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Healthy Competition

In 1995, Patrick Madden, an up-by-his-bootstraps Irish immigrant with two decades of service with the Daughters of Charity hospital organization, came to Sacred Heart Hospital in Pensacola as CEO. Madden found a facility described then by its executives as "a brick hospital partially hidden behind pine trees." The hospital was beginning to expand, but Madden quickly came to believe that to fulfill its mission of serving the poor, Sacred Heart would have to grow much faster -- and far beyond its home in Pensacola.

That same year, across town, executives at Baptist Health Care did a self-assessment and didn't like what they saw. Locally owned, with its flagship facility in one of the town's poorest areas on a little-traveled street, Baptist couldn't compete with Sacred Heart either in terms of funding or location. Worse, Baptist's internal surveys showed that both its employees and its patients were unhappy with its operations. Al Stubblefield, then executive vice president, was tasked to fix it.

What has ensued has been a decade of mostly friendly but fierce -- and expensive -- competition in which the leaders of the two non-profit hospital groups have strived to fulfill charitable missions by finding new ways and new places to make money. The battlefield for the competition is one of the state's poorer regions -- and one of the country's most competitive healthcare markets. Pensacola, says Stubblefield, is a "three hospital town where there ought to be two."

In 1995, Baptist was at a crossroads. In addition to having unhappy employees and customers, "our margins were mediocre, and we weren't seeing a lot of growth in revenue,'' says Stubblefield. Distracted by external affairs, including a lengthy consideration of three possible mergers, the hospital's leaders had lost focus.

Without the means to finance a huge expansion, Baptist's senior officers decided on a core strategy of improving patient satisfaction, says Jim Vickery, then CEO. Says Stubblefield: "We knew we could never outspend the competition, so we decided to outserve them."

Baptist leaders organized employees into improvement teams. Managers began soliciting and rewarding "Bright Ideas'' from employees. They established the in-house ServU university, boosted the fun factor at employee meetings, loaded bulletin boards with plaudits for employee achievements and dispatched torrents of thank-you letters to employees who helped improve the culture. Stubblefield also recruited talent from outside: A major player was Quint Studer, a hospital executive from Chicago who in 1999 parlayed his Baptist experience into his own successful healthcare consulting firm.

Al Stubblefield, CEO
Baptist Health Care

Age: 54. Born in Jackson, Miss.
Degrees: Bachelor's in business, Mississippi College; master's in hospital and health administration, University of Alabama.
Career: Joined Baptist Health Care in 1985; earlier, worked at hospitals in Mississippi and Tennessee.
Family: Wife, Mary Lee; married 31 years; two sons and two daughters.
Style: For quarterly employee training meetings, Stubblefield gets togged up in heroes' costumes -- Superman, Obi "Al"' Kenobi -- in keeping with committee-chosen themes. It humanizes him, he says. "At the same time, I'm able to deliver a passionate, consistent message of never wavering from this idea of service excellence and quality.''
Author: Stubblefield's book, "Baptist Health Care's Journey to Excellence,'' was published in 2005.
Travels: Stubblefield will be telling the story of creating the Baptist workforce culture at the International Health Work Force Conference next March in Geneva, Switzerland.
Observer: When Baptist Hospital Administrator Mark Faulkner joined Baptist 13 years ago as an administrative assistant, Stubblefield became his mentor. Faulkner says, "When I was given the opportunity to have a real office or a closet next to Al's, I chose the closet. I wanted to be where the action was.''
On Madden: "Patrick has been a wonderful asset to our community and has been a visionary; he's built a highquality staff and led them to execute his vision very effectively.''

Baptist Health Care

Opened: 1951.
Employees: 5,500.
Owner: Community owned.
Owns or operates: Four hospitals in Pensacola, Gulf Breeze, Jay and Atmore, Ala.; two medical parks in Pensacola and Navarre; three rehabilitation centers in Pensacola and Pace; Baptist Manor nursing home; Portofino Medical Spa; Lakeview and Avalon mental health centers; The Friary, residential alcohol/ drug treatment; Baptist Leadership Institute.
Planned: The Andrews Institute for Orthopaedic & Sports Medicine, opening this month; affiliated performance and research centers in 2007.
Partners with: Sports surgeon Dr. James Andrews.
Affiliated with: Moffitt Cancer Institute.
Award: Malcolm Baldrige Quality Award, 2003.
Healthcare collaboration: Jointly funds Escambia Community Clinic with Sacred Heart Health System and the county.

Within two years, employees' rating of Baptist jumped from subpar on 13 of 18 measurements to the highest levels of employee morale ever measured by the consultant who did the hospital survey. Says Jenny Lowe, radiology manager and 34-year employee, "There's the feeling of family again, of supporting each other, employees and patients -- something that had previously been lost as they grew.''

