07/09/2006
The turnaround man
Holzberg discusses St. Mary Hospital's recovery, recent profitable month
Hoboken Reporter 

St. Mary Hospital made a nearly $150,000 profit in May, a significant milestone in the hospital's transformation from a money losing private not-for-profit into a city-owned facility. St. Mary's chief executive and noted hospital turnaround guru believes that it is just the first of many profitable months to come.

Thursday morning he sat down the with the Reporter to discuss his vision for St. Mary Hospital, as well as his past successes in helping Jersey City Medical Center and Robert Wood Johnson University Hospital in New Brunswick emerge from major financial distress.

"We are no longer saving St. Mary's, actually, in the words of [Mayor David Roberts], now we are beginning to develop St. Mary into a profitable institution," Holzberg said.

St. Mary Hospital's current owner, Bon Secours Health System, Inc. (BSHI), a private Catholic health care company based in Marriotsville, Md., is negotiating to transfer ownership to the city of Hoboken, a move that should be finalized in the next couple months.

It is currently Hoboken's only hospital and the oldest in the state. The hospital, which has over 1,000 employees, is on the verge of closing because of financial losses.

Welcome to St. Mary

Holzberg recently learned that life doesn't always go according to plan. Not so long ago, Holzberg, 68, who was chairman of the Board of Directors of the Robert Wood Johnson Health Network and former president and CEO of Robert Wood Johnson University Hospital, circled December 2006 as his retirement date.

Even though he doesn't really like fishing and is the self-described world's worst golfer, he had decided that after a lifetime in the health care industry, it was time to stop working.

But then he learned that St. Mary Hospital was on the verge of closing and that hospital has been losing an average of $2 million a month.

"I found myself getting more and more involved. I found that this was the sort of challenge that I just couldn't say no to," Holzberg said. "It's such a necessary hospital and everybody - the mayor, the community and the medical staff were incredibly convincing and so determined to save this institution."

He said that he was sold on the job the first time he was introduced to the hospital staff back at the end of April. As he walked in the Hospital's Assembly Hall he was given the rock star treatment - a standing ovation.

"It's hard to say no when you walk into a room and everyone stands up to cheer and you haven't even done anything yet," Holzberg said. "It showed me how much they want to save this hospital. They had no idea who I was or what I'm about, but they did know that they wanted to save this hospital and that's what they were applauding. I knew right then and there that I was ready to come in for the next couple years to help get them through this turnaround."

More like a hotel

He said that the key to improving St. Mary Hospital is to attract the young professionals, who have made Hoboken so successful, but for too long have left Hoboken for their health care needs.

"You turnaround a hospital the old fashion way, by building volume, which brings in new revenue," Holzberg said.

The best way to attract these newcomers, he said, is by a new emphasis on customer service.

"When people go to the hospital today they expect to see hotel-type amenities," he said. "I'm going to work on turning every bed in this hospital into a private room. That's the way hospitals are built today."

He added that he also would like to see private showers, in room internet, DVD players, and expanded in-room dining menus.

Another major improvement will come in the form of a new emergency room. The current emergency room is inadequate by modern standards. Its physical capacity is listed at 16,000 patients a year, but 30,000 patents are treated annually.

Holzberg said that with a larger, state-of-the-art emergency room he hopes to institute a policy that every patient will see a nurse in less than 15 minutes and a doctor in less then 30 minutes.

He said that these, and other, improvements will be part of a $65 million capital improvement plan, which will be paid for through loans and philanthropy.

"We are going to make the improvements that are going to attract the physicians and patients, post haste. We are not going to wait," he said.

He added that the money will also go to buy new equipment and for programs, such as a cardiac program, which Holzberg said is desperately needed.

Advantages of a public hospital

Holzberg added that there are several advantages to becoming a city owned hospital, the biggest being that it be eligible for "huge reimbursement advantages" over other not-for-profit hospitals.

The second reason, he said, is that there are grants that are available for public institutions that are not available for private non-for profits.

"We are going to take advantages of those grants, big time," Holzberg said.

Also, the hospital could be eligible for up to $26 million in federal funds, which could be released by Gov. Jon Corzine. Those funds could be used to offset operating costs for the first several months the city runs the hospital.

He added that, if the city is fully committed to this process, this is the best way to move forward.

"If I got any sense that the city of Hoboken wasn't behind this it wouldn't work," he said. "I'm so impressed by Mayor Roberts, and not just his commitment to St. Mary's, but also his willingness to take risks, while at the same time balancing his concern for the tax payers. He doesn't want to do anything that will come back and be a burden to the taxpayers."

Holzberg said that the city will have "some pretty good hedges against" St. Mary being a long term drain on taxpayers - the biggest being that Hoboken will take over ownership of the property.

