Knowing the Way, Going the Way, Showing the Way
Someone once said that a leader is one who knows the way, goes the way, and shows the way. Headquartered in Flint, Michigan, McLaren Health Care is one such leader. Characterized as an integrated health care delivery system, McLaren has spent the past 20 years focusing on acquiring struggling hospitals and helping them become viable — quickly. Today the health care system is composed of eight hospitals along I-75 and I-69. It also provides a variety of ancillary services, such as home care, medical equipment, home infusion, and hospice, as well as health insurance products made available to the business communities in which they serve.
Since Phil Incarnati became president & CEO of McLaren 20 years ago, the company has sustained a revenue growth rate of 20 percent each year. How has McLaren maintained that level of growth? By recognizing that, although McLaren is a health care organization, it’s still a business.
The Business of Health Care
Prior to Phil’s arrival at McLaren, the company consisted of one hospital in Flint. “It had always been a good hospital from a clinical quality standpoint, but it was struggling financially,” says Phil. “We were able to turn it around very quickly, and that hospital became the platform upon which we built our system.”
McLaren’s vision has been to build a health system along the major arteries of I-75 north and south and I-69 east and west. And that’s just what they’ve done. They developed a strategic plan, committed to the plan, and were held accountable to its execution via their board of directors.
“Despite being a health care organization, we’re committed to using sound business judgment, financial accountability, and all of the other elements a good business needs to be successful long term,” says Phil. “Our mission is to be Michigan’s best value in health care as defined by quality outcomes and cost. When we developed that mission statement 13 years ago, people were aghast at the notion that we talked about cost and quality in terms of value, but that’s who we are, and that shapes what we do every day.”
The Importance of Quality
About eight years ago, the Institute of Medicine produced a report estimating that 60,000–90,000 people per year were dying in U.S. hospitals as a result of medical errors. “While there was considerable debate surrounding the accuracy of these estimates, it was nonetheless humiliating for health care providers,” says Phil. “After all, when you’re dealing with people, one is too many — let alone 60,000.”
Quality has always been of the utmost importance to McLaren. Several years before this report came out, the organization was already developing its “patient safety dashboard,” which allows McLaren to measure how they’re doing against various quality benchmarks.“The key is to learn from each others’ best practices,” says Phil. “We’ve been doing this so long — well before it became en vogue to target quality measures — that it’s become second nature.”
McLaren also relies heavily on its physician leaders to be the think tank in raising the bar on clinical quality. And it works. For example, McLaren’s Flint hospital was just named one of the country’s best hospitals in terms of quality improvement for the third year in a row. Almost all of McLaren’s hospitals have similar credentials.
“We have no excuse not to do it well,” says Phil. “After all, we have nearly 10,000 physicians associated with our company. That’s almost one-third of Michigan’s physicians at our disposal.”
Finally, it’s interesting to note that 50 percent of all senior managers’ compensation is based on the attainment of specific quality goals — equally weighted with attaining financial goals. In short, they walk their talk.
One of the things Phil is most proud of is how McLaren has been able to take troubled hospitals, improve quality and financial viability, and enrich the communities where they reside. For example, McLaren is in phase one of a $500 million investment in a new medical campus in Clarkston, Michigan. As part of the planning process, they developed a financial forecast to determine what kind of economic impact the development would have on the Clarkston community. The answer? It will produce 4,000 new jobs and generate $900 million/year in economic benefit for the community. That’s pretty powerful, especially right now when Michigan needs these types of investments so badly.
Another way McLaren is helping business communities is through the development of its health insurance products. “Our goal was to offer a product that would be priced very favorably in the marketplace and provide Michigan employers a nice alternative to some of the larger, traditional insurance companies,” says Phil. “We can beat most of the big players by 10–15 percent. And it’s not just for use in our hospitals; you name the hospital, chances are they’re in our network. We have significant support from the state to the point that they’re coming to us and asking us to provide coverage in other markets.”
So what’s next for McLaren? If the past 20 years are any indicator, more growth. “It’s important to point out that 50 percent of that growth has been organic,” says Phil. “Some years we may grow more from acquisitions, others from hiring the best and brightest people, but it’s been pretty even overall.”
Perhaps the biggest change for McLaren will be venturing outside of Michigan. “We’ve had discussions with players in Ohio, Indiana, and Illinois,” says Phil. “We don’t have a presence on Lake Michigan or on the east side on Lake Huron, so that may be in the cards as well.”
In the end, McLaren will remain committed to what’s made them such a success: high quality care, creating value, and focusing on training young people to be great doctors. “Our goal is to continue to be there for health care consumers,” says Phil, “to continue to do the right things for them and their loved ones.”
McLaren at a Glance
- McLaren began with one building and now has a presence in more than 150 locations.
- McLaren consists of 15,000 employees and more than 9,000 physicians credentialed through its hospitals and insurance programs.
- In fiscal year 2008, McLaren registered $3.47 billion in revenue, in large part due to 275,576 emergency room visits, 2.47 million outpatient visits, and 85,055 inpatient admissions.
- McLaren serves approximately 40 percent of Michigan’s population throughout 29 counties.
McLaren & Plante & Moran
Plante & Moran’s history with McLaren dates back almost as long as Phil’s been president/CEO. “We’ve always had a great relationship with Plante & Moran,” says Phil. “They play very important roles above and beyond auditors. For example, they’ve always done the due diligence on our acquisitions. We’ve also had the response and support from the top of the organization when we’ve needed it.”
Phil continues, “A lot of organizations of our size and our growth go to the Big 4. I’ve never seen the point. All of our needs have been and continue to be met by Plante & Moran, as they’ve grown as we’ve grown. It’s been a mutually beneficial relationship.”