Conversations
Chuck Beaman, CEO of Palmetto Health
MidlandsBiz:
Describe a key event in your formative years that helped develop your skills as a manager?
Chuck Beaman:
After completing an undergraduate degree in political science here at USC, I received a job at Baptist as a unit manager, but when I showed up for work the first day, there were actually no current openings for unit managers. So my first job at Baptist was as an admitting clerk helping to fill out the paper work. My supervisor told me straight up that if I ever wanted to become a manager, I needed to know what it's like to be a non-manager. She worked me morning, noon and night, the AM shift, the PM shift, I thought she was trying to kill me, but looking back, it was the best start anyone could ever have in this business.
MidlandsBiz:
Describe your leadership style? What leaders have inspired you?
Chuck Beaman:
I try to surround myself with competent people who have integrity, and I try to hire people who are smarter than me. I like the whole concept of servant leadership and I try to read as many books on the topic as I can.
Locally, I have always admired Andrew Sorensen and John Lumpkin and their efforts to improve the community. Emmett Johnson, my personal mentor, was the best I have ever known at integrating values and principles with decision making.
Jim Konduras, Johnny Folsom, Jim Reynolds, Dick Lincoln – pastor of Shandon Baptist, all of these are great local leaders.
MidlandsBiz:
Talk a little about the 1998 merger between Baptist and Richland Memorial that created Palmetto Health? Why did the two hospitals merge?
Chuck Beaman:
Prior to 1998, Kester Freeman, who was the CEO of Richland Memorial, and I, the CEO of Palmetto Baptist, tried to see whether we could join our two organizations. We accomplished that goal and became operational as Palmetto Health in 1998. We now have three main hospitals: Richland, Baptist Columbia, and Baptist Easley. In 2006, we also opened the Heart Hospital, South Carolina's only freestanding hospital devoted solely to heart care and we are planning to add Palmetto Health Baptist Parkridge in the northwest quadrant of the city.
You've got to understand Baptist and Richland were fierce competitors, but what made this possible was our shared values. Richland was governmental public, and Baptist was private and faith-based, but what was important to both of us was the ability to take care of our local people and a strong desire for our health system to determine its own destiny.
Back when we merged, a lot of for-profits were entering in the market and taking over hospitals. We believed very strongly in the non-profit status of health care and felt that this merger would strengthen our position. That was our main motivation.
Secondly, we knew that by coming together we could reduce costs, particularly by eliminating duplicate services. We made specific commitments about how much we were going to reduce in the first five years of operations.
Thirdly, it was an opportunity for us to be locally owned and controlled and responsive to our local citizens.
Lastly, we were confident that the business model would result in better care, help to reduce the cost of care, provide a safer environment for patients, and help to deliver a comprehensive patient care delivery system for our citizens.
MidlandsBiz:
Skip ahead almost 10 years, has it been a good decision?
Chuck Beaman:
It's been an excellent decision. We have been able to control our own destiny by having individuals who live and work in our communities serve in local leadership roles at the local governing level. We have been able to incorporate best-practices across our system and improve the quality of care. We were able to document a reduction in the costs by improving our buying power.
From an employee perspective, we are the 4th largest employer in the state and we pride ourselves on the opportunities for advancement within our organization.
It doesn't matter who insures our citizens or what their economic status is – we are here to serve. I can't imagine what our hospitals would be like today if hadn't merged and aligned our services; I would do it again in a heart beat.
MidlandsBiz:
Mergers are risky. Do you have any advice for businesses going through the process?
Chuck Beaman:
We studied the reasons why most mergers fail: lack of a solid business plan and the clash of egos, in particular, the egos of the two CEOs.
The Board, in its infinite wisdom, recognized that Kester and I had never worked together before and that we would be entering into uncharted territories. They took us both aside and made it clear that they would never fire just one of us. That cooperation between the CEOs enabled us to implement our business plan.
The execution and decision making models were different at the two hospitals, but again, the common values engrained in the two institutions - service, compassion, excellence - really made this possible.
In any merger, you have to recognize the different cultures of the two entities involved. The cultural transformation that takes place within the new organization is a journey that is a product of your common beliefs, your vision and of consistent decision making.
MidlandsBiz:
What role can hospitals play in helping put South Carolina on the map in terms of competing in the knowledge based economy?
Chuck Beaman:
We are positioned in a region that has a major research university right here in our midst. We have a partnership with Health Sciences South Carolina, a powerful collaboration between MUSC, USC and Clemson, Palmetto Health and two other major teaching hospitals, Greenville and Spartanburg, that is designed to help identify projects that will improve the quality of life and the economic development here in South Carolina and then to provide funds through the Endowed Chairs programs as well as through grants.
We also work in partnership with the USC School of Medicine to facilitate graduates entering our system as highly trained physicians.
But there is a broader challenge for all of us. Not everyone needs an MD, Masters degree or PHD to work in a hospital. We need to develop a qualified workforce to meet the demands of the patients.
In South Carolina, we do not produce enough nurses to meet the demands of the hospitals and we therefore have to go outside the state to attract nurses.
MidlandsBiz:
Is there a nursing shortage?
Chuck Beaman:
There is not only a nursing shortage, and but also a shortage of Master's and PHD prepared educators to teach nursing at the university and technical college level.
But it's not just nursing. Pharmacists, respiratory therapists, ultra sound technologists, biomedical engineers will also be in high demand over the next 15 years and are in short supply right now. Individuals who are well trained are in demand because that's what the patient requires.
As the baby boomers continue to age and move through our system, the demand for health care is going to continue to rise and clinicians to take care of them are going to be in short supply unless we do something about it.
MidlandsBiz:
Does the hospital have a mission or vision in place?