Employee turnover at Baptist Health Care dropped from 27% in 1997 to 13% last year. Fortune magazine has ranked the hospital among its "100 Best Places to Work" for the past five years.

By 2000, Baptist's trophy case was starting to be well-stocked with rewards: Successive highest satisfaction ratings by Press, Ganey for Baptist hospitals starting in 1998; in 2003, the Malcolm Baldrige National Quality award; and five consecutive listings, including a No. 18 in 2006, in Fortune magazine's "100 Best Places to Work.'' Employee turnover dropped from 27% in 1997 to 13% in 2005.

Stubblefield even began marketing Baptist's strategy to the hospital leaders around the country who kept calling to ask how Baptist sustained its satisfaction ratings. In 2000, a year after his promotion to CEO, he created the Baptist Leadership Institute, a for-profit venture that's brought 8,500 seminar attendees to Pensacola in the past five years and is keeping 10 full-time business consultants on the road, working with 300 clients across the country, in Canada and Ireland. Stubblefield expects BLI to post some $2 million in profit next year.

Mary Sand, director of a hospital-improvement initiative at Avera McKennan Hospital in Sioux Falls, S.D., is in the second year of a two-year BLI contract. "Our satisfaction scores are continuing to increase, a nice trend line,'' says Sand. "There's already a different feel to the place.''

Baptist, meanwhile, tried to grow within its means, in part by diversifying. While two small Alabama hospitals in its network decided to go independent, Baptist acquired Lakeview Center, a 2,200- employee Pensacola mental health organization with services across the region. In 2000, Baptist launched a $100-million expansion program, building a $20-million Baptist Medical Park on Pensacola's northern residential fringe, enlarging community hospitals in Jay and Gulf Breeze and acquiring a medical park at Navarre.

Stubblefield also moved Baptist into several niche markets. At the invitation of developers of the luxury-market Portofino Resort condominiums at Pensacola Beach, Baptist opened the Portofino Medical Spa in Gulf Breeze in 2004. And last year, Baptist partnered with renowned Birmingham, Ala., sports surgeon Dr. James Andrews to build the Andrews Institute for Orthopaedics and Sports Medicine at Gulf Breeze, a $30-million venture opening this month and expected to attract sports stars seeking Andrews' surgical skills. Baptist and clinic doctors will be majority owners. Next year, they plan to add a performance center for budding athletes and a non-profit research institute that's already garnered $5 million in state grants.

This summer, Stubblefield tried to make Pensacola a two-hospital market. He and Baptist colleagues approached HCA-owned West Florida Hospital about a possible acquisition, discussing what Stubblefield calls options for combining resources "to more efficiently and more cost-effectively address the healthcare needs of this region.''

Soon after, HCA executed an agreement for a leveraged buyout, and West Florida decided to continue operating as is. Dennis Taylor, president and CEO of West Florida, says the local market is competitive and remains competitive. "I'm certain Al would be more comfortable if there were only two hospitals, but that doesn't mean there should not be the three hospitals that are here. HCA would not be investing $100 million currently if they did not think there was a future for them in this particular market.''

West Florida, which hasn't been as expansion-minded as its two non-profit rivals, is currently spending $100 million on hospital upgrades and Hurricane Ivan repairs.
Still, says Stubblefield, "Maybe the opportunity will be there again.''

Patrick Madden, CEO
Sacred Heart Health System

Age: 62.
Degrees: Undergraduate, City College of New York; master's in business administration, Fordham University.
Family: Wife, Philomena; married 39 years; three daughters and one son.
Career: Mobil Oil Co. planning systems; American Stock Exchange finance department; has worked in healthcare since 1972.
Roots: Madden came to America from Ireland at age 17. "My parents blessed the move. The economy was depressed; there were no jobs.'' In New York City, "I washed dishes, shined shoes, worked in factories and went to school at night.'' And for a time, he worked on Wall Street.
Observer: "Patrick can seem to be focused at 50,000 feet, seeing a visionary thought for the region, and then, suddenly, he's talking to housekeepers about what's important to them,'' says Sacred Heart Executive Vice President Peter Heckathorn. "He can turn on a dime like that.''
Recent Reads: "1776'' by David McCullough, "Hope Dies Last'' by Studs Terkel.
Passion: "I find healthcare an absolutely fascinating industry. You can make a difference. You can change communities, and you can make people's lives better."
On Stubblefield: "I admire Al for his commitment to the community and for the innovations and leadership he has brought to Baptist Health Care"

An important part of Sacred Heart's strategy involves establishing partnerships. Six years ago, it opened a building to house the Nemours Children's Clinic.

tax and applause
As Stubblefield picked his spots, Madden developed Sacred Heart along different lines, crafting a strategy for a broad regionalization that has created a service range encompassing 25,000 square miles, from Mobile, Ala., to Port St. Joe.

