Beneath the blazing midday sun, an East Texas healthcare legend reels in another crappie from the murky, green depths.
It's easy to get snagged in the submerged brush that serves as cover for the tasty panfish. And Elmer Ellis, president and chief executive officer of the East Texas Medical Center Regional Healthcare System, frequently does. But he just keeps plugging away.
Standing on a bass boat on a lake outside the town of Tyler with several of his colleagues and fishing buddies, Ellis doesn't look like a high-powered healthcare executive.
Ellis, 64, is a short, stocky man with a ruddy complexion and dark glasses who could disappear in a roomful of ambulance drivers or shoe salesmen, from whose ranks he long ago graduated. While the slow-talking former chairman of the Texas Hospital Association may speak so softly you have to lean in to hear his words, his success has made plenty of noise and even earned him a few enemies.
"I always thought if I stayed low in the saddle I'd have less chance of getting shot," Ellis chuckles. "The guys in the big hospital systems never saw me as a threat."
And that philosophy has served him well. Despite serving on the boards of state and national hospital associations, Ellis didn't draw much national attention until late last year when Modern Healthcare confirmed that he was the unnamed hospital CEO who allegedly coerced executives within the not-for-profit ETMC system to contribute to the Texas Hospital Association's political action committee. ETMC, which denied that Ellis pressured any employees to give to the PAC, did not contest the IRS ruling and paid a modest $300 in excise taxes for illegally participating in political campaigns (Nov. 29, 2004, p. 4). While the rest of the country may not have heard of him, in East Texas he needs little introduction. His system's logo is plastered on ambulances and billboards throughout the region.
And despite financial setbacks at the organization in the late 1990s that would have cost many hospital executives their jobs, Ellis continued to plug away and this year celebrates his 20th anniversary as CEO.
Ellis has spent 36 years with ETMC, building it from a single, not-for-profit 110-bed hospital into a regional, nearly $2 billion powerhouse of 12 hospitals with about 1,000 beds, an expansive rural health system and one of the largest ambulance and trauma services in the country. In addition, he's launched for-profit subsidiaries in areas of emergency care, ambulance transport, group purchasing and clinical laboratories that bring millions into ETMC's bottom line.
THA President and CEO Richard Bettis says that among his 490 hospital members, Ellis is regarded with great respect for growing his system from a medium-sized hospital in a midsized community. Bettis says Ellis is known as a champion of patient-first initiatives and strong bedside care.
"He's very mission-oriented," he says.
Bettis says that when Ellis was THA chairman, some of his strongest points were made in his quietest voice.
"He learned that if you don't talk too loudly people will strain to hear you better," he says.
While Bettis said he's aware of the highly competitive atmosphere in Tyler, he doesn't view it as unique. "The velocity of competition is everywhere in this state."
The system's growth has not come without controversy. In the heart of the East Texas oil country, Ellis is embroiled in a long-standing, heated rivalry with crosstown competitor 309-bed Trinity Mother Frances Health System for the hearts, minds and insurance policies of 182,000 Tyler-area patients. Smith County and the surrounding area have grown dramatically as retirees flock to the green, wooded hills and lovely lakes of Tyler. World-class medical care is served up by ETMC, Trinity and Tyler's two other much smaller rivals-119-bed University of Texas Health Center at Tyler and for-profit, 20-bed Texas Spine & Joint Hospital.
Imagine the TV show "Dallas" with the rivals grappling over hospital beds instead of oil. At various times the two systems have filed antitrust lawsuits against one another, sought to exclude each other from lucrative managed-care contracts, attempted to pass legislation to circumvent those contracts and built competing hospitals in at least one town whose existing hospital was seldom even half full. It's competition, Texas-style.
Ellis is a native of Paris, Texas, with a population today of about 26,000. His personality is a uniquely Texan combination of humility and confidence, flashiness and courtliness-an almost shy man unashamed of displaying the expensive fruits of his labor. In status-conscious Tyler, everything has a price tag and nearly everyone knows the cost. Ellis' million-dollar salary has purchased a stately, 70-year-old Georgian mansion stocked with rare antiques he chose himself situated on five acres that includes landscaped gardens, a koi pond, swimming pool and jacuzzi spa. His home boasts a spotless six-car garage stocked with a Lexus, Mercedes SUV and vintage Jeep he's restored.
