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Analysis

The Interview: Memorial Hermann CEO Chuck Stokes

By Philip Betbeze  
   February 01, 2018

'The hands-on perspective of taking care of a patient gives you insight into running a health system.'

This article first appeared in the January/February 2018 issue of HealthLeaders magazine.

Chuck Stokes never wanted to be CEO. He would have been happy to finish his career at Memorial Hermann as its chief operating officer, a job he'd held since 2008.

So when longtime president and CEO Dan Wolterman retired in 2016, Stokes says he was not a candidate, and indeed, the health system sought a new direction in mid-2016 by hiring a physician CEO, Benjamin K. Chu, MD, from Kaiser Permanente.

But Chu's tenure lasted just one year. He resigned, effective immediately, June 19, 2017. It remains unclear whether he was forced out.

The board said he left to seek a role in crafting health and public policy, but he did not immediately find a new position. Reports suggest the executive, who had never been a CEO, struggled to adjust to the role and was a poor fit for the 13-hospital health system.

Stokes was immediately named interim CEO, and the board moved quickly, removing the "interim" tag only two weeks later.

He began his career as a critical care nurse at the University of Mississippi Medical Center in Jackson, and later became a nurse executive before completing his master's degree in health administration at the University of Alabama-Birmingham.

As he rose higher in the executive ranks, he began to get reacquainted with some of the doctors he used to work with in patient care. His role was different now, but he maintained a collegial role with those physicians, who joked that they could tell embarrassing stories about knowing him when he was just starting out.

When he was president of 650-bed North Mississippi Medical Center, the organization won the Malcolm Baldrige National Quality Award in 2006.

He came to Memorial Hermann as system chief operating officer in 2008, and its Sugar Land Hospital won the Baldrige award in 2016.

Yet even today, Memorial Hermann faces plenty of challenges.

The Houston-area market is reeling not only from the effects of Hurricane Harvey last fall, but also from a multiyear depression in oil prices.

The executive turmoil at Memorial Hermann has not been limited to the CEO. Numerous top executives recently left to take leadership positions at other large health systems, and the system laid off more than a hundred people in leadership roles in early 2017.

Its most recent layoff of 350 people was announced in late June, only days after Stokes took over as CEO.

Stokes calls himself "just an old clinician" regarding the circumstances surrounding his change of heart about leading the health system. He plans to revive morale and transform the way the still-profitable health system does business.

Following are the highlights of his recent conversation with HealthLeaders.

"The hands-on perspective of taking care of a patient gives you insight into running a health system. This is a clinically driven enterprise, and having someone understand that at the top provides a different dimension to decision-making. With movement from volume to value, we're going to have to deal with moving from an illness model to a wellness model. We have to get a handle on things that contribute to ill health. Those are things clinical people all know because we see it every day.

"I was not a candidate last time. I enjoyed the role as COO. Dan [Wolterman] knew that, and I did not put myself in that position. I enjoy operationalizing programs, and that has been my strength. Ben [Chu] made a decision that he wanted to go back into healthcare policy, and the board and I made a decision not to do another search. I was familiar with the CEO role and was in a good position to move forward. The medical staff and leadership team were comfortable with me. It was a symbiotic decision between the board and myself that this would be the least disruptive when there was a lot of unknown.

"The board really wanted to see me continue the legacy of anticipatory leadership that we've had for over a decade. We have a history of proactively anticipating the changes in the healthcare environment and responding to those before the rest of our market. As an example, we have 292 delivery sites across Houston, but we started putting hospitals in the suburbs years before the competition did. We put hospitals in The Woodlands and Kingwood and Katy and Sugar Land because we anticipated needing to be more consumer-friendly. Given the local, state, and national headwinds, they want me and our team to continue to anticipate changes, which is pretty scary. The benefit to me is that neither the medical staff nor hospital or health system leadership have to get used to a new person or leadership style.

"My leadership style is open, honest, transparent, and respectful of the talent in this organization. I think that's the type of leader everyone wants to follow and work with.

"What's next? Well, we know no one is going to pay us more money. Consumers and payers are looking for value. Our care redesign effort is a five-year journey with a goal of taking out $500 million in cost to make us financially sustainable. For example, we've implemented multidisciplinary rounding on patients. That means physicians, nurses, social workers, care managers, and PA professionals are making rounds when patients are admitted to the hospital to anticipate their discharge disposition within the first 24 hours. Will they be discharged to home, homecare, hospice? If we do a better job of anticipating, we can make those accommodations earlier in the patient's stay, which keeps us from scrambling and increasing length of stay trying to find a place for the patient.

"Our 20,000 employees and 5,500-person medical staff can submit ideas on how to improve care or reduce waste through a portal we developed called iGenerate. It's a simple thing but the people who know best about how to improve care are the docs, nurses, and the frontline people who do this every day. We've been doing this systemwide for about a year. This was generated from my experience with Baldrige. For example, one of our employees found our shredding service was charging us for every bin. But according to the contract, we should only be paying for the site. That will save us $100,000 a year, and not only that, they redid the contract and gave us a refund. Baldrige is not about winning the award, it's about the journey of getting better faster.

"Houston was growing at almost 100,000 jobs a year, but when oil dropped below $50 a barrel, it became a crisis. It's coming slowly back. The city is still growing at about 25,000 jobs a year but it's been more in service industry jobs, where people either do not have health insurance or have a $3,000–$5,000 deductible. They're using services but not paying the bill, so bad debt and charity care has continued to rise. We have to figure out how to mitigate that because I don't think it's going to go away.

"There's no going back: We've eliminated the COO position. In fact, we've eliminated two layers of senior leadership. I don't have an answer on how many years I want to stay, but the board has asked me to prepare this organization for both the changes we know are coming and those we don't. I'm in the best position to prepare us for that. I will know, and the board will know, when it's time for a leadership change. I'm comfortable with that, and so are they."

Philip Betbeze is the senior leadership editor at HealthLeaders.


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