The business of health care.

There's no business like the health care business. Just ask Marla Thomas, a Harvard MBA and former investment banker with Drexel Burnham Lambert. Thomas, 35, joined Drexel in 1982 and spent eight years as first vice president in corporate finance specializing in health care companies. "The health care industry experienced explosive growth over the last 10 years," recalls Thomas, who is also a graduate of Wellesley College with a B.A. in economics. By 1984, Drexel was handling about 70% of all health care transactions on Wall Street. More importantly, health care management was one of the few American industries to defy the gravitational force of a major national recession.

That was good news for Thomas, who lost her six-figure job when Drexel collapsed in 1990. While many of her colleagues joined the ranks of the unemployed or scrambled for positions in the manufacturing sector, Thomas' penchant for health finance smoothed the transition to her current position as president and chief operating officer of American Shared Hospital Services (ASHS), a San Francisco-based health services company that rents state-of-the-art magnetic resonance imaging (MRI) and other diagnostic imaging equipment to hospitals and doctors' positions are held by racial or ethnic minorities. Based on 1990 data, the Equal Employment Opportunity Commission (EEOC) reports that of the 287,014 health services officials and managers nationwide only 18,711 or 6.5%, were African-American. Of that number, 5,438 or 1.9% were black men, and 13,273 or 4.6%, black women. "In too many black communities health care is only about [becoming] doctors and nurses," says Nathaniel R. Wesley, director of planning at Howard University Hospital, who holds an M.S. in hospital administration from the University of Michigan. "As a result, the business side of health care has been generally overlooked as a career option."

Wesley, a fellow of the ACHE, says that few health care institutions in minority communities are headed by minority executives. "We need more people with specialties in functional areas such as finance, marketing, operations, research and quality assurance," he says, adding that the goal of health management goes way beyond keeping track of the bottom line. "The ultimate end product is a healthy person."

Beating The Odds

But there are African-Americans pursuing careers on the health management track. Take Denise R. Williams, president and CEO of Roseland Community Hospital (RCH), a 67-year-old neighborhood hospital on Chicago's far South Side. Williams joined the 164-bed facility in 1986 armed with only nine years experience in hospital management and a passion for making a difference. She inherited a hospital with a $1.2 million annual operating loss. "The hospital had a moribund outlook," recalls Williams, 39, who earned a masters degree in health administration (MHA) from Virginia Commonwealth University in Richmond and a B.A. in psychology from Norfolk State University, "and it was viewed as less than a quality place." Her mission: Rescue RCH from the city's list of endangered community hospitals.

It was an unenviable task. RCH is stricken by the same economic problems that have caused five out of more than 100 hospitals in the Chicago area to close since 1985. According to the American Hospital Association, 761 hospitals nationwide were closed between 1980 and 1990. Deficits and lack of patients with private health insurance are chief causes.

Only 20% of RCH's patients are covered by private insurers, says Williams. The majority are covered by revenues tied to Medicaid (45%), and Medicare (35%). These payments often do not cover the total cost of patient care provided by the facility. The result: a loss of vital hospital revenue.

To meet the challenge, Williams negotiated a new public-aid contract with the State of Illinois to provide more hospital service for Medicaid patients, a move that increased receipts $1 million by 1989. She then combined departments and reduced her middle-management staff to generate an additional $1.3 million. By 1990, RCH posted $50 million in revenue with a net income of $4.5 million, versus a 1987 net loss of over $200,000.

While those strategies helped pull RCH out of the red, Williams still faces the awesome task of boosting the hospital's market share. In a community where hospital occupancy rates are hovering only around 70%, a recession-beaten local economy cannot support major capital improvement programs for RCH's aging facilities. Williams is fighting to give her hospital a competitive edge by launching new outpatient services, such as a 3-year-old pediatric urgent care center. Williams says that outpatient services operate at one-tenth the cost of hospital emergency rooms.

But she says rebuilding a troubled hospital goes beyond the day-to-day business of administration. "We still have a lot of work to do to convince the neighborhood that we're committed to providing quality services," admits the native Virginian who got her first taste of hospital management as a work-study admitting clerk at Norfolk General Hospital. She says networking with community groups, and sponsoring senior-citizen services, hospital programs on infant mortality and rape counseling are part of RCH's approach to improving community relations.

