Professor Sherrie Lu
November 29, 2010
Transformational Changes in Healthcare: Two Case Studies
The economic downturn has led healthcare organizations to think big changes. We understand that all organizations experience micro changes in their normal adjustments to operating; however, occasionally a unique climate comes together to force new ways of thinking. This new way of thinking is usually a whole novel vision and an entire new direction which “transforms” the organization. When successful, these organizations become a learning experience for other organizations that perhaps need to make similar changes. This paper discusses two hospitals/healthcare organizations, one large and one small, which made transformational changes and became examples to others. “Change begins with a common vision, inspired by a transformational leader, capable of championing and communicating their vision to all of the organization stakeholders” (Johnson, 2009, p. 301). Sherri Welch, as reported by “The Crain’s Detroit Business Journal” (2009) describes Gary Valade as a healthcare hero for turning around the Henry Ford Health System in the State of Michigan. His name was a big player associated with the Chrysler Companies as a Chief Financial Officer and executive vice president with more than 36 years experience. Similarly, on the west coast, the Sebastopol California Rotary Club (2008) presented a program commending Laurie Austin as the interim CEO for turning around the small Palm Drive Hospital in western California. The once dying small hospital is now a vital player in the community offering an array of services. Understanding the transformational changes of these two hospitals will offer great insight to transformational leadership and learning. The problem at Henry Ford Health System was that they were drowning in debt and still not meeting the needs of the people. In 2003, the healthcare system faced a staggering loss of more than $88 million dollars. Additionally, the healthcare organization revealed many warning signs of a distressed system. During that year, Henry Ford’s Board of Director had a new incoming chair, Valade, who immediately convinced the Board that major changes had to take place quickly (Welch, 2009). On a smaller scale, the problems were similar at Palm Drive Hospital. During the period of 2002 to 2007, the small hospital was losing around $500,000 per month for a combined loss of $24,000,000. The hospital, licensed for 37 inpatients was averaging 7 per night and their costs were largely the same. The hospital was surviving by selling its assets and had no money to pay salaries. They were losing patients to nearby larger hospitals who offered more services managed by the Kaiser Permanente Organization (Hixon, 2008). Transformational changes require major reorganizing efforts which include risk taking sometimes in a short amount of time called a transformational launch (Johnson, 2009). Henry Ford Health Systems reached the apex of its debt during the years 2002 and 2003. After Valade took the reigns as chairman of the Board, it took until approximately the year 2005 to turn the trend around where the organization was making sound investments and recovering from their large losses. According to their website, for the first time since the crises, the system reported a net gain of $8.5 million dollars during 2008. This is tremendous accomplishment considering the amount of debt in 2003 and the huge economic problem in the United States in the last three years (“Henry Ford Health Systems,” 2010). Palm Drive Hospital reported $24 million dollars in combined losses from 2002 until 2007. The Rotary Club Award came on January 4, 2008, when during the second quarter of that year, operating losses had been reduced to $2,000 (Hixon, 2008). The stakeholders in Michigan under the Henry Ford Health System were many. The...