Absolutely. There were two 80,000-visit emergency rooms. You take two of those, and you put them together, and it's like Beirut. All of a sudden you are in some Third-World country fighting for your life. There hadn't been enough time to do (the merger) in an organized fashion.

We paid a lot of attention to the emergency room. We brought the community in, which was probably the most difficult thing to do because they were not only distrustful but angry. So there were some pretty contentious meetings.

Number one, I was a Caucasian woman, who was placed in the role in an African American community that didn't trust the system. But we kept at it. We kept inviting them back. In the beginning we met monthly, then later bi-monthly meetings to say "Here is the chief of the emergency room." It was always putting doctors out in front so that they could see that we had good doctors, and we wanted to hear what the problems were.

(We said,) "Here is the chief of the emergency room. Tell us what your recent experiences have been and tell us so we can do better." Then the next month we'd say, "How did we do?" They were pretty honest, and they kept coming back, which was pretty surprising.

One day I went to the kitchen in the bowels of the institution. The union steward happened to be walking by, and I said, "How are we doing with patient satisfaction?" He took me over to the wall. They had a United Way thermometer on the wall, and they were measuring patient satisfaction with the food. It blew me away. I thought, "Now we've made it."

I was there two years, and it took two years to break even. But we left the institution healthy.

How else did you bring expenses in line with revenues?

A simple thing like an emergency room where everyone is flying around, they are not always writing down to credit the services so you can get reimbursed for what you do. Making sure we collect for everything we do. Making sure we code for everything we do. That is where you go first before you start cutting people.

When you bring two hospitals together there is an awful lot of inventory. So it's getting that down to just-in-time inventory.

Length of stay was another one. There was a lot of efficiency to be gained by just people really managing the length of stay. We reduced the stay by a day and a half, which is probably $3 million to $4 million.

(We also worked) at sizing to volume, because hospitals are really bad at flexing to volume. The very last thing we did, which was the thing that took us over the top to break even and profit, was to reinstitute an open-heart program that had been suspended during the merger. You have to have a couple key clinical programs that drive the profitability. That took the institution over the top, and it keeps it healthy today.

What were the incentives for the physicians to turn around these two hospitals?

It really was to keep the place open. It wasn't a lousy place, it was their place, and you find the same thing here. If you go around and talk to the physicians here, this is their place. They are going to do it even though it was a disincentive to them. They have no incentive to see patients less days, because they bill for every day. So you have to approach it as "we are in this together." The reward will be the institution gets healthy and will be here for you.

How you do you find out the real condition of a hospital?

You spend enough time walking around the organization to really understand the care and the problems. People come to know you not as someone who sits in an office in command central. So you try not to spend time in your office. I remember one of the housekeepers stopping me one day and telling me we didn't have enough toilet seat covers in the public restrooms. You would think this is a pretty mundane thing, but to her it was the most important thing in the world, because the public would think badly of us. So you have to get to that level of the organization.

You look to find places ... the employee activities committee, that is always a good source. We formed nursing governance groups. People are pretty vocal if you ask them, and if they really think that you want to know the answer.

How did you divide your time as COO?

I tried to spend as much time with physicians as possible because they drive the organization. And then spending time in the hospitals. You know when you have nine hospitals, and you don't now how to find your way around them, that's a pretty good clue that you may not know what's going on. I would try to meet the presidents at their hospitals, make rounds and talk about the problems.

I'm not a big believer in meetings. It's hard to be COO of a big place because it is a big place. If you just end up shuffling the bureaucracy, it's not very rewarding.

I thought of my role as a leader is one of serving other people. So in this case, while the presidents reported to me, I thought of myself as really serving their needs, trying to advocate for them when they needed things. Nine hospitals are very competitive with one another, it's like having nine brothers and sisters.

Next week: MacKenzie's vision and plans for Sarasota Memorial.