Open Forum: CEO discusses challenges facing health care systemPosted: August 22, 2009
By Mark C. Peyko | Metro Monthly Editor
Forum Health sought Chapter 11 bankruptcy protection on March 16, but this decision has raised questions in the community about the future of the local health care provider.
The Metro Monthly recently spoke with Forum President and Chief Executive Officer Walter “Buzz” Pishkur about the challenges facing Forum Health and the measures being taken restore the company to fiscal health. The following interview was conducted on March 26 by Mark C. Peyko, Metro Monthly Editor.
Metro Monthly: Could you tell me a little bit about your background before you took on the role of CEO at Forum Health?
Walter “Buzz” Pishkur: I grew up in Hubbard, Ohio. I have a bachelor’s from Ohio State. I have a master’s from the University of Illinois. Prior to Forum, I had worked 39 years in the water-utility industry. I worked 10 years for the city of Hubbard. I worked 29 years for Aqua America in various places.
I had worked in the Struthers division, here in the Youngstown area. Then I moved to Marysville, then out to Danville, Ill. to run [the] water system there. Back in Ohio, I was president of the whole state. And Aqua Ohio, by the way, is the largest water utility in the state of Ohio with about 400,000 customers.
Metro Monthly: You were on the board of directors at Forum Health prior to becoming CEO. How long were you on the board?
Pishkur: I joined the board of directors in mid-year 2005. I became chairman in June of 2008 and became CEO of the hospital in October of 2008.
Metro Monthly: What are the biggest challenges facing Forum Health at this point?
Pishkur: Well, its challenges are that we’re in an industry that continues to be impacted by the economy – i.e. reduction in people’s ability to pay for health care because of loss of health-care coverage and loss of jobs – combined with a situation where we had struggled financially in the past three to four years, actually, to make our operations profitable.
So what we need to do is address our cost structure and address it in a way that allows us to also facilitate the declining usage and the declining ability of people to pay [charity care].
Metro Monthly: Is the charity care issue the single biggest obstacle you face or is it merging [with other things] to create a bigger problem?
Pishkur: Charity care is a major issue. The ability for hospitals to get paid for the services they provide is a major issue. Our charity care exceeds $50 million a year. Our operating losses, including investment losses, have exacerbated our position for about $16 million last year.
So, as you can see, if we had collected half of the non-paid care, we would have been profitable. I’m sure that issue will always be with us and it’s been with us, but the problem is it’s actually climbing. And for Forum Health, we have to deal with not only our current situation, but we have to understand in the short term, my sense is the pressure of not-paid care is going to continue to rise.
Metro Monthly: You met on March 23 with a variety of elected officials. Was the issue of charity care central to the discussion or just part of it?
Pishkur: It came up. I gave them a bunch of statistics that I had been talking to the media about, basically since I became CEO of the hospital. The main statistics are 4,000 jobs at Forum Health in the two counties. We have a $170 million plus payroll.
Our benefit package for our employees equates to about $50 million a year. And we pay $55 million a year in state, local and federal taxes. Not only are we a big part of the local economy from an economic standpoint, but we’re also a big player in providing tax revenues to the cities, as well as the state. And we are the largest employer in Warren. So a lot of the discussions we had were around those statistics.
The one statistic that caught everybody’s eye was the amount of charity care being provided. Everybody figured out very quickly that if we would collect half of that and if we could pay for half of that, it would erase all of our operating losses.
Metro Monthly: OK.
Pishkur: By the way, that’s not unique to Forum Health. It’s just a little more acute here.
Metro Monthly: When Tim Ryan said the Forum Health of the future will be different, he really didn’t go into what that meant. Was that something discussed with him or was it something discussed among the other people in the room?
Pishkur: I think that was an observation Tim made. I think it’s intuitive to most people. We have to somewhat change the way we’ve gone about our business. And I think that has a lot to do with some of the things I talked to them about, specifically the branching out we’re going to be doing in Newton Falls and moving into Hubbard, and the fact that we need to get back into the Boardman market.
Our organization really hasn’t been very aggressive in expanding its service areas and its catchment areas and that’s critical to bringing admissions to the hospital. As we’re dealing with our internal-cost structure, we’re also very actively pursuing expansion of services and expansions of admissions.
Metro Monthly: When you’re reorganizing, you’re putting your attention on economic recovery. It seems like it would be hard to expand during that time. Are things being done in tandem? You’re looking at recovering, but you’re also looking at having a sustainable recovery. Is that what the intent is?
Pishkur: Absolutely. And I would argue that Aqua Ohio, when I was managing that organization and it was buying systems every year, was managing its business very well and managing its cost structure and dealing with all the other things we had to deal with. I think that’s just intuitive in how very successful organizations function. You can’t be one-dimensional.
