The nurse who calls the shots

As CEO of a major health-care system, Valinda Rutledge says she is still taking care of patients — just on a broader scale.
By Edward Martin
 

At dawn, they will come with the gurney, the door will slowly open, and light from the hallway will stream in. Someone will ask his name, and the long night will end. Until then, there is darkness, the soft hum of machines and pumps, the tangle of translucent tubes and the dull ache where needles stick into his arms. The surgeons and family have gone, and the clock above the bed is dim in the pale glow of monitors. He is alone with his fear — and the nurse on the midnight shift.

This, in the 1970s, is the realm of Valinda Rutledge. She is young, and Detroit’s formidable Henry Ford Hospital is the first stop in her nursing career. The years will add experience and credentials. She will specialize in oncology nursing, working with kids suffering with what then was the nearly certain death of childhood leukemia, while earning advanced degrees. She will meld passion and compassion, on occasion baby-sitting her patients overnight to spell their parents.

She particularly remembers those awaiting operations. “You’d go into the rooms of patients who couldn’t sleep because they were worried about their surgery and what the morning would bring. You’d hold their hands and let them talk about how scared they are.” Sometimes, the darkest fear became reality. “You would have to go to a family and tell them that, no matter how much you’d done, their loved one had passed away.”

In the decades since, Rutledge, now 57, has moved from the nurses station to the executive suite. For nearly two years, she has been president and CEO of CaroMont Health Inc., the Gastonia-based health-care system that is in five counties in the Carolinas, anchored by the 435-bed Gaston Memorial Hospital. She’s an anomaly,  a nurse — and a woman — running an independent health system in North Carolina. With 3,800 employees, 44 medical practices and 133 physicians, CaroMont is the largest of the second tier of health systems, which often consist of an anchor hospital and multiple medical clinics and practices. Most are affiliated with one of the nine multiple-hospital systems, based in Charlotte, Winston-Salem, Greensboro, Greenville, Raleigh, Chapel Hill, Asheville, Wilmington and Pinehurst.

Now, rather than comforting solitary patients, she’s confronting upheaval in the delivery of care to tens of thousands, much of it driven by the sweeping provisions and uncertainties of national health-care reform and the heated competition among health systems in the Piedmont. She’s moving toward once-unthinkable precepts. Among them: that those who deliver medical care will be held financially responsible for its results and that medical procedures can be bundled — list-priced — like a car or washing machine. Ultimately, her system’s independence could be at stake. CaroMont, with net operating revenue of $483 million in the fiscal year that ended in June, posted an operating margin of about $23 million, about 5%.

Facing such hurdles while working to bridge the frosty aloofness that once characterized relations between administrators who run hospitals and doctors and nurses whose hands fall directly on the patients, she feels she has an advantage. On a gray, snowy day in Gastonia, a town where empty mills from the decades-long decline of textiles seem to mirror the collapse of the auto industry in Detroit, she takes stock. “When you move from the patient’s room into the boardroom, you leave a part of you back in the patient’s room. You never lose that.” “A CEO that has a clinical background and has worked with physicians certainly has an asset in their tool kit that will be more valuable as we move even deeper into health-care reform,” says Don Dalton, a vice president of the 130-member North Carolina Hospital Association. More than a mere matter of personnel management, it’s a gulf that must be spanned if the next generation of medicine is to succeed.

 

Smart but shy, she grew up a bookish kid in Baltimore and other places General Motors Corp. made its cars and their parts. “My dad worked for GM and was transferred several times. My parents married young and were not well-to-do in their background at all.” She had a job in high school, waitressing in a Woolworth coffee shop in Youngstown, Ohio. The family had two strong values — work and religion. After considering law as a career, she switched to nursing, earning a two-year degree in 1974 at Youngstown State University, then completing her bachelor’s in 1976 at Wayne State University, where she would earn a master’s, also in nursing, in 1984.

At Henry Ford Hospital, 10 minutes across downtown Detroit from Wayne State’s campus, there were general nursing assignments plus stints in intensive-care units and adult and pediatric oncology. “There were times when there was little we could do but educate families and support them emotionally,” she says. “Sometimes I was just there to hold their hands when there was nothing else we could offer from a medical perspective.” Other times, she got caught up in the frantic drama of hospital care. “There’s nothing that can replace having taken care of a patient in the midst of a code, trying to save their life.”