From Bedside To Boardroom

While Williams took the more traditional path down the health management career track, Margaret Hayes-Jordan, vice president and regional manager for Kaiser Foundation Health Plan of Texas Inc., began sewing the seeds of her management career as a staff nurse at San Bernardino Hospital in 1964. "My building block was patient care and learning how to organize health services to meet patient needs," says Hayes-Jordan, 48, who, in addition to receiving a B.S. in nursing from Georgetown University, holds a masters of public health (MPH) from the University of California at Berkeley.

After spending seven years in nursing, Hayes-Jordan moved into management to develop what she describes as her "natural talents for planning, coordinating and directing." She offices. "Some people see the move as a rise up the corporate ladder," says Thomas of her position, "but I see it as a chance to be part of one terrific opportunity."

Opportunity is the buzzword for this business. The health care industry is one of the fastest-growing sectors of the U.S. economy and fertile ground for career and business opportunities in the '90s. According to the Occupational Outlook from the Bureau of Labor Statistics (BLS), the health service industry is projected to grow from 1988 levels of 8,212,800 employed to 11,289,550 by the year 2000. While there remains a critical personnel shortage in traditional areas of medicine, such as doctors, nurses and emergency care workers, there is a growing need for health service managers and executives who are responsible for the facilities, services, staff, budgets and operations of health systems. This growing demand for health services and personnel has spawned new avenues for entrepreneurs, ranging from MRI centers to home health care businesses.

Why is health care so hot? According to the Department of Health and Human Services (HHS), U.S. medical costs exceeded $600 billion--over 12% of the gross national product (GNP)--in 1990, more than twice its rate 20 years ago. In fact, some estimates suggest the nation's medical bill could soar to 17% of GNP by the year 2000.

Increased utilization of health services by a growing elderly population; advances in medical technology, equipment, facilities, medications and procedures; and inflation all have contributed to the spiraling costs. So have public health problems such as AIDS and substance abuse. The need to hold down the nation's medical bill is significantly changing the way U.S. health services are delivered: More care is being administered in less expensive, nonhospital settings such as ambulatory surgical centers, free-standing clinics, short-stay treatment facilities and patients' homes. Equally important is the rapid growth of multi-hospital systems: the consolidation of two or more independent hospitals, physician group practices and managed care organizations such as health maintenance organizations (HMOs).

Where The Opportunities Are

This growing emphasis on cost containment and the explosion of complex, corporate-style health care systems and services have significantly expanded markets for health care entrepreneurs in the '90s. But more impressive is the increasing demand for health services managers, administrators and executives.

According to the Bureau of Labor Statistics, the number of health services managers employed in the United States will top 450,000 by the year 2000, up 42% from 1988. It is a demand driven by the anticipated boom in diagnostic, assessment and health care support personnel--from primary care physicians to physical and respiratory therapists to registered nurses. James N. Heuerman, vice president/senior partner of Korn/Ferry International, an executive placement firm in San Francisco, says the real action for health managers in the '90s will be in outpatient services, such as HMOs, insurance companies, consulting firms, associations, and long-term and ambulatory care facilities, to name a few. Indeed, Michael D. Caver, managing partner of health care practice for Heidrick and Struggles Inc. (HSI), an international executive-search firm in Chicago, expects to see "a 500% to 1,000% increase in opportunities in nontraditional settings by the year 2000," along with a contraction in management jobs at traditional acute care hospitals because of downsizing and consolidations.

Entry-level salaries start at $35,000 for managers holding M.S. degrees in health management with three years experience. Associate administrators and vice presidents with five to seven years in the field earn anywhere from $50,000 to $100,000 depending upon the location, position, size and type of organization. And salaries for the top health management positions are competitive with those of industrial and financial executives. In a recent Modern Healthcare magazine survey, conducted by Philadelphia-based Hay Management Consultants, the average base pay for CEOs at independent hospitals was $130,000 in 1991, with chief executives at multi-hospital systems earning over $300,000.

