As a vascular surgeon at Cleveland's Deaconess Hospital for 27 years, George Saad developed a deep, lasting allegiance to both the institution and its employees. His long association made the hospital almost as much a part of his life as his own family.
The true depth of Saad's commitment was tested about three years ago, when hospital owner Primary Health Systems filed for bankruptcy, leaving Deaconess' future in doubt after six years of financial troubles, shrinking services and the increasing likelihood of closure.
Saad, whose medical practice was supplemented by his considerable success as a businessman and real-estate developer, decided to add the debt-ridden, 212-bed hospital to his portfolio. The only committed bidder out of at least a dozen potential buyers contacted by PHS, Saad paid $5 million about 21/2 years ago to take over as owner, chairman and chief executive officer of a venerable facility that has served the blue-collar residents of Cleveland's Old Brooklyn neighborhood since 1923.
Asked what qualities are required to make the jump from a doctor who works at a hospital to one of those rare physicians who owns one, Saad, 59, thought for just a moment before replying, "Well ... I guess you have to be a little crazy."
In fact, Saad says, he tapped his experiences in private enterprise to create a business model that has helped transform Deaconess from a facility facing "significant" annual losses to one that has made money in each of the years he's owned it. Saad would be no more specific than that, saying he intends to unveil a partnership offering in the next six to 10 weeks to help raise capital by providing investment opportunities to fellow doctors and others in the community.
"We're in the black," is all Saad will say.
Help from the docs
Aside from cutting costs by lopping off layers of bureaucracy and trimming some nonessential positions, Saad says he closely examined all vendors' costs and insisted that his physicians be more careful and price-conscious in selecting procedures and ordering tests or medications.
"We're trying to get the physicians involved in hospital management and financing, and educating them about the different products we have available to them," Saad says. "The most expensive product that you implant, or the most expensive drug you use, isn't necessarily better. So we've adopted a new approach. If the doctors want the most expensive (service), we want to ask them why."
Many fiercely independent physicians might balk at this new form of case management, Saad acknowledges. So far, he says, he's been given the benefit of the doubt because of his credentials as a fellow physician. In fact, despite his time-consuming role as an administrator, Saad says he continues to practice medicine, though at a much slower pace than in recent years.
"I definitely can relate more to them than your average hospital CEO," Saad says. "They'd much rather listen to me. Of course, I've had some issues (with individual physicians). But we can always sit down and talk."
What's more, Saad says, he also is in a better position to recruit new doctors, as well as to serve as a key ally for the existing corps of about 325 affiliated physicians at Deaconess, highlighting the advantages of a smaller hospital over competitors such as the two giant regional systems anchored by University Hospitals Health System and the Cleveland Clinic. Lower prices and a more personalized approach, he says, also will help build loyalty among patients, increasing volume and revenue.
Adding to his portfolio
Saad, who has real-estate investments throughout the Cleveland area, purchased the hospital in October 2000 from Wayne, Pa.-based Primary Health, which paid $8 million for Deaconess in 1994 and eventually owned three other hospitals in the Cleveland metropolitan area before filing for Chapter 11 bankruptcy protection in March 1999.
He says absentee ownership was one key reason for the past fiscal turmoil surrounding Deaconess and other PHS hospitals, which Saad believes suffered under the weight of a big bureaucracy and an unwieldy staff. "There was a lot of fat," Saad says. "We have done away with that. We've trained people to be multitasked, and we've trained them to be involved in the hospital's operations on all levels."
Saad doesn't have a master's degree in business administration and delights in dismissing advanced management degrees as essentially superfluous. In fact, he says jokingly, "I've fired a lot of MBAs. My MBA is the school of hard knocks."
Saad says his entrepreneurial spirit allows him to take bold risks or new initiatives-precisely the type of action that a buttoned-down business school graduate might resist.
Last summer, for instance, Saad shook up the local medical establishment a bit by running a full-page ad in the Cleveland Plain Dealer announcing that Deaconess would cut in half the amount of malpractice coverage required of its physicians. Saad says he hoped his plan, which allows his doctors to carry only $500,000 of per-incident malpractice insurance and $1 million aggregate coverage, would encourage cash-strapped physicians to stay in the area.
"I lost six to eight doctors who couldn't afford to practice anymore," says Saad, who acknowledges that the reduction hasn't had a great deal of impact so far. "I felt like I had to do something."
Asked whether the change in coverage might expose Deaconess to increased liability in lawsuits, the blunt-spoken Saad says, "Physicians are well-trained. Sometimes you have to make restitution. It's the luck of the draw."
Under Saad's ownership, little has changed at the hospital in terms of the services it provides patients in a 15-mile radius around the Old Brooklyn neighborhood southwest of downtown Cleveland. Though he considered reopening the hospital's obstetrics unit, Saad says, mounting concerns over malpractice costs thwarted those plans.
How would Saad describe the secret of his success? So far, he says, it's largely because of his "hand's-on style" of leadership.
"You can't manage a hospital from the boardroom," he says. "You need to roll up your sleeves and understand every single thing that takes place in a hospital. And you've also got to have the support of your fellow physicians-not just financial support, but moral support as well. Sometimes you need people to cheer you on a little."
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