"You have to be careful not to think that you deserve certain kinds of things," he says. "I fly often enough to go first class on upgrades. But you have to watch that. I cringe if a board member sees me in Platinum class."
Ellis may be a little eccentric, but East Texas embraces self-made men like him. He can speak authoritatively about Frank Lloyd Wright and architectural history. He hunts and fishes in exotic locales but also enjoys antiquing. Ellis may house his bird dogs in kennels beside his garage, but he doesn't play golf. And he may be one of the few hospital CEOs in the country to display a 4-foot, leaping stuffed bobcat in his office. But this is Texas, and somehow it all fits.
Before his 1985 appointment as CEO, Ellis served in other executive roles with ETMC predecessor Medical Center Hospital. Before joining the system he was controller with St. Joseph Hospital in Paris. Ellis' first job at age 16 was driving an ambulance for a Paris funeral home, a converted Ford station wagon.
Ellis served in the National Guard and was planning to attend mortuary school when he was dispatched to Louisiana during the Berlin Crisis in the late 1950s. After taking classes at a Dallas mortuary school, he left for Paris (Texas) Junior College, pursued a bachelor's degree in accounting at East Texas State University (now part of Texas A&M University) and then earned an MBA at East Texas State.
Ellis arrived in 1969 at Medical Center Hospital, which was renamed ETMC in 1990.
ETMC Chairman William Hartley remembered Ellis as "that financial guy" under his predecessor, George Pearson. Hartley, the chairman and CEO of Tyler's largest independent bank, the Southside Bank he opened in 1960, has served governance roles at ETMC for more than 30 years.
"When George retired some of us felt Elmer made us feel more comfortable as his successor. The dollars are important in any business and boards need to know where the money is. Elmer kept us posted on the numbers, the census and cash flow," Hartley says. "That's how he became administrator. He remained because most of all, I believe Elmer hires good people."
The `vision thing'
In describing Ellis, ETMC staff, board members and even critics frequently cite his sense of vision. Hartley says Ellis is a man who follows through on his brainstorms.
"Where he gets his ideas I don't know. But Elmer has a vision. And he has the expertise," he says. "He wants Mr. and Mrs. Smith in Trinity, Texas, or Carthage, Texas, to be able to go to Trinity or Carthage doctors and keep patients in those towns."
ETMC Senior Vice President and Chief Financial Officer Byron Hale says there is a method to Ellis' vision that has paid off handsomely for ETMC.
"Mr. Ellis has a vision of putting services into underserved areas," Hale says. "East Texas is rural. Much of it is federally designated underserved area with a maturing population that is seeing significant growth. We have Medicare status as sole community provider and Medicare dependent, which are also cost-based reimbursement."
In addition, Hale says, ETMC has grown its nontraditional activities as well. The system is entrepreneurial, operating for-profit subsidiaries that include a clinical lab and a company that provides ambulance services for Oklahoma City and Tulsa, Okla., and Pinellas County, Fla.
Stephen Rydzak, an internist and medical director of ETMC health system for 10 years, says Ellis has turned around most of the rural hospitals the system has leased and made it economically feasible for physicians to practice there. "Everyone knows about his vision. It's not always been popular. There has been concern about overreaching this hospital."
Ellis' rivalry with Trinity Mother Frances President and CEO J. Lindsey Bradley Jr. is renowned in Texas hospital circles. Both are ambitious, driven men. Both are on their second wives and drive power vehicles. Bradley drives a Hummer. Both head large, complex healthcare organizations and are competitive to the bone.
Sources who know both men say the competition isn't just about business, it's personal.
Trinity Mother Frances spokesman John Moore says officials there "politely declined" Modern Healthcare requests to discuss the rivalry, litigation, or anything else relating to ETMC.
ETMC's Hale, who has worked in other hospital markets, says he hasn't seen anything approaching the intensity of the competition in Tyler. "We keep a close watch on our competition. We have a lot of opportunities for growth and development in the markets we serve."
