Late in January he publicly announced he was stepping down from the Group CEO’s position at St John of God Health Care for a quieter, non-executive life as a board-member, firstly of the Melbourne-based Healthscope, with prospects of several others over the next few months.
In corporate terms, 16 years is a marathon for a group CEO. He told Medical Forum last month that he was a SJG record holder after four years. He’s pretty pleased by that.
“I came to the job when I was 42. Sally and two of our three children headed west with me while our then teen boarded for a couple of years in Melbourne so as to not disrupt his secondary schooling. We’d moved around a fair bit – I’m originally from Sydney and Sally from Geelong, but I was looking for a quality group that had good organisation and good culture.”
“I was fortunate to have had opportunities early in my career, running two public hospital networks in Victoria and then deciding to move into the private hospital sector to run an ASX listed hospital company. When I arrived at St Vincent’s in Melbourne in the early 90s, which was run by the Sisters of Charity, I saw what a difference great culture and deep knowledge can have on an organisation.”
“When the SJGHC position came up in 2001 it ticked the boxes. After 18 months, Sally and I were sure we wanted to stay and keep going.”
A growing concern
If one word was to sum up Michael’s tenure, growth would have to be it. He has overseen the growth of the group from 1300 beds to 3300; revenue has increased 500% from $350m to $1.8b; the workforce has more than tripled from 4000 to 14,000.
The group has built and manages the Midland Public and Private Hospitals – the first public-private partnership (PPP) for the group in the WA market –acquired Mt Lawley, doubled the size of the Subiaco and Murdoch hospitals, and doubled the capacity at Bunbury.
It has taken the number of hospitals in the eastern states (primarily Victoria though it has a presence in NSW) from three to 11 and its Outreach division has moved strongly into the counselling, homeless youth and disability services sectors.
On the other side of the ledger, SJG Pathology was sold in 2016 to Clinical Laboratories because, as the Group CEO put it, “we couldn’t do that as well as we would have liked. You have to be big to get pathology right”.
The national scope of SJGHC is not often visible to those on the home turf of WA. When we spoke to Michael, the group had just opened its 18th hospital in Berwick, a fast-growing region 40km southeast of Melbourne, not dissimilar in demographics to Joondalup and Perth’s eastern suburbs. It has relocated what was a 70-bed hospital into a nearby 190-bed modern facility.
As the group has grown, so too has its management style.
Ears to the ground
“When I started 16 years ago, we only had three hospitals in Victoria and I travelled a lot in those early days. We always strive for local accountability with the local community, and you can’t manage well from afar. So for the past 10 years, I have had State Directors reporting to me.”
SJGHC has become a large business.
For the medical community in WA, the most recent mining boom saw an unprecedented phase of constructing medical infrastructure both in the public and private sectors. There was money and there was fast-paced population growth. While the money tap may have been turned to winter settings, population continues to grow which has been driving health investment planning.
While the Midland PPP was conceived, negotiated and constructed in more robust financial times it remains one of the group’s boldest local moves, but entirely logical from Michael’s perspective.
“It was a bit weird that as a Catholic-owned entity we weren’t in public hospitals. It’s been an integral part of this group’s history and of other Catholic health groups before Medicare came along. We made a conscious decision that we wanted to be in the mainstream of hospital care. We didn’t go to Midland to run a private hospital we went to Midland to run a big and growing public hospital,” he said.
“In this age, doctors go where there’s work. We have been able to recruit the Midland medical workforce well, partly because of the new facilities – in our cases with both the public and private hospitals – and because of its growth potential.”
Potential of the east
“Doctors recognise there is a huge population growth in the eastern corridor. Babies are being born and a lot of people want to use our services – that’s a good sign.”
So has the demand for Midland’s public services surprised him?
“Yes and no. Something I’ve learnt, and it’s partly related to Midland and Fiona Stanley Hospital as well, if you build a new facility, you will get more work coming through than you thought you’d get”.
“During the design and commissioning phases we sent our executives to visit every hospital in Australia that had opened in the past five years to learn from them. They all said, you will get more people through ED than you expect, and you’ll do more obstetric deliveries.”
“I’m sure there is an element of voyeurism that people want to take a look at a new facility, and new public facilities across Australia are unbelievably good. But nowadays, cost concerns for consumers are a serious reality.”
“We are delivering more babies at Midland but we have started losing deliveries at our private hospitals because of the out-of-pocket component, which is becoming a particularly big thing in obstetrics.”
While babies are welcome at Midland, it has created problems in the great chain of hospital activity.
“State governments have fixed budgets and buy what they estimate, but if we are faced with more people needing to be treated, the chances of more money from the government are very slim. More obstetric patients have an immediate impact on elective surgery because it is about the only thing that’s flexible in a public setting.”
Don’t abandon Reid
The Midland experience has also re-activated Michael’s call (as published in our December magazine) for the government to return to the spirit of the Reid Report with its driving thrust being to treat people locally.
A lot of Midland’s patients are coming from well outside of the zone, the Wheatbelt included, and it has been a challenge for the Midland budget.
“Midland was premised on the idea of self-sufficiency for people living in its catchment – that’s logical. The hope and expectation was that 75% of people in the catchment would be able to be treated locally, instead of the previous 35%.”
“As part of our bid we had to show how we could go from 307 public beds to 460 beds in five years – in 2020. We are already nudging upwards and the government should be looking to not only fund us more but with a vision to build into the budget those extra beds.”
“We took the creative approach to build 60 private beds with our own money and told the government that with three years notice we will move those beds off-site, so we have those beds ready to go public. We have bought a separate block of land from the MRA nearby and we are likely to build 150-bed private hospital to serve the expected 1.5% per annum population growth.”
