Making it his business

Entrepreneurial background helps system through recession, merger talks

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.