Ellis says he inherited the rivalry from his boss. "He told me that a member of the community who became the patriarch of the competing hospital vowed to make ETMC the No. 2 hospital in town. That was in 1979 or 1980. It's gotten pretty heated since then," concedes Ellis, who seldom calls his rival by name, referring to Trinity Mother Frances as "the other hospital."
Ellis and his staff minimize the intensity of the rivalry.
"I've been here a long, long time," he says. "I don't think of it as competition. But everyone in the state hospital community likes to talk about it. I tell my people to focus on doing their jobs well and not focus on other people. The other hospital does a good job. There's enough business here for everybody. It doesn't have to be cutthroat competition."
But when ETMC signed a lease agreement in 1997 with Nan Travis Hospital (now 66-bed East Texas Medical Center Jacksonville) and invested $43 million there, Trinity Mother Frances launched its $15 million, 10-bed Mother Frances Hospital-Jacksonville.
In 2003, Trinity Mother Frances sued ETMC in U.S. District Court in Marshall, Texas, alleging state and federal antitrust violations, false advertising and attempts to illegally divert business through unlawful waivers of copayments and discounting out-of-network patients. Trinity Mother Frances also challenged ETMC's exclusive ambulance contracts with the city of Tyler and Smith County. ETMC countersued, alleging Trinity Mother Frances sought to exclude ETMC from the most desirable healthcare markets through its contracts with insurers, in particular Blue Cross and Blue Shield of Texas. While the ambulance claims were dismissed, the other allegations go to trial in October.
Recovering from tough times
In 1998, the ETMC system suffered bottom-line losses for the first time in years. Moody's Investors Service downgraded the system's bonds four grades to junk status. With merely 11 days' cash on hand, more than $200 million in outstanding bond debt and a $5 million loss, the system faced a liquidity crisis or worse.
ETMC closed its money-losing HMOs, several clinics, its home-health division and a 24-hour satellite ER and laid off staff. Hale, who joined ETMC as CFO in the midst of its 1998 financial crisis, says an audit showed ETMC lost $4.5 million that year even as internal numbers reflected a $10 million profit.
"We discovered that we had improperly reserved accounts receivable and as result overstated patient revenues. We had a collection problem," Hale says.
He says it took three years to account for past miscalculations. In 1999 the loss grew to $9.7 million and in 2000 it hit $9.86 million.
Ellis concedes an oversight failure. "I wasn't tending to detailed accounting," he says. Since then ETMC has focused on improving operating results to bring operational stability.
Hale says ETMC added several dozen new physicians in the past three years and has averaged 10% annual growth in subsequent years. By 2001 the system reported net income of $13 million and in 2003 posted record net income of $47.2 million. "We're predicting a $30 million profit for 2005," he says.
During Ellis' 20 years as CEO, the system has posted stellar growth. In 1985, it had $49 million in gross revenue and net revenue of $46.9 million, compared with gross revenue of $1.9 billion and net revenue of $744.8 million in 2004.
During the hard times of the late-'90s Ellis says his management team had grown too large and unwieldy. In 1998 and 1999 ETMC terminated 16 vice presidents.
"I'm not one for pitting employees against each other," Ellis says, instead favoring a collaborative, brainstorming approach that delegates shared responsibility to hands-on division heads.
"The greatest lesson I learned was to keep the management staff small. It was a hard way to learn it, though," he says. "ETMC has 13 managers running our companies. They have a lot of responsibility, but it works better than having 30 people doing the job."
Ellis says that after the system started losing money in the late '90s, things looked bad.
"A lot of people wrote me off then," he says. "But I took my medicine."
And he kept plugging away.
Birthplace: Paris, Texas
Family status: Married to Betsy Smith, father of two from first marriage and three from Smith's first marriage.
Education: Bachelor's degree in accounting 1964, East Texas State University (now part of Texas A&M); master's degree in business administration, 1969, East Texas State University.
Previous jobs: Funeral home ambulance driver; shoe salesman; controller, St. Joseph Hospital, Paris, Texas, 1964; assistant administrator, 1969, senior vice president, 1981, and executive vice president, 1983, Medical Center Hospital, Tyler, Texas (later renamed East Texas Medical Center).