Learning from adversity: diary of a medical manager.

University Mednet is a 120-physician, multispecialty group practice located in the northeastern part of the Greater Cleveland area. In 1966, when I joined the clinic as a general and vascular surgeon, there were 25 physicians and dentists. The governance consisted of a board of trustees with an internally elected president who practiced medicine full-time and who was not involved in day-to-day management. The administrator was not a physician. The physicians practiced under the same roof, utilized the same billing services, and covered each other on nights off and vacations.

During the ensuing years the clinic grew and prospered, as did my career. I gradually became interested in participating in the governance of the clinic and, in 1971, succeeded in getting elected to the board. I served in that capacity for 14 years. Although relations between clinic and nonclinic physicians at our local hospital were never very good, particularly after we started our HMO, I managed to get myself elected chief of surgery and eventually chief of staff, the first clinic physician to serve in that capacity.

Two events were pivotal in shaping the clinic prior to the 1980s. The first was our decision to build a clinic facility in Mentor, a community 20 miles from the main clinic building. Subsequent growth has confirmed the correctness of that decision. The second major event was the formation of our HMO, which occurred in 1978 as a joint venture with the local Blue Cross/Blue Shield organization. This also was a fortuitous move, and, on more than one occasion, it saved the day for the clinic financially.

In the early 1980s, the clinic was run by an administrator who did not have the abilities of the prior one. He could not deal well with physicians, his management abilities were questioned, and he failed to develop the trust of both his staff and physicians. The CEO and president of the board was a physician who had been elected to the board in the late `60s. Initially, he practiced medicine full-time, but, as time went on, he gradually worked part-time in medicine and part-time in administration. He had no real experience or formal training in administration but learned on the job, as the rest of us did, with help from various ACPE courses that we all took.

During this time, the clinic seemed to be doing fairly well, in spite of a lack of capable administration. The executive director finally left and, for one-and-one-half years, we had no executive director. Yet we dramatically improved our pension plan, instituted profit-sharing plans, started a car and gasoline allowance, and instituted better insurance plans. Our auditors were beginning to tell us that. we needed to make significant improvements in the way that we ran the business, but in the face of healthy profits, we saw no need to make any drastic changes. However, we did hire a new executive director in 1984.

Starting in 1983, we began to show operating losses. In spite of these losses, we continued to give physicians increases in their pay. Finally, in the summer of 1985, we recognized that we were in trouble. Many were not happy with our executive director, and many were not happy with the job that the CEO was doing. A physician pay cut was looming on the horizon and our bankers were telling us that we were tapped out.

In June 1985, an off-campus meeting was held by the board, without the CEO or administration present, and it was decided we should meet with the CEO and inform him of our concern with the way things were going. We had doubts about the capabilities of the executive director, were troubled about the financial position of the clinic, and sensed a lack of confidence in the leadership of the CEO.

Another off-campus meeting was held with the CEO present, and he was informed of our concerns. We agreed to his request for full-time status in administration, with the understanding that he would become more involved in the day-to-day running of the clinic. We gave him a one-year contract to do just that. Unfortunately, a few months later he developed some cardiac difficulties requiring hospitalization and some time off. Upon his return, things did not improve, and we felt that he was no longer an effective administrator. He had been CEO for many years and had accomplished a lot during that time, but we felt that a change was in order. We were not sure about the executive director, but we felt that change had to start at the top.

A third off campus-meeting was held in early December at which we decided to dismiss the CEO. After volunteering, I was elected to fill that position. We met, once again off-campus, with the CEO present, and he was relieved of his duties. I read a prepared statement to him, explaining why we thought a change was necessary and telling him I was taking his place. He asked if there shouldn't be a transition period, but we felt the change should occur immediately.

I think that, when such events occur in physician organizations, the initial reaction is to have an internal person assume the position. That person is a known quantity, is a physician (in this case), and is one of us. If the person also seems to have some leadership ability and, most important, the respect of physicians, it would seem logical to have him step up and take charge. Of course, that person must want to do the job.

I did not have any real experience in the day-to-day running of a $40 million business, but I was convinced that with the right kind of help, I could get the job done. In addition, being the busiest surgeon in the group and having had bypass surgery in 1982, I was beginning to think about early retirement, and this seemed an exciting challenge on which to end my career.

I proposed a five-year plan in which I would act as CEO until 1990/1991, provided I was successful in the effort. These changes were instituted immediately by the board with only one dissenting vote. That person felt that there should be a transition period, and perhaps it would have tended to smooth over the hurt feelings that were bound to occur. Knowing what I know now, I still feel strongly that there is no polite, kind way of telling a person he is no longer wanted as a group's leader.

