J. Patrick "Pat" McGillis identifies with western Montana, a region carved by gently curving creeks, dotted with livestock and shadowed by the majesty of the Continental Divide.
"It's a profound privilege to live here," McGillis declares, gesturing toward the landscape as he navigates his Cadillac through icy, wind-swept MacDonald Pass. The mountain road descends into Deer Lodge, the town where the 52-year-old McGillis has lived most of his life.
Despite containing Montana's only prison, this village of 3,400, 45 miles southwest of the state capital of Helena, could model for postcards. It's surrounded by three national forests, has dozens of late 19th-century and early 20th-century homes and buildings and a pristine blanket of snow that transforms a frigid mid-December day into a sequence of Kodak moments. And if jaded urbanites aren't charmed by Deer Lodge's scenery, they at least will be given pause by its unlocked doors and cars routinely parked with keys dangling from their ignitions.
Yet while the serenity may make it a privilege to live here, for a time earlier in this decade, becoming ill in Deer Lodge was not a happy experience. The role McGillis played in Powell County Memorial Hospital's dramatic transition has earned him MODERN HEALTHCARE's Trustee of the Year award for hospitals and healthcare systems with fewer than 200 beds or revenues of less than $25 million.
In 1992, Powell County Memorial ran a deficit of $57,000 on revenues of $1.7 million, according to hospital records. But by 1995, it posted a surplus of $344,692 on revenues of $3.3 million, according to HCIA, a Baltimore-based healthcare information company. Meanwhile, the hospital's assets climbed to $1.7 million from $1 million.
The hospital's burden on the county's taxpayers also declined, to less than $25,000 this year from $70,000 a year in 1990. That's the type of change widely celebrated by government-leery Montanans.
Subject of concern.
But the 19-bed hospital entered the 1990s as a frequent subject of concern in town chat. Much of its equipment was laboring into its second or even third decade. The X-ray machine had an unsettling tendency to emit electrical arcs. And while its management company, Fargo, N.D.-based Lutheran Health Systems, appeared disinterested in capital improvements, virtually any staff member could order supplies unquestioned, inflating costs and tightening cash flow.
This did not sit well in a region where the reality of tight economics is usually eclipsed by the swell of civic pride. According to Sales and Marketing Management magazine, Powell County's median household income in 1995 was only $22,720, compared with Montana's median of $25,880. (The U.S. median is $32,238.)
Yet when a consortium of California developers proposed to buy Deer Lodge's movie theater and convert it to retail space a couple of years ago, residents managed to raise nearly $100,000 within a few weeks to stave them off. On another occasion, the community raised more than $300,000 to refurbish and expand its library. It also has managed to scrape together the money to build and maintain an indoor public swimming pool.
So it was no surprise that in 1990 the Powell County Board of Commissioners voted to terminate the hospital's 30-year-contract with Lutheran after lobbying by town leaders. The commissioners formed a not-for-profit corporation, the Powell County Hospital Association, and appointed a seven-member board of directors. McGillis, who since 1973 has run a physical therapy practice out of a building behind the hospital that also contains its outpatient clinic, was approached about serving on the board. He was named its president.
"I had never done anything like this before and really didn't know anything about running a hospital," McGillis recalls in his customary soft voice.
But he had a simple and immediate goal in mind for Powell County Memorial: Get it back on solid financial footing. Otherwise, he believed if the hospital closed, Deer Lodge itself would be endangered.
"Rural hospitals are under fire all the time," McGillis acknowledges. "But they need to survive. They're the center of a town, oftentimes the biggest employer. I felt it was my mandate to make this place run well and prosper."
The right stuff.
McGillis seemed up to such challenge. After earning his undergraduate and graduate degrees in physical therapy from the University of Montana and Stanford (Calif.) University, he served as an officer in the Air Force, flying 200 combat missions in Vietnam as a pilot of C-141 cargo planes and AC-119 gunships. The experience dulled McGillis' taste for hunting, even though some townsfolk proudly mount the heads of moose and deer on the exteriors of their homes. But it taught him how to stay one step ahead of pursuers. His accumulated years of business acumen and diplomacy from running a physical therapy practice and knowing virtually everyone in the county didn't hurt either.
"I didn't know much going in, but it didn't take me long to see what was going on. (My business) helped me understand the system and gave me an in with the local doctors," McGillis says.
