End of an era looms at CoxHealth

Numerous challenges,

positives ahead for future health system president

by Eric Olson

SBJ Reporter

eolson@sbj.net

A year from now the Larry Wallis era will have officially ended at CoxHealth. A new president and CEO will be charged with leading the nonprofit Springfield health system through a time of substantial facility growth but also under the cloud of two pending lawsuits.

This summer, Wallis announced his resignation effective Aug. 1, 2004. He is a 10-year veteran in the position of president and CEO and has worked at CoxHealth for 38 years; he turns 60 next year.

"That's just about two-thirds of my young life," Wallis said. "For me, it just felt right."

The early announcement, he said, gives CoxHealth's board of directors ample time to search for a successor.

But is it an odd time to leave, considering the health system's growth curve and lawsuit issues?

Robert Spence, a member of CoxHealth's Board of Directors for 29 years, doesn't think so.

"With a system as large and as complex as CoxHealth, I don't know that you could ever find a time that there's not something that is in a state of litigation. Those things have a way of happening," said Spence, who also serves as president of Evangel University.

Wallis said there is no correlation with his announcement and the lawsuits related to the health system's collection practices and the May 15 death of local attorney Carl Lippelman.

Rather, Wallis cites a specific career plan that is coming to its end.

"If I was able to move on at age 60, that was my goal," he said.

That milestone lies in the middle of the hospital's two-phase facilities master plan. Because phase I is expected to wind down next fall, Wallis was faced with a choice: "Either do it now or wait until the end of that process," he said. "I felt that was too far out." Phase II has a timeline of three to five years from fall 2004.

Spence is comfortable with Wallis' timing.

"There are construction projects that are ongoing they will continue to," Spence said. "But they're not the kind of projects that represent a radical change in direction. It simply is a continuation or expansion of programs that are already in place."

To ease the process, Wallis said he plans to remain with the health system as an executive advisor for as long as five years.

Challenges ahead

Still, no easy task awaits the person accepting the role of president and CEO. Wallis points to a challenging future for hospitals, largely due to declining reimbursements for doctors, coupled with the enticement of becoming independent.

"We're in the midst of a new dimension of health care called niche providers," Wallis said, where more physicians are testing the entrepreneurial waters.

Cox already has dealt with the trend and will again when a CoxHealth orthopedic group, Ozarks Area Orthopaedics Associates, becomes independent next year and builds its own facility.

"If the very best physicians migrate to those locations where they can have ownership potential, then there are profound implications for the hospitals in Spring-field," Wallis said.

"That is a challenge. I don't have any disrespect or ill will for those that want to embark on such initiatives. But it does have profound implications for the future of health care, as I see it. If, indeed, these providers flourish, and they peel off what we know as some of the more profitable aspects of a health care organization, then it is going to be difficult to support what remains. That's a challenge for not (only) Cox, but for Springfield, Missouri and the country it is going on everywhere."

Revenues are down for the health system, though Wallis would not say how much until the hospital's fiscal year ends Sept. 30.

"This has not been a strong financial year," he said. "More than likely, when we put together our budget for next year, we're going to look for a margin of less than 3 percent."

Wallis said 10 years ago, hospitals saw profit margins of 6 percent or 7 percent.

"This is what's happened with the decreased participation by Medicare and Medicaid," he said. "Every year the payment goes down, but the population to be served goes up. We have a national dilemma where the ability to maintain health care is going to be stressed. It is stressed. Our profit margins continue to be eroded. This is not a Springfield, Missouri, phenomenon. The federal government is strapped to meet all their needs."

Wallis added, "That plays into why physicians are more interested now in entrepreneurial positions than before. Their incomes have been hard hit. I respect that and recognize it. They are more interested in those kinds of relationships to maintain what they've become accustomed to."

The lawsuits, Wallis said, are simply a part of doing business as a health system the size of CoxHealth.

A verdict hasn't yet been rendered in the collection practices case, but CoxHealth has changed the name of its collection agency from Ozark Professional Collection to CoxHealth Profess-ional Collection.

The first lawsuit CoxHealth was involved in was in the late 1960s, when a woman fell on ice in the parking lot, Wallace said.

"It was one of those historical points in Cox history the first time we were involved in a lawsuit," he said. "Since then ... we've had lawsuits, we continue to have lawsuits and we will. When you think about this institution representing 9,000 employees, 500 doctors .... there are so many encounters with patients every day. We have a human element. And as hard as we work ... there are going to be times when we have had outcomes that are not what they should have been. So we have to deal with those the best we can."

Search committee

For those challenges and the responsibility of continuing CoxHealth's growth curve, Wallis' successor must be able to think ahead, said Jerry Jared, CoxHealth board member and member of a search committee established to select Wallis' successor. Jared owns CRW Properties Inc.

"I think we really need a visionary," Jared said. "One of Larry's strengths, among many others, is that he's been a real visionary in a changing environment."

The nine-member search committee, headed by Charles Chalender, has yet to meet. Neither the salary, nor the extent of the search internal or external, local or national is known at this time.