According to the Washington, D.C.-based American Hospital Association (AHA), the CEOs of 5,455 community hospitals nationwide managed over $191 billion in net revenues in 1989. Being a hospital CEO "is one of the biggest, most complex management assignments anyone can undertake" says Caver of HSI. "Those who have the skills and are top performers will be kings and queens in the business," he adds.

But while the industry's overall outlook for management careers is optimistic, the career opportunities for African-American health services managers have been less than promising. The Chicago-based American College of Health Care Executives (ACHE), estimates only 1% of top hospital worked first as a consultant, then as deputy director in the resources development division of the U.S. Public Health Service, a bureau under the Department of Health and Human Services. By 1979, she moved to an associate administrator position at San Francisco General Hospital, where she managed a $10 million budget and directed a hospital and community-based primary care and outpatient program. "I brought the expertise I accumulated in the federal government and put it to work in the delivery system," explains Hayes-Jordan, a Washington, D.C., native.

In 1981, she joined the Kaiser Foundation Plan Inc., a nonprofit arm of Kaiser Permanente, the largest multi-specialty group-practice HMO in the country. In just five years, she went from licensing and accreditation coordinator to her current position as vice president and regional manager for the Dallas-Forth Worth region. Recognized as one of the "21 Women Of Power And Influence In Corporate America," (BLACK ENTERPRISE, August 1991), she now controls a $166 million budget; oversees an 880-member staff; and plans, manages and evaluates Kaiser's health and medical care services for her region's 116,000 members.

According to the Washington, D.C.-based Group Health Association of America, managed care organizations or prepaid health programs such as HMOs represent one of the fastest-growing segments of the health care industry. In 1990, the nation's 569 HMOs served over 26 million members--a significant increase from 18 million members in 1985--and generated over $38 billion in revenue.

While the thriving HMO market sounds like the perfect place for Hayes-Jordan's finely tuned management expertise, she says the move to managed care was a big philosophical shift from the public health arena where "worrying about underserved minorities and working for equity in health care" were part of her mandate. Kaiser's emphasis on lowering medical costs over time through health promotion and preventive medicine helped ease her transition to the private sector.

Dr. Paul E. Wallace, chairman of Howard University's graduate health administration program agrees that finding the right fit is an important consideration. He also says HMOs make good training grounds for new managers in the '90s. "After five years as a senior manager, you can apply for top jobs in tighter markets like multi-hospital systems, insurance firms or the public sector," he adds.

Managing For Profit

For those who want to pursue entrepreneurial prospects in health care, the opportunities are wide open. Just ask Rick VanNoy, president and CEO of Consolidated Critical Care (CCC), a Georgia-based home health services company.

In 1990, the former broker for Dean Witter Reynolds in Atlanta left the firm to start his own health services business. VanNoy's 2-year-old company sells and rents respiratory and durable medical equipment, and provides home-based intravenous therapy. Based largely in minority communities throughout Georgia, CCC's six locations serve 50 private physicians and 7 hospitals. Of the company's 800 consumers, 70% are covered by Medicare and Medicaid. Last year, CCC averaged $1.2 million in sales with a net profit margin of 15%.

His success is not surprising. The home health care market, a relatively new component of the health care industry, is a natural byproduct of the movement to cut spending while meeting consumer demands for more convenient services. According to VanNoy, home health care entrepreneurs racked up $2 billion in sales in 1991 with close to 80% of the market controlled by a few major companies.

Even with his initial success, VanNoy says big profits can easily become major losses if home health companies like CCC don't control how quickly they grow. "The business is capital-intensive, so you can only grow so fast and maintain the same continuity of care," warns VanNoy. He says he is holding CCC's growth to no more than 50% in 1992.

VanNoy relies on his business smarts to oversee the day-to-day operation of the company and the 20 years of experience of his 13 sales, marketing and technical staffers. While MBAs, MPAs and MHAs are necessary credentials for those who want to start or advance in large health care institutions and firms, VanNoy says: "When it comes to running a home health care business, an analytical mind, good marketing instincts and decision-making skills far outweigh any specialized training."

