Like many hospital chief executive officers, Robert Willett personally recruited and hired many of the top executives at 467-bed Kettering (Ohio) Medical Center.
But when the hospital board last year began looking at layoffs as one way to cut costs in order to maintain 7% to 8% profit margins, Mr. Willett found it difficult to ask employees to resign or take early retirements, according to board members and hospital executives.
Instead of handing out pink slips, Mr. Willett, 58, who had been employed by Kettering for 30 years-the last 14 as president and CEO-chose early retirement for himself last December.
"He felt what was good for the troops was good for him," said Frank Perez, Kettering's new president and CEO. "It is very difficult for a person who has been around for so long to face changes that are painful."
Mr. Willett declined to comment on his reasons for retiring. However, he issued a statement to MODERN HEALTHCARE that indicated support for Mr. Perez.
Shortly after Mr. Willett retired, the hospital laid off 65 employees, 62 accepted early retirement deals and about 50 positions were eliminated. In 1992, the hospital had 2,900 employees, according to American Hospital Association statistics. In addition, the Cleveland office of Ernst & Young was hired to help restructure the hospital and prepare it for managed competition.
In 1992, the hospital earned $12.9 million net income on total revenues of $166 million.
Last month, Mr. Perez was hired to implement the restructuring and integration plan that was part of "a process that Mr. Willett found so disagreeable," said a board member who asked not to be identified. Mr. Perez, 50, had been president and CEO of 300-bed New England Memorial Hospital, a two-hospital system in Stoneham, Mass., that faced similar integration challenges.
Mr. Willett agreed to help out the board.
He was following a tradition set by Kettering's only other two former CEOs, who remain accessible to advise management and trustees.
Mr. Willett accepted the newly created position of special assistant to the president of Kettering Adventist HealthCare, Kettering's parent organization. As special assistant, Mr. Willett reports to the president and board chairperson, who have not yet specified his duties, Mr. Perez said.
Kettering's restructuring plan includes further layoffs of managers, but it also is aimed at improving communications, decisionmaking and quality at the hospital, Mr. Perez said.
It also will strive to position Kettering as an integrated system that can compete for managed-care contracts, Mr. Perez said.
Kettering and the New England Memorial hospitals are affiliated with the Seventh-day Adventist Church, which sponsors 50 hospitals in the United States.
Two years ago, Kettering settled a lawsuit with a group of six non-Adventist trustees and other community members who sought ownership of the hospital, which they contended was improperly taken from them by the Adventist Church.
The settlement, however, didn't address the central question of the lawsuit: Which group, the Adventists or the community, owns the hospital (July 27, 1992, p. 12)? It did give more power to the non-Adventist trustees, who are a minority on the 18-member board.
Shortly before Mr. Perez's arrival, Kettering announced the first phase of its restructuring plan, which was developed through a committee of trustees and physicians.
To cut costs and improve decisionmaking, Kettering plans to reduce its top management levels to three from five. Four of 10 vice presidents already have been laid off, Mr. Perez said.
In addition, Kettering is in the process of reducing its number of department directors to 22 from 37. It also is assessing whether it needs the 60 managers currently on staff. The results of that study, Mr. Perez said, will determine how many directors will be laid off or reassigned to the managerial level.
"We want to empower those managers to act on behalf of cost and quality control," Mr. Perez said. "Our objective is more than taking away or adding people. We want to achieve a higher level of empowerment by breaking down departments that don't fit together naturally and by increasing collaboration."
Mr. Perez also said Kettering is moving to create an integrated system with physicians and other Dayton-area hospitals.
Future plans call for Kettering to construct nursing homes and a physician office building, Mr. Perez said. It also plans to spend an estimated $1.9 million to remodel its women's health and obstetric floors, he said.
"The level of integration in Dayton is not that significant at this time, but the market is poised for it and moving toward it rapidly," Mr. Perez said.