What you need to know about the forces reshaping our industry.


September 23, 2014

How to prove a boss wrong when he thinks you're the second choice? Do what this CEO did.

Daily Briefing

    This interview of Gene Michalski, President and CEO of Beaumont Health, was conducted by Eric Larsen, managing partner, and condensed by Dan Diamond, executive editor.

    Q: For this series, we've talked to nurses, doctors, even accountants who became CEOs of health care systems. But you have a unique background—your career began in the lab.

    Gene Michalski: I actually came to Beaumont on the afternoon shift as a phlebotomist in 1971 while working on my master’s degree in physiology. I gradually did more and more, until I went from a phlebotomist, to a junior tech, to a senior tech—and eventually I became the Afternoon Shift Supervisor.

    At the same time, Beaumont was building a new hospital campus in Troy. My first key mentor—Hazel Stoerck , who was the Chief Tech for the laboratory—thought I should throw my hat in for the job of Chief Tech out at Troy. I did once I finished my master’s degree, and I was blessed to get the opportunity.

    After about a year and a half, the hospital's director Ken Matzick promoted me to my first administrative role. This was 1978—after which I began working on my MBA.

    I had the responsibility of building the first medical building on the campus and all the programs that went into it. And another fellow, Mike Boyle, helped mentor me in overseeing a major construction program.

    That gave me a beautiful blend of facilities development and program development.

    Q: What do you wish you knew back in 1978? What would have been a useful sort of insight for you thirty-five years ago?

    Michalski: Back in those days, I knew a lot about developing programs and projects. But I didn't have as much knowledge or appreciation of the people side of the business. I didn't have as much emotional intelligence.

    Over the years, I've also learned a paradigm that I try to pass along: if you want to get an outcome, you really have to follow two tracks.

    One track is the structure, process, outcome track. You start at the outcome and ask yourself, "What process do I need to put in place to achieve that outcome?" That's what kaizen is about. And then what structure do you need to have in place to support the process?

    And the other track is the culture, behavior, outcome track. Culture drives behavior and behavior drives the results or outcome. So you have to have both tracks working together in sync to get the outcome that you want.

    Q: I've heard you mention that your job is all about the patient—and if it's not about the patient, it's about helping somebody who is helping the patient. Was there a moment in your career that anchored you in that?

    Michalski: Yes. So there was a moment…I'll get a little emotional about this…when I was a phlebotomist and had to draw blood from a young child in the emergency room who was about to die.

    And I ran the tests, even as the child passed away.

    I went to see the doctor after that, and I said, "How do you do this? How can you deal with death and dying and disease, and how do you manage this?" and the doctor told me, "Well, I'm just so committed to helping people. It's magnificent, meaningful work."

    Admittedly, I was just a phlebotomist at the time, but I was part of the team. The nurses are there and the doctors were there and I was there. We're all grieving over this child that's lost…[and] I never forgot that story, and I never will.

    Everything that we do, it's anchored in that.

    How other CEOs got started

    Hear how some of the industry's most prominent leaders began their careers, and in their words, the lessons it taught them.

    Perspective on the industry

    Q: M&A activity is accelerating, as we well know, but there's also been quite a few false starts. What's your perspective on how changing industry dynamics are affecting the health care sector?

    Michalski: You know, this is auto town, right? And I think there are lessons to be learned from other industries here, particularly in this town.

    The auto industry didn't move quickly enough to address the end consumer's wants and needs in the way that the consumer wanted their wants and needs attended.

    It was a very production-oriented mentality. It wasn't a service-oriented mentality.

    The auto industry has retooled to focus more on pleasing the customer. For a silly example, just think of all the features that get added for moms and women that a company never thought about putting in before, just because they know more about their customers' wants and needs.

    Health care is going through that transformation as well. Value-based care versus volume-based care is a good example of that—bundling the care, knitting it together more seamlessly, focusing on the quality metrics, and being reimbursed for value versus volume.

    There's so much more focus on the patient and less on the doctor.

    Q: How has this industry transformation affected Beaumont's strategy? You've made investments in Meaningful Use, you've explored some partnerships…

    Michalski: When we looked at health reform and some of the imperatives associated with it, the consolidation that's occurring in markets across the country prompted us to consider a partnership with Henry Ford.

    We had considered such a partnership on two previous occasions, back in the 1980s, but for a variety of reasons chose not to pursue it. This seemed like it might be a different time and place, and there were a lot of potential financial synergies. But for a lot of cultural and other reasons, it was just not a good fit.

    That doesn't mean we haven't continued discussions to find out what others are doing to prepare for health reform and to consider areas where we might collaborate. Laboratory, for example, has become more of a commodity in terms of working with health plans and health systems and physicians. That's an area where we do have a joint venture that is among several hospitals in the area.

    So we'll continue to look at collaborative opportunities as we look to the future.

    [Note: Since this interview was originally conducted, Beaumont finalized an affiliation with Oakwood Healthcare and Botsford Health Care to create a new eight-hospital system called Beaumont Health. Michalski will serve as the initial CEO of the new organization.]

