Ted LaLiberty steered the hospital out of a $10 million deficit.
Photograph by Thom Thompson www.thomthompson.com
Ted LaLiberty wasn’t wearing a flower-print shirt or Bermuda shorts the morning before starting a vacation in Mexico. He had too much work to do. Yet if there was anyone in the state who should have been sitting on a beach, BlackBerry well out of sight, it was LaLiberty.
During his first year at the helm of St. Francis Hospital in Wilmington, LaLiberty moved the financially shaky facility to firm ground while forging relationships that should help it thrive into the next decade. If that doesn’t warrant a little fiesta, what does?
“It was one of the most difficult turnarounds in terms of the challenges at hand,” LaLiberty says. “I’m not being melodramatic. It was challenging.”
When LaLiberty arrived in January 2006, St. Francis was a shell of its former self, operating in ink so red it’s a wonder anyone could distinguish the balance sheet from a pint of A-negative. There was $25 million in debt to repay, and St. Francis had been operating with negative cash flow for 35 days.
In other words, the hospital couldn’t pay its bills. “We spent the first two months doing forensic accounting, trying to understand what was wrong,” LaLiberty says.
Some people thought St. Francis needed a new president, one with a keen eye for accounting. Others might have argued for a faith healer. At stake was not only the fiscal health of St. Francis, but also the concept of the community hospital.
It seems both are safe. Even with other hospitals near enough, that’s good news for the city.
LaLiberty came to St. Francis from New York, a state that, he reports, has seen “a hospital close every month over the past several years.” St. Francis wasn’t in immediate danger of shutting down when he arrived, but it was certainly getting closer. The reason? The previous administration had not taken a hard look at its problems.
“In the past, we had an administration that failed to work effectively with all its partners,” says Julie Topkis-Scanlan, St. Francis’ senior vice president for external affairs and marketing.
Some of LaLiberty’s initial changes were basic, such as increasing accountability among managers, most of whom LaLiberty imported within the past 18 months. Then he made two other strong moves.
The first was to negotiate better reimbursement rates from insurers. Till then, the hospital had been badly low-balled. The insurance community hadn’t lost faith in the institution or come to consider it a risk. Instead, the hospital simply hadn’t stuck up for itself in negotiations, nor had it demanded a fair payment schedule.
“I can tell you that we didn’t ask, so we didn’t get,” Topkis-Scanlan says. “The insurance companies were well aware we were being paid below what we should be.”
Then LaLiberty posed a simple question to the community at large: “Do you want us to survive?”
The answer from the city and state was a resounding yes. After all, another reason for St. Francis’ ill health was its treatment of city residents who had no means of payment.
The Delaware Economic Development Office immediately provided an emergency transfusion: a $4 million, 15-year, interest-free loan—no payments due until the loan’s sixth year. The city of Wilmington then delivered a $2 million grant, spread over two years. Finally, in recognition of its years of underpayments, and the hospital’s service to patients who could not pay for treatment, Blue Cross Blue Shield of Delaware gave St. Francis $1.5 million.
Though the hospital’s negative net worth remains, cash flow has improved dramatically. “Our initial goal had been to reduce the 35 days of negative cash flow down to about 25,” LaLiberty says. “We managed to reduce it to nine.”
LaLiberty plans to reach 150 plus days of positive cash flow, and he is backed by St. Francis’ parent, Catholic Health East. Based in Newtown Square, Pennsylvania, CHE is the fourth largest health care system in the country. It owns 34 acute care hospitals. “From here on in, cash flow improvement will have to come from growth, not cost reduction,” LaLiberty says.
Yet the most effective long-term change at St. Francis may prove to be the administrations’ new relationship with physicians.
The hospital board has increased the number of physician members from 5 percent to 40 percent, and, according to LaLiberty, 35 percent to 40 percent of the hospital’s physicians now have input in the planning of its future.
“We want our decisions to be informed from a clinical perspective, as well as an organizational perspective,” LaLiberty says. “If they’re going to be partners with us, then they have to participate in the strategic planning of the hospital.”
One manifestation of the partnership is the hospital’s state-of-the-art robotic da Vinci Surgical System—a sizeable purchase for a hospital that was running a significant deficit.
“The physician community told us it was something which could help us,” says chief nursing officer and vice president of patient care services Jennifer Kirby. “They had started to have patients asking questions about procedures which were less invasive and featured less blood loss.”
Instead of dismissing the idea as a wish-list item for doctors who were looking for a new toy, management listened respectfully to their case. In its 15 months at the hospital, the robot has surpassed the volume of work it was expected to do. It thus serves as a great example of a decision that benefited the hospital financially while improving its relationship with physicians.
Spend enough time speaking with LaLiberty or anyone on the management team, and you’ll hear one word used again and again:
LaLiberty’s speaks to sound fiscal management, certainly, but, just as significantly, to St. Francis’ role in the community.
Delaware’s healthcare market is unique. There is no group of hungry predators looking to swallow up smaller concerns. Instead, our hospitals, large and small, enjoy a collegial relationship that allows them to coexist.
That dynamic allows St. Francis to continue its work in Wilmington without fear of takeover by a large competitor. Yet at the same time, St. Francis is careful not to plan for significant market growth.
“We need to be respectful to the six other hospitals in the state,” says David Capone, chief financial officer for St. Francis. “We all need to be successful, so we won’t create a strategy to take market share away from a competitor. There’s enough business for all of us. We need to be good at what we do.”
For St. Francis, that means providing a full range of services. There is no desire to specialize in heart care or cancer research. The city of Wilmington is better served overall by one-stop service, so St. Francis provides that.
Yes, the da Vinci Robot is a great selling point, one that represents a bold step forward when it’s important to build confidence. But because it’s not an all-purpose tool, the hospital must be careful not to spend too much energy promoting it alone. St. Francis doesn’t want prospective patients to think it has become a boutique.
“We clearly are a community hospital, and we do provide services where people can come in and get an assessment,” Kirby says. “We want to meet the needs of the community.”
That doesn’t mean St. Francis isn’t trying to adapt to trends in population. It will always be strong in the maternity field, for example. But it is trying to build its joint program, too, especially as the older population grows.
Another important way the hospital serves the city is the St. Clare Medical Outreach Van. Its necessity is proven. Over the years, the van has provided care to more than 50,000 patients, most of them homeless or uninsured. The van and other initiatives keep St. Francis connected to all people in its neighborhood. As a Catholic hospital, such ministry is part of its mission.
Not long after LaLiberty took over, the hospital underwent a ministry assessment. “We found that there is a real need here to get our financial house in order so that we can serve the community,” he says. “If we can get the state and local governments to support our need to be there, that can make a significant statement about our financial viability in the future.”
St. Francis plans to recruit more physicians, expand the residency program and maintain an engaged board.
Meanwhile, Kirby has even more good news in the area of patient satisfaction. The biggest jump comes in the emergency room. In previous ratings within Catholic Health East, St. Francis was stuck in the bottom third of the network’s acute care hospitals. Now it’s in the top three.
Other departments have experienced a similar growth. St. Francis’ 22 various medical departments rate themselves every month, and 15 have experienced a significant positive rise, while three others have maintained their status.
Is the picture perfect? Absolutely not. But for a hospital that has struggled to gather momentum during the past decade, any good news is welcome. At St. Francis, there seems to be plenty of it.
Additional reporting for this story was supplied by contributing writer Reid