Holzberg also gave his promise that St. Mary will not become a political job mill. "The way we are structuring it so that the hospital will be run by a not-for-profit corporation and the owner will be the city of Hoboken," he said. "We will not allow it to become a place where [politically favored] people get jobs. It will be operated in a fully professional manner, like it should be."

Where does Holzberg see the hospital three years from now?

"I see it as a very strong community hospital. In fact, I see it as the star of Hudson County. I see all of the other hospital chasing us because we became that good," Holzberg said.

Not the first time

Holzberg first made a name for himself in New Jersey in 1983, when he took over the floundering Jersey City Medical Center, which was a city-owned hospital until 1988. Like many industrial cities, Jersey City struggled in the '60s and '70s, and with a lack of maintenance and improvements, the hospital fell into disrepair. At the time the Medical Center was in Chapter 9 bankruptcy, which is the public equivalent a Chapter 11.

"It had been failing for a number of years, they weren't making the capital investments, they weren't making human investment, so there were lots of unfilled positions," Holzberg said.

He added that when he took over the massive hospital it was only operating 300 beds, even though they were certified for over 600.

Additionally, the hospital's record keeping was haphazard and sloppy. He said that they didn't even have a remotely effectual system in place to document the uncompensated care, what today is called charity care.

"It was a very inefficient business," Holzberg said. "I told the state health commissioner to give me three months and we will have a better system in place."

At the time, the state was giving the Medical Center the statewide average for compensation for charity cases, which at the time was 7 percent. But once Holzberg implemented a more accurate system, he found that close to 25 percent of the hospital's visitors couldn't pay.

"That's why the medical center went into Bankruptcy. They treated so many indigent patients, who they didn't document and didn't get reimbursed for," he said.

After the state agreed to increase the hospital's funding, that was the turning point for Jersey City Medical Center.

"The additional money meant we had a couple million dollars in the bank, which was the first time we had money in a long time," Holzberg said. "Finally employees didn't have to rush down to cash their paychecks because they were worried [they would bounce]. That was really the beginning of the turnaround."

He then put into motion a plan to turn the city owned hospital into a private non-profit, and to build a new smaller, better facility. Although he left before all of the plans came to fruition, Holzberg created the basic blueprint the Medical Center followed.

Liberty Health Services privatized the hospital in'90s and in 2004 the brand new Jersey City Medical Center Wilzig Hospital opened.

At Robert Wood Johnson

After leaving the Jersey City Medical Center in 1989, Holzberg became president and CEO of Robert Wood Johnson at a time when the hospital was struggling financially and as many central New Jersey residents went to New York and Philadelphia to receive specialized care, a situation somewhat similar to St. Mary Hospital.

"Today people think of Robert Wood Johnson as it is now, but 17 years ago it was much smaller institution and was losing a $1 million a month," Holzberg said.

"At Robert Wood Johnson, the solution was to form a partnership with the medical school, blending the medical school faculty and community physicians together so that it was positive for everybody," he said.

Holzberg added that once they strengthened its revenues the hospital was able to buy the kind of regional equipment that is only found at an academic medical center.

The programs established under Holzberg's watch included: the designation of the hospital as a Level I Trauma Center and a Regional Perinatal Center; the developments of The Heart Center and The Vascular Center of New Jersey; centers for heart, kidney, and pancreas transplantation; the Bristol-Myers Squibb Children's Hospital at Robert Wood Johnson University Hospital, and The Cancer Hospital of New Jersey.

Some controversy

In the politically charged atmosphere of New Jersey it nearly impossible to go an entire career without at least some controversy, and Holzberg is no different.

In August of 2002, then Gov. James McGreevey appointed Holzberg as chairman of the board of trustees of the University of Medicine and Dentistry. He had already served on UMDNJ's board for the previous five years.

But Holzberg's term at chairman of the board was short lived. After only a year, McGreevey withdrew this appointment when concerns were raised over his dual role as chairman and president and CFO of Robert Wood Johnson, an affiliate of UMDNJ.

In recent months, UMDNJ has been experiencing a major mismanagement scandal. In December 2005, UMDNJ ceded control of its day-to-day operations to a federal monitor.

A criminal complaint filed against UMDNJ in U.S. District Court in Newark by the U.S. attorney's fraud department charges that UMDNJ knowingly double-billed the government for Medicare and Medicaid patients.

At one point UMDNJ was interested in buying St. Mary Hospital, but pulled out of negotiations earlier this year. Holzberg said Thursday that the only reason he was removed as chairman of the board was because of the possible conflict of interest. He has never been personally implicated in any of the current allegations against UMDNJ.