“We will have our annual activity notice at the end of February and I’m sure we will be asked to treat more patients again because they have to be treated somewhere. It’s cheaper for the state to treat them at our place because it was part of the commercial bid that we had to offer a discount to the benchmark hospital bed cost. We are all set up for that, and we want to do that and grow.”
Midland will get bigger
Michael has great expectations of Midland and thinks the siting of the Curtin Clinical School there will have benefits for everyone.
“Curtin will need Midland to succeed and Midland will need Curtin to succeed. It will become a teaching hospital and people in the eastern suburbs will end up with a 460 bed public hospital, a 150+ bed private hospital and lots of doctors working in a thriving academic program. It will be fantastic for people there. We all have to grab the nettle to make that work because I think it will be something special.”
Cost was an ever-present companion in the conversation, and how value of health care was now driving decision making, from consumer level to group executive level. How and what health will be funded was a hot topic.
With population growth and an ageing population over the next 30 years, demand will not wane and Michael said governments needed to plan for the 2.5% more beds per annum or get smarter at what we’re doing.
Not surprisingly, he thought the combined public-private service offered in Australia was a good model which gave people choice and allowed services to do what they do best – acute and chronic in the public sphere; obstetrics, surgery, chemotherapy and rehabilitation in some circumstances in the private.
“What WA needs is to understand the maths of our future and its inevitability, plan for it and build capacity and capability ahead of time. How we do that within the current budget is the trick.”
It’s certainly not the time to ditch the private health insurance rebate, he said, and it is certainly a time for collegiality.
“We will all be better off when our systems are all interoperable and information can be shared. It’s not rocket science. There’s no money to waste and it will improve productivity and efficiency and be much better for the consumer.”
Data linkage move
To that end, SJGHC is in the throes of committing $200m over five years to digitise its computing and communication systems. “As a state we are behind the others, and within WA, the public system is moving ahead of the private system in this area. We are finishing off our investment planning this year and expect to have an agreement around our Electronic Medical Record implementation next year.”
“It is a significant investment but we believe we won’t be able to attract the workforce or convince the health funders unless we have evidence. Our doctors are already working ahead of us with health technology and we have to catch up with them.”
When it comes to growing gaps being faced by consumers for specialist treatment, Michael is diplomatic.
“It’s a specialist’s business. They can assess the market and work out what is reasonable. But if every person acts in isolation, we could end up with a problem. If the number of people insuring continues to decline, and if doctors went nuts and charged outrageously, ultimately the system will bite back because there isn’t enough money.”
“We are subject to market forces except that health care is an imperfect market. Consumers don’t have full knowledge but that is changing with the rise and rise of consumer feedback portals. Consumer views on doctors and hospitals are already out there.”
“Currently there is little transparency about fees, and patients find it very hard to ask how much a treatment will cost. In that sense it is in everyone’s interest to have a sustainable portal for the doctor, fund and consumer. If the doctors and funds don’t work together, there will be major changes in the offing because health care will simply be unaffordable.”
A competitive environment may also make a difference.
Don’t fear competition
“The past two or three years since the end of the boom, people are thinking about how to win the work for want of a better term. It’s one of the impacts of having more medicos around. The doctors may not like it much but it is good for the consumer,” he said.
“I am also acutely aware that having to compete against a very good free public system or another good private operator, it makes you try harder, and it makes you think about investing in facilities and equipment and intellectual capital that improve services for the patient. Competition is good in the long run but painful in the short term.”
However, part of that imperfect market is the concept of best practice and Michael sees doctors committing to many hours of training on new equipment, studying new evidence, in order to deliver the best outcome for the patient.
“While there is a competitive element for doctors to learn these new skills, it is mostly driven by the commitment to deliver the best outcomes for patients,” he said. “And when something new takes a while to diffuse, you must let it because doctors are very cautious and that’s a good thing.”
Michael’s 16-year journey with SJGHC ends on March 21 with his board’s deep regret but best wishes. His move to the Healthscope board was upfront and with a view that any potential conflict of interest could be managed.
“I raised this question with the Trustees and the Board and they preferred I stay six months rather than three! Of course I have confidentiality clauses written into my contract and I am not now involved in any forward planning at SJGHC. My contribution to Healthscope will obviously include my knowledge of the healthcare market. The Mount is the only hospital Healthscope runs in Perth, though it has 46 across the country.”
Complex and rewarding
“Health is a complex industry and a career within it gives you enormous experience. It has lots of stakeholders – patients, doctors, workforce, funders both public and private, regulatory requirements, multi-billion capital investment, construction, commissioning. It’s an evolving, hugely challenging market. That’s what I bring to my new life as a board member.”
“To succeed in this job you need to enjoy working with people – 14,000 of them. Crucially, you need to be able to work with doctors, because they are our partners and between us, we want patients to get better. Both sides need to understand the other.”
“I’ve had great executive teams, which I’ve loved developing. Seeing people such as Dr Shane Kelly and Dr Lachlan Henderson become group CEOs over east is a fantastic endorsement of SJGHC culture. And I have worked with wonderful people. But there is a lot involved and it’s a 24/7 operation. So I’m also looking forward to fresh non-executive challenges and I think it will be good for SJG to have someone come in with fresh eyes.”
“It will great to spend more time with Sally and the family; play more golf and tennis, and I’ve promised myself to learn Italian and French, but I’m starting with Latin because I want to get the grammar right.”
“I also want to read for pleasure after 23 years of reading reports. I want to be able to finish a Spectator magazine!”