My approach to the job included continuing a small amount of surgery rather than full time administration. I did not want to completely sever my ties to my scrub suit. I wanted my fellow physicians to continue to think of me as one of them." I also practiced an open door policy - my office was along one of the main hallways and my door was always open. l did insist on not taking call, and this created difficulties in my department. Even though I was on a straight salary, any cases that I did took potential revenue from other physicians. These issues are always present with physician administrators who wish to continue to have physical contact with medicine but who need to devote most of their energies to solving the complex problems of clinic administration.

My first major task was evaluation of our executive director. During the next six weeks, I sought opinions of him from many sources, including legal counsel, our bankers, officials from Blue Cross/Blue Shield, and various members of the board. I also interviewed all of the current administrators and second level managers . I observed his performance in the various managers' meetings and spent considerable time with him. In the end, I felt that his effectiveness had been lost and that he had to be terminated. The board accepted this recommendation. At the same time, I told the board I would assume his duties. After being in the job only 6 weeks, I was convinced the prior CEO had not really been involved at all in the daily operations of the clinic. If I were to become actively involved and if I could surround myself with the right people with the proper technical expertise, I could also do this job. I wanted to be in charge. Whether this was a "surgeon's mentality," bred of 20 years in the operating room or my own basic personality of needing to be in charge is a moot point. It was probably one of my biggest mistakes.

Other mistakes that I made included the failure to recognize that 80 percent of our work force was female. All of my administrators were male, and I'm sure that we gradually became know as the "good old boys" with our Friday morning administrators' meetings. We had several outstanding female managers who would have make good administrators, had I chosen them.

Another mistake was to try and work with all of the previous administrators. I should have been more aggressive in replacing some people. If I was to be successful, I needed to have very capable people around me, and the board needed to support that concept.

The early results, particularly in 1986 were good. We had a profit and the physicians got a raise. Obviously, I cannot claim a lot of the responsibility for this turnaround. Many things started by the previous administration resulted in considerable savings, and we were obviously in one of those cyclic upswings in business. In 1987, because of continuing profits, we decided to give a bonus not only to the physicians, but also to every employee in the clinic. Needless to say, my popularity was quite high at that time. However, the bankers were not enthusiastic about what we were doing, preferring that we keep some of the money for a rainy day. But we would hear none of that.

In 1987, an event occurred that I rank with the two prior major events in the Clinic's history. University Hospitals of Cleveland was interested in increasing its share of the tertiary care done in the area and James Block, MD, then CEO, initiated a discussion with me about how the two organizations could work closer together. These discussions ultimately resulted in Mednet being purchased by University Hospitals. Negotiations lasted for five months and a settlement was reached. However, because University Hospitals was a not-for-profit corporation and Mednet was not, it took another 14 months to get government approval and to settle on a final document that was acceptable to all. This agreement was finally signed in late February 1989, a date that probably had some significance with regard to the length of my tenure as CEO.

A problem that occurred during this period was the fact that I became all consumed with the University negotiations. Little of my time was spent on in-house problems. We needed 100 percent approval of physicians in order to consummate the deal and that proved to be a formidable task. Ultimately, only three physicians decided to leave the clinic, and we were able to complete the agreement.

Events since my departure seem to confirm the correctness of the purchase. This is particularly true in view of the significant loses that have continued to occur over the past few years, the increasing financial difficulties most clinics without strong financial backing are encountering, and the fact that clinic physicians are still receiving substantial salaries, in addition to the monies they are receiving from the purchase price.

In 1989, financial woes returned. We were once again losing money, doctors were not going to get any raises and, worse, we would not be able to contribute to their 401(K) plans. At our quarterly meeting in October of that year, I attempted to explain why we were in difficult times again and what we in administration were recommending be done to correct the situation. In most organizations, the bottom line is paramount. As long as it remains positive, people will go along with management, putting up with whatever perceived deficiencies there might be, rather than disrupt the entire process. Once the bottom line deteriorates, however, all bets are off - particularly when physicians' salaries begin to be affected. This is probably a gross oversimplification of what had happened, but I think it did set the stage for what followed.

In my address to the membership at our annual meeting in January 1989, I felt that I was still in control of my own destiny. However, I knew some members of the board were not happy with me or with the job I was doing, so I asked for, and received, a contract for all of 1989 so I could be assured I would have a position at the clinic until my planned retirement in 1990. Prior to that time, I had no written contract. In fact, Dr. Block had suggested during our negotiations that University Hospitals guarantee my salary for the next three years, but I refused, on the grounds that I did not want to give the impression o personally profiting from the purchase.