And you can’t cut costs to prosperity. And I believe the organization [Forum] is really adapting to this – that we need to be doing all these things. We need to be expanding our business, we need to be growing our business, and we need to be working on our cost structure, so not only do we survive but we begin to be able to be financially solvent and be able to do the things we need to do to be a top-notch hospital into the future.
Metro Monthly: As you reorganize, will Forum Health health care facilities continue to have the same level of service and areas of service?
Pishkur: Fundamentally, the answer is yes. One thing that will change is that each of the entities – i.e. the three major hospitals in our services group – need to be financially solvent on their own. We will not be cross-subsidizing. … And that to me makes a lot of sense from a corporate standpoint. We will have several hospitals, maybe add a hospital someday … but each of them has to contribute and be able to financially be viable.
Metro Monthly: Are you looking at reducing the amount of beds at any of the hospitals or closing any wings?
Pishkur: Actually, at both of our hospitals, we increased the number of private rooms. And that’s where our focus is, because we believe that’s an important patient-satisfier as well as an important new standard of care.
We’ve increased our private rooms at Northside Medical Center in the last two months by 42 percent and we’re doing the same thing at Trumbull. And so what that does is it reduces, I guess, the number of beds by virtue of having no more than one bed per room. But in reality we have the capacity at our hospitals for 250 beds or so. Northside has 177 people in beds as we speak right now and Trumbull’s very close to that. So we’re pretty much at our normal census.
Metro Monthly: How will Chapter 11 affect your contracts in the future with interns and residents coming to the hospital?
Pishkur: We don’t believe it will affect it at all. On March 19, we just matched all of our residency positions. That’s the third time in history and the third year in a row we’ve done that on the first day. All those residents were made aware of our situation. … So we don’t see any issue with that.
Metro Monthly: At the meeting with the elected officials, it was said that there were no plans to eliminate jobs, to kind of keep things at the status quo for employment, but is Forum Health considering asking the unions to reopen their contracts during this period?
Pishkur: Absolutely. When 60 to 70 percent of your operating costs are in labor and benefits, obviously those issues have to be dealt with if you have a cost problem. And yes, we’ve been doing that. What I’ve told our unions, and the way we’re going to try to approach this until it proves itself not feasible, is [that] we want to keep all of our institutions open.
I want to preserve every job that’s currently filled. If we reduce jobs, it will be through attrition as those opportunities present themselves. But we certainly have to address some of our other cost structures with having those people on board. To be honest with you, I’m trying to approach this as if it was me sitting on the other side here.
Metro Monthly: The lenders were pretty clear during the Chapter 11 hearing about the status of Northside Hospital and the losses at Northside and the losses at Trumbull Memorial. What are the biggest threats facing Northside?
Pishkur: Let’s be clear: Trumbull Memorial is profitable and Hillside is profitable. The only hospital we have that loses money is Northside.
Metro Monthly: OK.
Pishkur: And the little bit of information that I think is important: The same procedures at Trumbull, if they were performed at Northside, would generate $20 million more because of the payer mix.
But the biggest challenge to Northside and one of the biggest reasons leaving the Boardman market was so critical – not only in number of admissions but in the payer mix piece – is because a higher number of people in the Boardman market are employed and have employee-sponsored health care benefits and can pay for procedures.
Northside’s Achille’s heel is very simple: It’s a teaching hospital. We have the largest residency program in the area. It’s been in existence since 1881. Its clinical outcomes are second to none, but its payer mix, because of its location, is challenged. Therefore, we have a higher amount of non-paid at Northside, which obviously impacts its financial viability.
For Northside, its admissions and its getting a catchment area in an area that has a better payer mix will help it enormously in its financial viability.
Metro Monthly: The care center you’re planning for southern Mahoning County – that’s an attempt to recapture what you lost when Beeghly Medical Park was sold?
Pishkur: Exactly. Somebody asked me, “Gee, that’s crowded down there. Do you think you can get back in?” First of all, remember one thing: We only sold Beeghly one year ago, so it’s not as if we’ve been gone 20 years.
And we were the first hospital in Boardman. We had the first emergency room. Our reputation there is excellent. And my sense is we can get back in that market. We might be out two years at the most, but we can certainly get back in that market. So it’s not like we’ve been gone 20 years and there is a replacement for our services. … My sense is we’ll be able to recapture a significant part of our lost admissions by getting back in that market.
Metro Monthly: A lot of people talk about the importance of health care choice, but they don’t explain why it’s important. What are some of the things Forum has that cannot be found elsewhere? What are your strengths as a hospital system?
Pishkur: Maybe number one is that we are locally headquartered, locally owned, and our orientation is strictly to this region. That’s one thing that we’re talking to people about. Our quality of care, the physicians we have – certainly in the awards that we consistently win – set us in a very elite group of hospitals across the country as far as cardiac care, orthopedics, emergency room management.
