Healthcare professionals who have worked closely with Stacey emphasize his willingness to listen, his deference to frontline workers and his obsessive focus on quality of care. The standard he established at Poudre Valley was that it should strive to be in the top 10% nationally in every measurable benchmark of care delivery. That emphasis paid off in 2008 when Poudre Valley was among the recipients of the Malcolm Baldrige National Quality Award, the only healthcare institution to receive the prestigious honor that year.
“In the end, those in the industry that are successful are those that are absolutely religious about quality,” Stacey, 53, said in an interview. “That's what's going to differentiate who we are and what we are. The bottom line will become less impactful.”
Stacey takes over at Fairview after a tumultuous period in the not-for-profit system's century-plus history. The last permanent CEO resigned in March 2012 following a nationally reported scandal over aggressive bill collection practices by a private contractor. Then last April, merger discussions with Sioux Falls, S.D.-based Sanford Health were abandoned after Minnesota public officials criticized the potential deal.
Stacey also assumes the new post as his and other healthcare organizations wrestle with the financial implications of the Patient Protection and Affordable Care Act. He argues that hospital systems would have been forced to cut costs and improve quality of care to remain competitive with or without the healthcare reform law. “What happens in Washington, to me, is just irrelevant,” he said. “It's turned into a grandstand. We do what we have to do. (We have to) collaborate more, share data more, find best practices and replicate them.”
Despite Fairview's recent difficulties, it remains financially sturdy. Revenue has increased by more than $600 million over the past five years—a jump of roughly 25%. In 2012, it had an operating margin of 3.3%, up from 0.5% the previous year. In 2012, Moody's Investors Service downgraded Fairview's bond rating from A2 to A3, in part because of management turnover and negative publicity over its collection practices. That bond rating has not changed, but last year Moody's raised its outlook for the hospital system from negative to stable.
Fairview would not disclose Stacey's salary. In 2011, he earned $1.5 million as CEO of Poudre Valley Health System, according to the not-for-profit group's tax return. His predecessor as Fairview's top executive, Mark Eustis, was paid $1.4 million in 2011.
Fairview has long been the second-largest hospital system in the Twin Cities market, behind only Allina Health. The system includes six hospitals, roughly 1,500 staffed beds, nearly 100 medical clinics and more than 22,000 employees. Between 2010 and 2012, Fairview provided roughly $60 million in charity care.
But in recent years, Fairview and Allina have seen other players encroach on their turf. Most notably, in 2012 HealthPartners took over Park Nicollet Health Services, making it the third-largest player in the Twin Cities market. In addition, largely rural healthcare systems—including Sanford and Essentia Health—have been looking for opportunities to expand into the Twin Cities.
Fairview likely will look beyond its current geographic footprint for expansion, predicted Allan Baumgarten, an independent healthcare analyst who writes the annual Minnesota Health Market Review. “I think what they're looking at is going further into Minnesota or western Wisconsin or even other states in the region,” he said.
Dave Murphy, who chaired Fairview's search committee and serves as chairman of the board, said that he's confident Stacey is the right person to lead the organization through a challenging period. “Obviously, this world is changing in a big way and we want somebody who's strategic in their thinking,” said Murphy, president of Red Wing Shoe Co.
Fairview's recent troubles began in July 2011, when a laptop computer was stolen from the vehicle of an employee of Accretive Health in Minneapolis. The computer contained medical records for more than 23,000 patients of Fairview and other medical facilities.
In response to that security breach, Minnesota Attorney General Lori Swanson filed a lawsuit accusing Accretive of failing to protect confidential health records. Swanson's office also launched a probe into the billing practices used by Chicago-based Accretive on behalf of Fairview.
The end result of Swanson's investigation was a six-volume report, released in April 2012, that lambasted Accretive's bill collection practices. It described high-pressure collection tactics that included squeezing patients to pay their bills while they were still receiving treatment in the emergency department. “Perhaps the most damaging act by Accretive was to undermine the basic premise that a hospital is a sanctuary to treat the sick and infirm,” the report concluded.