At the same time, he apparently took care not to rub people the wrong way.
"He's patient, unassuming, and he does things very quietly. But he also has stick-to-it-iveness and gives positive feedback," says Lee Jewell, one of McGillis' co-trustees. "That has made Pat instrumental to the success of the hospital."
"Pat brought some good ideas and management philosophy. He happened to be the right person in the right place at the right time," says James F. Ahrens, president of the Montana Hospital Association. "He's added a lot to the day-to-day spirit of the hospital."
After discussions as to how to run the hospital, the board decided against operating as a stand-alone. It awarded a management contract to Portland, Ore.-based Brim.
"It was the single most crucial thing we did," McGillis says. "They've done a remarkable job."
But it didn't seem that way at first. The board began its governance of the hospital with virtually no surplus. Vigorous lobbying of local lending institutions produced a mere $200,000 line of credit, less than a sixth of the hospital's net patient revenues at the time. And from that capital the board had to immediately pay Lutheran $53,000 to purchase the hospital's existing inventory of supplies.
Also, the first chief executive officer appointed by Brim clashed repeatedly with the board, particularly over his proposal to temporarily shut down the hospital's 16-bed extended-care unit. While it might have saved money in the short term, McGillis and other board members believed shuttering the unit would be the first step toward the hospital's complete closure. After about 18 months, the board voted to fire him.
"The single most difficult thing in my life was to make that phone call," McGillis recalls.
Hitting it off.
So in April 1992 Brim assigned a new CEO, Tony L. Pfaff. The Idahoan was then only 29 and had never run a hospital. But he had a lot going for him: Like McGillis, he's soft-spoken, thoughtful and optimistic. His hobby as an amateur pilot also helped him hit it off immediately with the former Air Force flier. During breaks between patients and after work, McGillis found himself taking more and more strolls from his building and through the hospital's tiny boiler room, which led to Pfaff's office. They swapped copies of Smithsonian Air & Space magazine and often socialized with each other's families.
"The relation with Pat helped a ton, especially with him being across the street. He also knows everybody," Pfaff says.
Their rapport helped them to rapidly develop a business plan. It was a good thing, too, because by then, creditors were calling almost daily.
"We probably owed $300,000 at that point," Pfaff recalls. "Making payroll was a challenge."
However, Pfaff immediately clamped down on purchasing, and the hospital began saving thousands of dollars a month. That proved to be a linchpin of Powell County Memorial's economic turnaround. And with the simplicity of Montana's healthcare economics-managed-care penetration is less than 5% statewide-sweeping changes that dramatically boosted revenues came swiftly.
McGillis and Pfaff also spotted economic opportunities where others did not. For instance, a logical source of business was the state prison, which houses more than 1,200 convicts, many in need of constant healthcare. But for years, Powell County Memorial treated convicts on a per-case basis, and the state often stalled payment. It was a natural to sign a contract with the prison for care, given that Powell County's nearest competition was 50 miles away in Butte and Helena. That occurred in April 1993. The PPO-style arrangement was worth $800,000 a year, or about 20% of all patient revenues.
Meanwhile, Brim and the county incrementally sunk cash into new equipment, such as a laparoscope, and an update of its laboratory equipment.
"We performed 11 laparoscopic surgeries the first month the equipment was on line," Pfaff says. Before that, the hospital performed perhaps six surgeries a month. Nowadays, the number is closer to 40. By spring 1993, only a year after Pfaff's arrival, the hospital began generating positive cash flow.
In turn, the increased cash flow made potential lenders give the hospital a second look. Brim and some local lenders are on the threshold of financing a $2 million renovation of the 32-year-old facility later this year. The project would expand Powell County Memorial's size by about 40%, to 24,000 square feet from 17,000, and optimize the use of existing space.
"I think we're going to see nice, controlled growth from here on in," McGillis says.
Yet McGillis still intends to dive in with both hands. He often lends a hand in pruning Powell County Memorial's landscaping and helped repair the facility's boiler. On a recent walk-through, he closely scrutinized the tile being installed for the soon-to-be relocated physical therapy unit.
"You don't need to have a lot of skill to do this type of work right," McGillis asserts, tapping the pristine ceramic tiles. "Just the right saw."