His most important decision, Madden says, was "to expand the hospital beyond a community hospital to a regional tertiary-care hospital. We had to create a larger critical mass that was reflective of the growth of the entire region and large enough to support the millions of dollars of new investment that we expected to make in new facilities, new technology and skilled people."

Geographic outreach would bring new patients into the network and help the bottom line, but to accommodate those referrals, Madden knew that the Pensacola campus would need to grow. A half-billion dollars has gone into doubling the size of the hospital's main campus -- now covering 91 acres. Sacred Heart opened a new Children's and Women's Hospital and a Heart & Vascular Institute and enlarged the hospital's emergency center.

In 2000, Sacred Heart opened a sixstory building to house Nemours Children's Clinic -- which has been bringing some $8 million a year in children's care to Pensacola. In 2001, Sacred Heart launched its Air- Heart ambulance service, with bases near Destin and at Marianna. In the past two years, it's built medical centers in Pensacola and Pace and acquired a clinic at Crestview. It opened a Pensacola nursing home in 2001 and an assisted living facility there in 2005, partnering on both with Methodist Homes for the Aging.

Even with its AA bond rating and the bulk-borrowing clout provided by membership in Ascension Health, spending on the scale needed wasn't always assured, notes construction company executive Bill Greenhut, a board member since 1977. "To get capital from our parent company, you have to provide a business plan that's sound and will provide return.''

An important part of Sacred Heart's expansion strategy has been to establish partnerships with communities, doctors and religious and business groups. One corporate partner is St. Joe Co. As it develops its extensive land holdings throughout northwest Florida, St. Joe believes it can leverage the presence of a first-rate healthcare facility in a region where many of the few rural hospitals are aging and financially ailing. The company donated land in south Walton County where Sacred Heart built Sacred Heart Hospital on the Emerald Coast in 2003. "If healthcare is better, more people will be secure in a decision to live in and explore west Florida,'' says St. Joe's chief strategy officer, Chris Corr.

Residents of the region have responded. In Destin, population 12,000, residents raised $25 million to help fund the south Walton hospital. Says hospital board chairman, retired insurance professional Gerald Christie: "People put money as well as time into it, like being a stockholder.''

Next year, on another St. Joe-donated site at Port St. Joe, Sacred Heart will begin building a 25-bed, $39-million hospital. Gulf County health administrator Doug Kent recalls last year's meeting at which county commissioners approved passage of a half-cent sales tax to help support indigent care at the proposed hospital. "We had a packed house. The commission vote was unanimous. The audience got up and clapped. In 33 years as a health administrator, I've never before seen an audience stand and clap because they'd just had a tax put on them.''

Madden expects to spend another $500 million on local and regional expansion within the next five years. Planned projects include a children's medical research hospital and a cancer research center.

Sacred Heart Health System

Opened: 1915.
Owner: Daughters of Charity; member of Ascension Health, the nation’s largest Catholic, non-profit hospital system.
Employees: 4,800.
Owns or operates: Two hospitals in Pensacola and South Walton County, plus Women’s & Children’s Hospital; Sacred Heart HomeCare regional home health agency in Alabama and Florida; two elder-care residences; five rehabilitation centers; medical parks in Pensacola and Pace; a physicians group with 35 offices from Foley, Ala., to Panama City Beach. Planned for 2008 opening: A hospital at Port St. Joe in Gulf County.
Partners with: Nemours Children’s Clinic; Methodist Homes for the Aging; Florida State University College of Medicine; St. Joe Co.
Affiliated with: M.D. Anderson Physicians Network.
Award: National Research Corp. annual Consumer Choice Award since 1996.
Healthcare collaboration: Jointly funds Escambia Community Clinics with Baptist Health Care and the county.

Greater Benefits
Growth of the two healthcare systems has been a catalyst for importing dollars, patients, jobs and new technology into northwest Florida, say their executives. "We concluded 10 years ago that this region would grow, and if we helped to create a first-class health industry that it would become an engine of economic growth for the region,'' says Sacred Heart Executive Vice President Peter Heckathorn. Since then, Sacred Heart has added 2,000 employees and doubled revenue.

Baptist's re-engineering, besides providing the community payoff of happier patients and employees, has enabled the organization to move into new ventures, like the Andrews Institute, that dovetail with efforts of economic developers.

Nor have primary missions gone unserved: Combined, the two have boosted their community charitable care to more than $50 million.

"These are charitable hospitals, and for them to serve their mission, they have to make money,'' says Robin Herr, a former Baptist board member and CEO of a 600- physician network across west Florida.

"Thank God for competition,'' says Herr. "That's what drove them.''