Mak­ing it his busi­ness

En­tre­pre­neur­ial back­ground helps sys­tem through re­ces­sion, merger talks

Modern Healthcare - - SPECIAL FEATURE -

When it comes to mak­ing busi­ness de­ci­sions, Stephen Howard be­lieves in an open mind and metic­u­lous due dili­gence. It’s an ap­proach that has proved in­valu­able dur­ing his years of health­care gov­er­nance.

“He ex­plores dif­fer­ent op­tions and se­lects what is best, as op­posed to hav­ing a pre­con­ceived idea of how some­thing should work,” says Hugh Car­ney III, a Detroit-based in­vest­ment con­sul­tant who has been a close friend of Howard’s since col­lege.

As an en­tre­pre­neur, for ex­am­ple, Howard toured the man­u­fac­tur­ing op­er­a­tion and cus­tomer lo­ca­tions of a Ger­man com­pany that de­signed ma­chin­ery to pro­duce trim for molded au­to­mo­tive parts. Sat­is­fied with the find­ings of his re­search, Howard agreed to li­cense the rights to pro­duce the ma­chin­ery in the U.S.

“It was a tech­nol­ogy that was not here at the time” in 1981, says Howard, 63.

Howard has been ap­ply­ing his judg­ment and busi­ness ex­per­tise for nearly two decades at three-hospi­tal Beau­mont Health Sys­tem, Royal Oak, Mich., where he be­came a trustee in 1994 and a mem­ber of the board of direc­tors a few years later. At Beau­mont, the 27-mem­ber board of direc­tors is the ac­tual de­ci­sion­mak­ing body, while the 60 trustees, who meet twice a year, ad­vise the board. Howard has served as board chair­man since Jan­uary 2011.

“It helps to be a bet­ter leader, in his mind, if he has a really deep un­der­stand­ing of how the place works,” says Gene Michal­ski, Beau­mont Health’s pres­i­dent and CEO. “He fre­quently tours the hospi­tal—some­times ac­com­pa­nied and some­times not.”

For his ac­com­plish­ments—in­clud­ing help­ing to steer Beau­mont through the Great Re­ces­sion and for play­ing an in­te­gral role in merger talks with an­other not-for-profit sys­tem last year—Howard has been se­lected as the Trustee of the Year for a not-for-profit health­care sys­tem.

In 2008, Howard re­calls, Beau­mont “had a lot of things in the pipe­line that we were

spend­ing money on when the mar­kets melted down and we didn’t have ac­cess to cash. For the first time in our 50-year his­tory, it caused us to sit back and come up with a sig­nif­i­cant game plan to fig­ure out how to get through that era of no-ac­cess-to-cash.”

Beau­mont had re­cently ac­quired Beau­mont Hospi­tal, Grosse Pointe (for­merly Bon Se­cours Hospi­tal), and part­nered with Oak­land Univer­sity to de­velop a new med­i­cal school. It also was in the midst of numer­ous con­struc­tion projects, such as a new in­pa­tient tower at its Troy hospi­tal and emer­gency de­part­ment at its Royal Oak hospi­tal.

Un­der Howard’s lead­er­ship, Beau­mont put those con­struc­tion projects on hold tem­po­rar­ily and elim­i­nated 500 jobs, in­clud­ing a mix of lay­offs, re­as­sign­ments and cuts through at­tri­tion. The sys­tem also cut ex­ec­u­tives’ salaries, froze em­ploy­ees’ wages, and rene­go­ti­ated its con­tract with Blue Cross and Blue Shield of Michi­gan.

As a re­sult of those moves and oth­ers, the sys­tem went from a $30 mil­lion op­er­at­ing loss in 2008 to a $29 mil­lion op­er­at­ing profit in 2010.

But the ex­pe­ri­ence of weather­ing the re­ces­sion con­vinced Howard to spear­head a com­pre­hen­sive strate­gic-plan­ning process in 2011. Through that work, board mem- bers and ex­ec­u­tives ar­rived at the col­lec­tive con­clu­sion that Beau­mont was not big enough to suc­ceed in an era of health­care re­form. As a re­sult, they sent out re­quests for pro­pos­als to 12 po­ten­tial merger part­ners and then slowly whit­tled the list to Henry Ford Health Sys­tem. If the deal is fi­nal­ized, it will cre­ate a sys­tem with 40,000 em­ploy­ees, a health plan, 10 hos­pi­tals, two med­i­cal- school af­fil­i­a­tions and some $6.4 bil­lion in an­nual rev­enue.

As Beau­mont and Henry Ford work to com­plete the merger—which could hap­pen by Septem­ber, pend­ing reg­u­la­tory ap­provals—Howard has con­tin­ued to con­trib­ute count­less hours to the deal’s due dili­gence. “We will be ex­chang­ing e-mails at 9 o’clock at night,” Michal­ski says.

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