But for MBAers like Marla Thomas of ASHS in San Francisco, specializing in health care company financing added value to her graduate degree. While working for Drexel, Thomas handled transactions for the now 8-year-old diagnostic imaging company. She was subsequently appointed to ASHS' board in 1988 by the firm's chairman and CEO, Dr. Ernest A. Bates, an African-American neurosurgeon turned entrepreneur who controls 40% of the company. When she lost her job at Drexel in 1990, Thomas was recruited by Bates to manage ASHS. She started as the company's vice president for corporate development and was promoted to president in 1991.

Her experience on the board and her one-year stint as vice president, strengthened Thomas' working knowledge of the company where revenues hinge on one of the health care industry's hottest trends: MRI, a diagnostic procedure that unlike X-ray, uses no radiation. Instead, a magnetic field is combined with low-energy FM radio waves to create a digitized image. ASHS leases the equipment and technical staff to hospitals and doctors offices, a major savings for small medical institutions and private practitioners. "Without the rental option, small hospitals and group practices would have to come up with $2 million or more to buy and install their own MRI equipment," Thomas explains. "These days, that's simply not affordable." About 60% of ASHS contracts are for MRI systems with the remaining 40% generated from other imaging equipment such as Doppler ultrasound and computerized tomography, or CT scanners.

The technology may be hot, but Thomas' job has been anything but easy. Unlike the highly regulated world of traditional nonprofit health care, small for-profit companies like ASHS--traded on the New York Stock Exchange--are much riskier ventures. Consider Thomas' management problem: While ASHS' 1990 revenues topped $60 million, up 17% from 1989, the company posted a net loss of $3.6 million in 1990 compared with $2.7 million the year before. The company also assumed $30 million in high-yield, unsecured debt with bonds issued in 1988.

To improve profitability, Thomas cut spending, reduced staff and trimmed $150,000 a month in expenses. She also sold off unprofitable ultrasound and CT routes and older equipment to reduce the company's debt. In addition, she reinforced the company's commitment to high-end markets by purchasing six state-of-the-art MRI systems, increasing ASHS' MRI fleet to 28. The result: a leaner, 500-employee firm that posted a modest profit of $20,000 in the third quarter of 1991, compared to a $1.7 million loss in the same period the year before.

Building Strong Relations

America's health care industry is also on the verge of a human resources revolution. "The emphasis on efficacy and quality performance makes relationship management one of the catchwords of the '90s," says Michael Caver of HSI in Chicago. According to Caver, among the most challenging organizational relations issues in health care is employee/labor relations. That's where Queen Steele, associate vice president for human resources at St. Luke's-Roosevelt Hospital Center (SLRHC) in New York City, applies her expertise.

"I see human resources as a service department within the hospital setting," says Steele, citing employee records, benefits, employment, wage, salary and labor relations as her department's primary services.

To fully appreciate the enormity of Steele's responsibility, consider that SLRHC, a 1,315-bed facility and one of the largest nonprofit hospitals in NYC, employs about 6,000 and operates on a $400 million budget. Steele is responsible for 2,500 employees at the Roosevelt Hospital site. In addition to her labor relations duties, the North Carolina native manages the paperwork--from processing worker's compensation and employee benefit claims to handling requests for unemployment benefits.

Steele started her career in health care in the early '60s when she was a psychology counselor at a mental health facility in Cleveland. After moving to New York City in 1973 and following a series of promotions at Beekman Downtown Hospital, Steele was named assistant director of human resources in 1974. In that role, she successfully over-saw Beekman's merger with New York Infirmary Hospital in 1981.

No easy task, the hospital merger required Steele to organize layoffs and supervise two union elections. Flexibility, a working knowledge of the health care delivery system and the ability to listen and apply common sense, play important roles in Steele's management strategy. "You have to have exceptional people skills," says Steele, who joined SLRHC in 1989.

"If the situation gets hostile," she continues, "you have to be able to minimize the conflict, inform management as to proper hospital procedure, keep your professional cool and avoid burning out."