Those are important things. We have a dental clinic. We have a family clinic with urgent care. We provide $50 million plus in unpaid care. That care, without our institution, would probably not be available to the population that’s taking advantage of it.
Having one provider in a market is certainly going to put pressure on the price of health care. The competition between the two hospitals certainly benefits employers and Anthem and others [that] negotiate contracts.
Choice is an important thing for both the patient as well as physicians. … My sense is that if you have one provider in this market, the price of health care is going to go up for employers. The choices that we talk about will not be available. And my sense is we will lose physicians due to that, so there are a lot of [positive] factors related to having two sources of health care in the Valley.
Metro Monthly: If you were describing to someone from outside of the area the three best things about Forum Health, what would they be?
Pishkur: Clearly, we have world-class physicians. We have experienced nursing and we have some of the best technology around.
Metro Monthly: The term “sustainable business model” has come up repeatedly in reference to the future of the auto and newspaper industries. I just wonder how you would define a sustainable business model for Forum Health. What does that mean for the system?
Pishkur: It means we have to develop a cost structure that allows us to employ the best and yet be able to maintain enough operating margin so we can capitalize our business and stay up to date with technology.
It’s not just a break-even proposition. As we look to restructure and as we go through this process, we’re looking to bring our cost structure in line to provide enough profitability to both meet our expense levels as well as create an operating margin that allows us to continue to recapitalize our hospital. We will then supplement that with growth initiatives which will bring in additional admissions and therefore allow us to expand that margin and better structure our business.
Metro Monthly: During the hearing the banks were pretty clear about Forum meeting benchmarks in its recovery. Can you identify these benchmarks and what measure are being taken to meet them?
Pishkur: Yes, I actually can. I can tell you I just had a meeting with our leadership this afternoon and I was happy to report on the six parameters for the first 10 days. We’re on a 13 week kind of budget here, which is a 91 day budget. After 10 days, or about 12 percent of that period, we are exceeding every benchmark.
Metro Monthly: What was the beginning date for the benchmarks? Did it begin the date of the hearing?
Pishkur: It began the date of the hearing, on the sixteenth.
Metro Monthly: What benchmarks did you meet?
Pishkur: One of the benchmarks is total external receipts or total expense and we’ve exceeded that by 25 percent. Our total receipts are exceeding what the benchmark needs to be. That means we’re getting people billed, we’re having admissions, we’re providing procedures and people are paying.
One of the other measurements is total disbursements and that’s operating costs and again we’re exceeding that benchmark by 25 percent. Cumulative cash flow, which is the difference between whether we’re building cash or burning cash, is almost $5 million favorable through the first 10 days, the benchmark. On capital expenditures, we’ve agreed to a fixed amount. We actually haven’t had any capital expenditures in the first 10 days, so obviously 100 percent ahead of budget.
On fees that we would incur to file during this bankruptcy, we haven’t been billed yet but we think we’ll be fine as far as tracking against that number. At Northside, we are 25 percent ahead of budget for adjusted admissions and at Trumbull we are 10 percent ahead of budget for adjusted admissions. We are exceeding every one of the benchmarks through 12 percent of the period.
Metro Monthly: Just the idea of reorganizing and being in bankruptcy presents a series of public relations problems. How are you instilling confidence in the public during this period?
Pishkur: That was one of our major concerns as we prepared for the filing because obviously if we didn’t handle the messaging well internally and externally, it actually could have precluded us from having any opportunity to succeed. I’m very much pleased to date. Our employees seem to be very much invigorated. We’ve talked to them and continue to talk to them and communicate with them.
Metro Monthly: Why did you agree to become CEO when some of the problems at Forum Health were starting to become more obvious? What made you want to become CEO and take this on?
Pishkur: Well, obviously, a lot of people have asked me that question. It’s a combination of things. Here’s the thing that weighed into my decision. Number one, I happen to have four sisters that work at Forum Health. My father retired from Trumbull Memorial Hospital and my father has a very fond affinity for the hospital, as you can imagine. I am a person I believe that is community-focused and I’ve spent a lot of time in my career devoting both my time and some of the wealth my wife and I have created to supporting community activities.
I just believe that from an economic standpoint, and a social standpoint, and a quality of life standpoint, the facilities – the hospitals at Forum Health – are just really crucial to our community. I saw some of the challenges and what I thought was the need for leadership and someone locally to take an interest in this hospital system and try to address its needs. … It prompted me to consider being available for the job.
I can tell you, as frank as I can say it, that in June of 2008, when I was asked to chair the board and I agreed to do that for basically the same reasons, I had no intentions of ever leaving Aqua Ohio and my 39-year career and changing careers. But I can tell you right now, it’s been exciting, it’s been challenging, and my sense is if we’re successful it will be the most personally and professionally gratifying thing I’ve ever done.