While working in intensive care, she received a memo from a hospital administrator. “I remember turning to my colleagues and saying, ‘I don’t think he understands at all how it is to really take care of patients.’ At that point, there were no CEOs with clinical backgrounds. I said, ‘I’m going to go back and get an MBA because there have to be more clinicians as part of hospital administration.’” After earning that degree in 1991 from Butler University in Indianapolis, she became associate chief operating officer at Duke University Medical Center in Durham. “It was at Duke that I moved from the clinical role to more of an administrative role. I’ve always believed I’m still taking care of patients — just on a broader scale.”

During this time, besieged by health-maintenance organizations powerful enough to force providers to cut rates and change the way they cared for patients, hospital corporations fought back by bulking up, gobbling scores of local hospitals to balance their end of the equation. The biggest would be Nashville, Tenn.-based Hospital Corporation of America, created in 1989 with the $5.3 billion buyout of a rival by the family of Bill Frist, who would later become Republican Senate majority leader. In 1993, HCA merged with another rival, Louisville, Ky.-based Columbia Hospital Corp., to form Columbia/HCA Healthcare Corp.

In late 1996, it hired Rutledge to run 255-bed Brandon Regional Medical Center in Brandon, Fla. In less than a year, the relationship crumbled. To increase shareholder returns, the company pressured her to cut jobs, order doctors to release newborns and their mothers more quickly and steer more patients into Columbia/HCA’s home-health agency. Ordered to trim 150 jobs from a staff of just over 1,270, she cut about 45. Patients would be endangered, she argued, if she let go any more.

From court documents, a picture emerges of an executive under siege. Her choice: risk her career or risk patients’ lives. Refusing to make additional cuts and take other steps the corporation ordered, she was demoted, then fired in October 1997. She sued, ultimately settling out of court. She won’t discuss the terms, but says, “As leaders, people look to us to make hard decisions but also decisions that are morally right.” In early 1998, she was hired as president of St. Anthony Hospital in Oklahoma City, leaving there in 2003 to become CEO of Bon Secours St. Francis Health System in Greenville, S.C. Targeted by the FBI and other federal agencies, Columbia/HCA pleaded guilty in 2002 to 14 felonies, including Medicare fraud and giving doctors kickbacks to refer patients to its hospitals.

n early 2009, Wayne Shovelin, who had led Gaston Memorial and its successor, CaroMont Health, for 32 years, announced his intention to retire. Banker H. Spurgeon Mackie Jr., chairman of the system’s trustees, headed the search for his successor. “We were fortunate to be in a sound financial situation, with great quality metrics and a dominant market share, but we also realized the past is no predictor of the future,” he says. Standard and Poor’s rates CaroMont’s more than $200 million in outstanding bonds AA-, noting, among other things, that it controls about 70% of the health-care market in Gaston County. It is one of four hospitals in the state singled out for clinical excellence in this year’s Business North Carolina ranking of the state’s best hospitals by Golden, Colo.-based Health Grades Inc. and is in the top 10 of nine specialties, such as gastrointestinal surgery and critical care (page 52).

The search committee knew what it wanted, Mackie says. “We needed someone who’d have great rapport with doctors but also somebody with a good sense of the business side of health care and who was not intimidated by the larger competitors in the region — someone willing to compete with them — but also someone who knows how to collaborate.” Mackie had reason to seek a competitive CEO. CaroMont lies in the shadow of Charlotte-based Carolinas HealthCare System, the nation’s third-largest public system. It dwarfs its neighbor, owning or managing 33 hospitals with 6,300 beds, 1,700 doctors and 48,000 employees across two states. While CaroMont poses little threat, Carolinas has repeatedly demonstrated that is no defense.

In the mid-’90s, for instance, Gaston Memorial sought state permission to perform open-heart surgery. Carolinas opposed it, as it had virtually all of Gaston’s efforts to expand, but the fight took on a new dimension when leaked internal memos revealed its opposition was based not on whether Gaston County residents needed the surgical unit but on loss of patients from Carolinas’ Charlotte cardiology unit — which it called its major “profit center.” The state allowed Gaston Memorial to create an open-heart unit — though it is managed by Carolinas, a decision that still stings some Gaston physicians.