    Q: Some health systems have grown tremendously—Ascension is a $22 billion organization, CHI is $15 billion. My question to you is, how big is big enough?

    Michalski: Beaumont's in a local market, so I really don't have a national view. I imagine that national players [like] Ascension and Trinity have economies of scale that are not available to a regional or local market player.

    From my perspective, everybody is barely eking out a living in our market—Southeast Michigan is particularly difficult because of the dominance of Blue Cross in Michigan and because of the economic downturn that occurred back in 2007 and 2008 in the auto industry.

    “From my perspective, everybody is barely eking out a living in our market... We were ground central for the meltdown in the Great Recession.”

    I mean, we were ground central for the meltdown in the Great Recession. We were.

    I think what we're doing and what we will continue to do is to always honor the local conditions but have a systemic approach to doing so.

    Q: In spite of all of these headwinds, Beaumont has navigated this period relatively well.

    Michalski: Yes. We're pretty fortunate. Our operating performance has been key, but it's getting tougher to do.

    We're having to do all the things that everybody else is doing: To make sure that we are as efficient as we can possibly be.

    And that means preserve the core and make it more efficient. Make it more effective through quality, safety, service, and value. And then stimulate progress by implementing new programs throughout the continuum of care.

    Physician strategy

    Q: Beaumont, historically, maintains an independent relationship with physicians—in fact, you have a quite nuanced approach to physician employment and engagement. Can you talk about how you developed this strategy?

    Michalski: First, it's incredibly important to have engaged physician leadership. That's [essential] to what we do.

    It's always been our philosophy that there should be a place for any physician who wants to practice high-quality medicine and serve patients in this community to hang their coat on the hook of Beaumont comfortably and feel part of the medical family.

    And our employment strategy is one way to do that. The hybrid approach, where you work in one of the three venues—clinical care, teaching or research—or all three, is another way to do it, and you can do that either full-time or you can do it part-time.

    Full engagement of the private practice community is absolutely critical, too.

    Q: Your counterparts across the country are going in a different direction and disproportionately employing physicians. Why is Beaumont taking a unique approach here?

    Michalski: I believe that there's still a great opportunity to practice independently, and I don't see the whole country migrating to an employed model.

    Our experience is that the ability for a physician to customize their lifestyle, both economically and clinically through private practice, is still going to exist.

    We do have a model where our health system is working with our physician organization —we've jointly formed a 501(c)(3) organization called Beaumont United Care Partners, where the doctors and hospitals are going to work together to get as much value out of a collaborative relationship in working with the patients and the payers.

    Q: Is this your Clinical Integration network?

    Michalski: Yes. And to the extent that we can achieve savings through better value-management, ensure those savings with doctors in the health system—that will be our approach for engaging private practice physicians.

    Lessons for mentorship

    Q: I've heard that when folks solicit your advice, you recommend, 'Don't think of your boss's job, but your boss's boss's job.' Basically, to model your career …

    Michalski: Two steps ahead.

    Q: Two steps ahead. Talk about your conception of mentorship. You already mentioned a pair of mentors who were key to your professional and personal development.

    Michalski: The way I like to mentor—the way that has been successful for me—is to lay down a challenge and have a participatory process built upon the mentee actually doing value-added work.

    Value-added for them in terms of a learning experience, for the organization in terms of contribution.

    Let me give you an example from when I applied for the Chief Tech job for the Troy Hospital. Paul Goodman— the pathologist who was going to be in charge—wasn't sure I was the right guy. In fact, Paul had somebody in mind, and he was thinking about me as the second-in-command.

    Q: How did you convince him to give you a shot?

    Michalski: Paul actually gave me some homework. He told me, "Gene, this is going to be a 200-bed hospital. Here's the profile of services that are going to be in the building. What kind of lab testing do you think would be appropriate for that kind of patient mix?"

    So I went to all of the department heads in the laboratory at Troy and said, "Here's the profile of hospital services. Help me understand, from your perspective, what would be appropriate for Royal Oak to do, versus what would be appropriate for us to send to you but do ourselves out at Troy?"

    And I did a little studying outside of the box to figure out what other satellite hospitals were doing, too.

    After two weeks, I went back to Paul and said, "Here's my recommendation based on this homework for a test profile."

    He said, "That's good. But what kind of equipment will we need to have to do that? Go back, and in a couple of weeks tell me what you think of that," and so the pattern repeated, and pretty soon I came back with an equipment profile.

    Q: Now, this is before you've been hired?

    Michalski: It's actually before I've been hired. Even after doing a test profile, after doing an equipment profile, I hadn't got the job. And Paul kept going. "How would we staff it?" So I came up with a staffing profile. Okay. "Well what policies and procedures would you need to have in play?"

    Well, by the end of six months—six months—finally I had convinced him. I basically planned the laboratory.

    And that gets to how I like to mentor. To coach them, "Have you thought about this? Have you considered that?"

    Mentorship, to me, is a give-and-take relationship. 

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