Chuck Beaman:
"To be remembered by each patient as providing the care and compassion that we want for our families and ourselves". We try to live that vision every day.
Everything that we do – systems, quality improvement, finances – goes back to that vision. It's supported by our management systems and also by the strategic plan.
We also have five main categories of operational excellence that we strive for: People, Service, Quality, Growth, and Finance, and anywhere you walk around Palmetto Health you will see a communication board with those five pillars of excellence with examples of our progress under each one of them. And, it all starts with people.
We are trying to create an exceptional place for employees to work, an exceptional place for people to receive care, and an exceptional place for our physicians to practice medicine.
MidlandsBiz:
In such a big institution, how do instill a sense of team?
Chuck Beaman:
One of the things that I am most proud of here at the hospital is our internal leadership training group.
A few years ago, we noticed that some of our employees were apathetic about their jobs - they were showing up just to collect a paycheck. People didn't seem to have a sense of belonging or ownership to the hospital. I saw this not as an employee problem, but rather a failure of leadership and management.
We decided that we needed more than just incremental change - the entire system needed to be improved. So we asked the question, how can we improve accountability, improve our existing pool of talent, and get our best employees working towards a mission that was larger than themselves?
We decided to invest heavily in leadership development and training of our people across the board. Four times a year, we now take 900 people who are in leadership positions at Palmetto Health to a two-day, off-campus leadership training program designed to identify areas of strength and to transform our people.
We have incorporated a merit-based pay system that rewards individuals for performance and the better one performs the higher their rating. In the not too distant future, we will incorporate a HML (high, medium, low) system with the goal to have every employee performing at the middle to high level. If you are a low performer, you need to move up the scale or move on. Accountability is critical if you are going to instill a sense of team; our employees don't like for us to carry people who aren't productive.
Whereas before we were spending 80% of our time on 5% of our problems, now we try to identify top performers, our superstars so to speak, and model that behavior.
The Leadership Institute has been the best way to instill a sense of team over our large institution.
MidlandsBiz:
What is your relationship with Lexington Medical?
Chuck Beaman:
We have a very good working relationship with Lexington Medical Center and I also personally have a good working relationship with the CEO of Lexington Medical, Mike Biediger. Both organizations do what they can to help and support each other.
That said there are a couple of issues that strain the relationship – their desire to put in a heart center, and our desire to build a new hospital out in the North West corridor. Lexington Medical has appealed this project.
You end up in competitive situations that can strain the relationship. That's just business.
MidlandsBiz:
Health care costs are increasing at a much greater rate than inflation. How do you deal with that and keep your costs down?
Chuck Beaman:
One of the major drivers of health care costs is that not everyone who comes in pays his full way. What happens is that the expense of serving those who have no coverage or limited coverage is shifted onto those who are covered. When people get their hospital bill and see that they were charged $3 for an aspirin – that is an example of how deficiencies in one area are shifted into other revenue streams.
Our country has difficult days ahead figuring out how we are going to fund health care for our citizens. As the baby boomers reach retirement, Medicare will continue to grow at a phenomenal rate and it will eventually get to the point where the current financing mechanism can not support the added costs.
In a hospital, you have the end product – the patient outcome – but every point along the way you have limited ability to restrict demand for the resources that are applied to achieve that outcome. Well over 70% of the costs of health care are determined by the order that the doctor writes for her patient. That drives the pharmaceuticals, whatever equipment needs are there, and also the level of nursing care that will be provided.
You have to try and do what you can and apply good business practices. About 43% of our expenses are labor related, so we have to be efficient in our spending in this area.
We also try to reduce our costs by buying our supplies through our Group Purchasing Organization (Premier). By combining the purchasing power of hundreds of hospitals, it enables Premier to buy products at good prices which we can pass along to our patients. We also have to make sure that patients are not consuming unnecessary resources because we have not been efficient with our systems.
It is a constant balancing act of revenues and expenses.
MidlandsBiz:
Do you have to treat everyone who shows up at your doors?
Chuck Beaman:
At Palmetto Health, we will treat you regardless of your ability to pay. If you need care, you can come here and we are going to serve you. It's our policy to serve; we have an obligation to serve.
As a management team, we have to constantly try to balance our social responsibility to treat patients with our job to maintain a viable business. If someone says they want to have an elective procedure, then we will want to know that they have the ability to pay. The difference is whether it is elective or emergency. If it's an emergency, we will take care of them.
MidlandsBiz:
How do you attract the best and most talented physicians to your hospital?
Chuck Beaman:
Most physicians want to work in an environment where their patients can receive the best care in the most efficient manner possible and they can make a living. A high-risk obstetrician who does high risk neonatal work isn't going to go to a hospital that doesn't have a level three nursery. All of that goes into the decision making.
At Palmetto Health, we wanted to become a leader in the practice of heart care, so we built our world class Heart Hospital. That's an opportunity for talent to come in to our institution.
We have partnered with USC to set up a neuroscience center.
We want the patient experience to be the same: the best possible care available. That's the standard we strive for whether you come in to Baptist, Richland or Easley.
MidlandsBiz:
What percentage of your business is done directly with Medicare?
Chuck Beaman:
It's about 35% right now and growing. It is going to continue to be a struggle because Medicare does not pay its full way. Medical costs are increasing 9% a year, but our Medicare monies are increasing about 1.5% to 3%. And that gap is widening because the Federal government is constantly trying to reduce the expenditure of Medicare funds to hospitals and providers.
Medicaid utilization is around 22%, so you combine that with Medicare and about half of our clients are either Federal or State government sponsored.
Another 5% are self-pay. When these are added up, one can see the dependence on other insured patients.
You now see a trend where hospitals are trying to get into outside ventures that may be owned by physicians in order to diversify their revenue streams.