The latest skirmish is over CaroMont’s plan to build a $24 million free-standing emergency department in the small eastern Gaston town of Mount Holly, just across the Catawba River from Charlotte. The state approved the project in 2009, before Rutledge arrived, but Carolinas has fought a series of stalling actions, including an appeal in December to the N.C. Court of Appeals, which likely will drag on through 2012.

In 2008, about a year before her hiring, CaroMont’s trustees carved out what would be another challenge for her. They voted to keep the system independent, ruling out possible mergers with Carolinas, Winston-Salem-based Novant Health Inc. and others. It’s a sound business decision, says Steve Graybill, senior health-care consultant with Mercer LLC in Charlotte, but not one that would make the CEO job any easier “As long as they have the capital to maintain a top-notch facility and keep up the investments required to maintain their technology, facilities and good physicians, independence can be great. It creates a more nimble environment. The question is, can they maintain their market share? Do they become an acquirer, as opposed to being acquired? They can’t expect Carolinas or Novant to cut them any slack.”

With that as a backdrop, the search committee began its work, soon focusing on Rutledge. “We were impressed with the fact that she started as a nurse when she was 18 or 19 years old and had worked her way up, taken on new challenges, gone back to school and been a very successful hospital administrator,” Mackie says. “Not many women have done that in hospital administration.” Another factor entered the decision. It reflected the stand she had taken at the Florida hospital. “She’s a person of high integrity. That situation is a good example. We trust her, and that she is going to do the right thing. That’s one of the things a clinical background brings to this position. She understands that there’s a patient at the end of every outcome.”

 

On a bitter winter day, nightfall nears as ambulance lights flicker at the entrance to the Emergency Department, where concierge Logan Hoffman fields questions from anxious relatives. Last year, 100,000 patients came in this way. Nearby, a bronze plaque memorializes Gaston County’s war dead, and down a gracefully curving hallway stands an abstract sculpture of a mother hoisting a baby above her head. It marks the maternity ward, The Birthplace, where about 2,800 babies were born last year.

The hospital itself was born in an old frame house in 1908. City Hospital moved twice as it grew. In 1946, war veterans, members of the American Legion, began a drive to build a modern hospital. Gaston Memorial moved to its current site on the east side of the city in 1973 and grew steadily. It became the heart of CaroMont Health in 2000, the name representing the wider region it now serves.

In her new job, Rutledge has had to focus on the future rather than reflect on the past. Launched in May and June of last year, two initiatives deal with the revolutionary changes bearing down on modern health care. First, she announced that Gaston Memorial was joining 60 other hospitals nationwide in the first wave of what the federal Affordable Care Act — health-care reform — calls accountable care organizations. A month later, she unveiled an agreement with Sg2 Inc., a Chicago- and London-based analytics company that measures the performance of hospitals, and GE Healthcare Corp., a division of the U.S. conglomerate based in Chalfont St. Giles, England, that provides imaging and diagnostic technology and advice on how to improve that performance. The goal: launch a pilot program in bundled care.

“Health-care cost continues to escalate, so we’ve got to figure out how to decrease cost, or at least manage it, so it stays on a flat trajectory,” Rutledge says. “The second issue, though, is the health-care status of America. We know obesity is escalating faster than we’re controlling it, and none of us wants to develop diabetes or congestive heart failure. We also know 75% of health-care costs relate to chronic diseases. So we’ve got to develop ways to better partner directly with employers and the community. What we’re moving toward is not just a health-care system that takes care of you when you come in for your hip replacement or open-heart surgery but one that focuses on keeping you healthy.”

Accountable care organizations — ACOs — will soon become as much a part of the health-care lexicon as was HMO in the ’90s. It’s a fuzzy concept with sharp-edged consequences. In its broadest sense, hospitals such Gaston Memorial will sign government contracts to manage the health of segments of their community’s population.

