Getting his Hands Dirty to Drive Improvement: Q&A With Larry Anderson, CEO of Tri-City Medical Center

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Larry Anderson isn't afraid to roll his sleeves up.

A self-described participative leader, Mr. Anderson stepped in as CEO of Oceanside, Calif.-based Tri-City Medical Center in 2009 to turn the facility's deficit around to a positive balance sheet in just two years. He also took charge and helped form the hospital's accountable care organization, North Coast Medical ACO, and dove into healthcare reform.

His actions at Tri-City have been recognized by the community. In 2012, he was named "Most Admired CEO" by the San Diego Business Journal. He was also recognized as the 2012 Business Person of the Year by the Carlsbad Chamber of commerce.

Here, Mr. Anderson shares how Tri-City Medical Center has grown financially and as an ACO, his take on the solution to the physician shortage and his resolutions for 2013.

Question: Tri-City's North Coast Medical ACO has been operating as a CMS Shared Savings accountable care organization since July 2012. What have been the major lessons you've learned in the last six months as an ACO?

Larry Anderson: The formation of North Coast Medical ACO has been an incredible learning opportunity, not only for Tri-City Medical Center but also our ACO-affiliated primary care physicians, specialists and other ACO providers. Among the lessons learned are:

•    The complexity of implementing an IT platform that all providers can access and use for sharing specific data related to the ACO patients.

•    Where the money actually goes. The quarterly information supplied by Medicare documenting how and where all expenditures are allocated has been illuminating. It is one of the few times that we are able to see the entirety of the relationship between physician reimbursement, hospital reimbursement, SNFs and other ancillary providers. Of particular note is the significant amount of money being spent to care for end-stage renal disease patients in our community — both in the outpatient and inpatient settings.LarryAnderson

•    Medicare’s reimbursement methodology is evolving rapidly. The ACO model is an excellent way of understanding how this evolution will impact hospitals like Tri-City Medical Center. It is really our first look at 21st century Medicare.

Q: How did you and your team communicate the ACO to stakeholders and patients?

LA: First, we formed a physician-led ACO steering committee. That committee did the hard work of developing the bylaws, affiliation agreements and compensation plan. We then presented the plan in a series of dinners and evening meetings to all interested community-based physicians. After that, we conducted a tremendous amount of one-on-one meetings with individual physicians and eventually secured their commitment to participate.

As required by Medicare, we are developing an ACO-specific website so that patients can clearly understand what the ACO is about, who is participating and what our distribution plan is. We have also prepared handouts and documentation for our primary care providers to distribute to Medicare patients directly from the ACO.

Q: Besides becoming a CMS ACO, what are some other ways you're maneuvering Tri-City to succeed in a post-healthcare reform era?

LA: In addition to the ACO, we are finding a myriad of ways to partner with our physicians to ensure alignment between their goals and those of the hospital. For example, we purchased controlling interest in a surgery center adjacent to our campus, created two institutes in cardiology and orthopedics/spine and are pursuing joint hospital-physician ventures in both oncology and radiology. These partnerships allow us to create goals that assist the hospital's bottom line but the physicians participate in the development and execution. The goals, jointly developed in this way, have helped us to improve both process and outcome indicators and thereby improve the quality of our care.

Q: You led Tri-City Medical Center from an $11 million loss in 2010 to an $8.2 million gain in just two years. What were the main drivers of that success?

LA: There were a number of steps that we took to achieve financial viability. First, we took a look at all contracts, including all managed care contracts, but also contracts with the state and County of San Diego and, over time, renegotiated all of them with better outcomes.  

Second, we drove reductions in length of stay by honing and improving processes for care. This effort brought our relationship with our hospitalist group to the forefront, and we found them to be very willing partners.

Third, we had to refinance our debt. Upon our arrival in 2009, we were paying higher-than-market interest rates on our debt and we were able to negotiate those rates initially to market rates and, with profitability, to lower-than-market [rates].

Fourth, we began to focus on our quality with amazing success, reaching levels for readmission rates that rank us among the top hospitals in the nation.

Finally, we launched new business ventures, including robotics, hyperbaric medicine, aesthetics and forensic medicine with the state that have emerged as important add-ons to our basic service lines. We have become a leader in robotic surgery in areas, such as robotic spinal surgery, that other hospitals have not ventured into. This has created a differentiation for Tri-City Medical Center that has become an important feature of our branding.

Q: During the Becker's Hospital Review Annual CEO Strategy Roundtable in November 2012, you mentioned concern over the physician shortage in your market. What steps have you taken to alleviate the effects of the shortage for your patients?

LA: We are aggressively recruiting physicians and surgeons to meet the needs of our community into the future. However, this is not a "real" solution to the shortage problem as we are literally borrowing from another healthcare market to meet our needs. But it is one short-term way to address the problem.

Long term, we are expanding our existing residency program, and [we are] looking to add additional resources to residency programming and to partner with academic medical centers to help them develop more physicians for the future as well. The success of these programs will depend, in large part, on the willingness of the federal and state governments to solve the physician reimbursement issues in the long term and to fund educational development programs for our new generation of physicians. Without help from government funding sources, it is unlikely that either we, or our surrounding academic partners, really have the resources to create a long-term solution to this problem.

Q: How would you describe your leadership style?

LA: I have always described my leadership style as "participative." By that, I mean that I roll up my sleeves and work with my directors and managers to solve problems. I believe the best model is to pick the very best people you can, provide them the resources they need to do the job, support them in every way you can, but, ultimately, hold them accountable for the outcomes they have agreed to. If there is no accountability, the entire process does not work. This is where most managers fail. No matter how good you are at judging people's abilities, you will make mistakes. The key to being a successful manager is the ability to admit that you made a mistake and to help someone who is not able to do the job to move on to another position, usually not in your organization. You are not doing anyone a favor by keeping them in a position that they cannot handle.

Q: Any New Year's resolutions you can share?

LA: My New Year's resolution is to "do it better this year." Progress is incremental. It is rare to find the silver bullet that no one else could find. Progress is achieved in small steps by accepting your mistakes and never giving up.

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