At this point, it would be appropriate to mention two management studies that were done at the clinic during my tenure. The first was done by J. B. Silvers of the Case Western School of Business sometime late in 1986. Feedback from that study concerning me was my "surgeon's mentality," in which "everything was black and white" and I did not allow room for disagreement etc. My reaction at that time was that I did have a surgeon's mentality and some of that was necessary to get the job done. I should have taken those comments more seriously.

The second study was done by Irv Rubin and Temenos, Inc. It was started in June 1988 and continued for about a year. My relationship with Irv was good at the start, but, after subsequent visits, it became apparent to me that our relationship had deteriorated. I felt he was becoming particularly critical of the way I was doing things. I stopped receiving feedback, and he began spending more time with other member$ of the board. I suspect that, by then, he was aware of the board's displeasure with me. Sensing the inevitable outcome, he became involved as a facilitator in that regard. We had our annual retreat in February, and it proved to be one of the most violent emotional roller coasters I have ever been on.

Looking back on it, it was obvious the board was trying to tell me something that I did not want to hear or accept. They were trying to have me step aside and let others come in and take over a lot of the responsibilities that I had and I wasn't willing to accept that. From then on, it was a downhill struggle. I suppose I did not make things easier for anybody, but I just was not ready to admit I had been a failure in the CEO role, particularly when we were now on the threshold of an exciting future for the clinic and its parent, University Hospitals. I felt I had played a large part in achieving that goal, and I wanted to participate, at least in the beginning, in that relationship.

I was formally dismissed from the CEO position in May 1989. I was to resign from the Board and I would not take part in the transition process. My contract and salary would be honored, and I would not be required to return to surgery. In the meantime, the clinic would be managed by the board as a collective group until a successor could be found.

My successor was the long-standing legal counsel of the clinic. He was thoroughly familiar to all the members of the board and the clinic, because he had been at every quarterly and annual meeting during his tenure. He had sat through every board meeting, both open and closed, and he was a participant at every board retreat. He also was personally responsible for a lot of the negotiations that occurred while he was legal counsel, and he negotiated very favorable contracts for the clinic. In addition, he specialized in medical matters for his law firm and had represented several other medical facilities. I suspect another reason for his selection was the fact that at least one or two members of the board might have had designs on the job and the rest of the members rightly recognized that the mistakes of the past should not be repeated.

Thus, there was a very high comfort level with this person. He had no hands-on management experience but expected to surround himself with people with the necessary expertise. In addition, I think he probably benefited from the mistakes of both me and my predecessor in his previous role as a close confidant and advisor to both of us.

My own thought at the time, obviously prejudiced by events, was that there were many well-qualified, well-trained physician managers available for the position. I still felt a physician was the best person to be the CEO of a multispecialty clinic; preferably one who had some clinical experience before going into administration. It seems to me that only a physician who has actually experienced the practice of medicine can understand the patient-physician relationship and the difficulties that occur in that relationship, both in the clinic setting and in the hospital setting. However, I'm sure that the board was not of a mind to risk bringing in an outsider at that point.

What are my conclusions regarding my experience as a CEO at University Mednet? My own deficiencies were many. I did not take criticism well, I did not delegate well, I had to be in control, and I usually felt that my way was better. Another thing I did not do well was politics. I felt that as long as things were going well, that sort of thing was not necessary. I now think some of that is always essential.

Nevertheless, I did accomplish several good things during my tenure, and I think perhaps my interlude as CEO came at the right time in the clinic's history. For me, the experience was terribly exciting. It came at the perfect time in my career, and, during the earlier part of the tenure, I thoroughly enjoyed what I was doing. The latter part of the experience was very unpleasant, however. In spite of the fact that I believed I had accomplished a lot in my 25 years in Euclid, both as a general surgeon and as an administrator, not only at the clinic, but also at the hospital, my overriding thoughts at that time were that my colleagues had decided I was a failure in this last task.

Would I do it again? I'm not sure, but I think I probably would not. Knowing what I know now, could I have changed the way did things? Probably not. I think that it is very difficult for a person in his 50s who has been a surgeon all of his life to become somebody else. In fact, I'm not sure that anyone can change his basic personality. To this day, I still find it difficult to sit at meetings and not eventually attempt to influence or ultimately to take charge.