Medicare patients are the likeliest initial target. “Right now, 20% of Medicare patients are readmitted for the same diagnosis within 30 days,” Rutledge says. “Within the next 12 to 18 months, we’re going to start seeing some degree of penalties for that. For us to change our focus from hospital-centric to community-centric and change our delivery system, we’re going to have to keep people out of the hospital and help them manage their chronic diseases — not just care for the patient that comes to the Emergency Department and then discharge them.” If early efforts succeed, Gaston Memorial could apply for ACO contracts in 2012.

Despite uncertainties about reform fostered by Republican efforts to repeal Obamacare or strip funding from critical portions, hospitals are pushing ahead with accountable-care planning. “A lot of health-care reform is going to happen not from the political arena but from industry, employers and providers,” Mackie says. That partly accounts for Rutledge’s second initiative — bundled care. Popular with employers who bear the brunt of health-care costs, bundled care is flat-rate pricing. Heart bypass surgery, for example, might have a list price of $70,000. Hospitals and doctors share each other’s pain: If the doctor’s follow-up care is lax and the patient comes back, the hospital suffers; if the patient contracts a hospital-borne infection and spends an extra week, the doctor suffers.

How drastic are the changes Rutledge faces on the financial side of her administration? “Especially, the percentage of revenues from the inpatient side is going to decline, and a higher percentage of health-care expenditures are going to move into the outpatient arena,” Gastonia oncologist Steve Yates says. “CaroMont is certainly not the only health system that’s figuring out how to work in this environment.” CaroMont had about $474 million in net patient revenue in the fiscal year that ended last June.

A key link in the new chain will be doctors. “One of the biggest challenges will be to get doctors and providers that you don’t own in the community to cooperate,” says Graybill, the Charlotte consultant. “And if not, do you own — do you acquire — the doctors in order to deliver on accountability?” If they balk, ACOs and bundling will fail. That’s where Rutledge’s credentials as a business-trained clinician who has juggled life-and-death struggles in intensive care and been forced to keep her books balanced could prove critical. To coax cooperation, she is relaxing rather than tightening the grip that administrators traditionally hold over hospital internal affairs. “The change that’s happening is absolutely an essential part of medicine,” says Todd Davis, an anesthesiologist and specialist in intensive care who has practiced in Gastonia for 13 years and is a former Gaston Memorial chief of staff. “The partnership between physician and hospital administration is going to have to be shared governance. That’s what Valinda has been doing here — sharing governance.”

Among Rutledge’s first steps has been to set up physician councils, five groups headed by doctors to shift more responsibility to them for patient outcomes. How many days should a hip-replacement patient be hospitalized? “It’s one thing to say you’re accountable, but if you’ve never had a system in place to measure things, it’s hard to understand what’s relevant,” Davis says. “The chairmen and vice chairmen of the councils are practicing physicians. They’re developing strategies for providing the best quality care at the clinical level, but also at the business level, for the community.”

If Rutledge’s job is partly to remold hospital culture, she is blending personality — she’s still an avid reader, mother of two teenagers and spare-time baker at home — with executive acumen to go about it. Most here call her by her first name. “When Valinda arrived at CaroMont Health, there really was no place for physicians to come together to discuss cases and expose new ideas,” says Rowena Timms, CaroMont’s vice president of public policy and partnerships. “She put in a physician’s lounge, and now she’s in there three times a day visiting. They speak the same language. She’s not in there, going around with her financial report, saying, ‘What about this, and this …’”

Rutledge, whose compensation package last year totaled $1.1 million, was recently named one of the nation’s top 52 women in health care by Becker’s Hospital Review, a respected trade journal that focuses on law and management issues in the industry, and she was elected a member of the American Hospital Association’s metropolitan-hospital governing council. But she still has to contend with the traditional rigors of hospital administration — including the constant threat from larger health-care systems. “We try not to get distracted by being in a large geographic area with multiple needs and competitors,” she says. “One of the reasons we’ve gotten a lot of national attention is we’re independent, and there’s our size — we’re not a system of 25 hospitals. We’re nimble, which allows us to move and implement things quickly.”

She concedes that the pressures of reform, competition and managing a health system sometimes weigh on her. “I wouldn’t be human if I said no,” she says. “That would mean I don’t care. But when I get stressed, I like to get everybody in the room — clinicians, physicians, board members, community leaders — and say, ‘What should we do together?’” It helps too, she says, that in some ways she will always be on the midnight shift.