Lanky, charismatic, and a rising star in the health-care industry, Lassiter could have become just one more executive casualty when he took the job as CEO of the Alameda County Medical Center in Oakland, California, and its flagship, Highland Hospital. Instead, he did what seemed impossible: He turned a shockingly mismanaged urban safety-net hospital system in one of America's most violent cities into a model for other public hospitals. He trimmed costs without any significant cutback in services -- in fact, services have been greatly expanded. A new $668 million hospital building is under construction. Six years on, the center has turned a positive margin every year but the last, when a new auditor required it to set aside more money for pension costs; so far, it is on target to break even this year.
No one is pretending that ACMC is immune from the severe financial problems facing public hospitals. Atlanta's Grady Health System is facing a $30 million shortfall. Miami's Jackson Health System is in even worse straits: It lost $93 million in fiscal 2010 and is on track to lose another $78 million this year; cash on hand is down to 19.6 days. Over the past 20 years, the number of public hospitals has declined by more than 25%, to 1,072. With federal budget cuts looming, states going broke, and local governments preparing for the worst of it to roll downhill and bury them, public institutions are going to have to learn to manage better. Forty-seven-year-old Lassiter and his team's accomplishment in Oakland shows it is possible for even the most dysfunctional public hospitals to shake themselves awake, serving the public and respecting taxpayers' dollars at the same time. Says Thomas Rundall, a health-policy and management professor emeritus at the University of California, Berkeley: "It's a model for how a publicly owned hospital with a challenging payer mix can be profitable."
Highland sits on a small hill above a low-income residential neighborhood in inner-city Oakland. Hidden by trees from the nearby freeways, it's barely visible to suburban commuters heading toward the Bay Bridge to jobs in San Francisco.
The site is an architectural hodgepodge: the cream-colored Spanish baroque towers of the oldest building, erected in 1927; a recently built clinical center wrapped in green glass; a huge gray block in the Brutalist style, slated for a teardown as the new hospital rises.
Walk inside, past the ever-present county-sheriff squad cars, and you may see some gangbangers and gunslingers, crackheads and crazy people, and the other stock characters who lend drama to every inner-city public hospital. Mostly, though, you'll just see sick poor people -- mainly blacks, Latinos, Asians -- the unemployed, and the working poor sitting under fluorescent lights, waiting for their turn to see a doctor or nurse.
"Ten years ago, if you said in 2011 I'd be working in a public-hospital system, I would have said, 'Not likely,' " Lassiter says. "A worthy cause, yes, but not my kind of thing." At 6-foot-5, he is scrunched against a little round conference table in his office at Highland; papers are strewn across his desk, reports and journals piled on the floor. It looks more like an academic's college office than the lair of a corporate CEO.
In 2002, he was climbing the executive ranks at a large private-hospital system in Dallas. Then the CEO of JPS Health Network in Fort Worth, which serves the poor and uninsured in Tarrant County, recruited him as VP of operations and charged him with making a system that never turns anybody away as good as any private one. A challenge that big, Lassiter decided, could be his kind of thing.
The son and grandson of ordained ministers, Lassiter had what he calls a "small-town Southern upbringing" in Tuskegee, Alabama. His father is an educator, his mother a nurse. Tuskegee in the 1970s remained starkly segregated, which Lassiter realized at age 12, when his family moved to Columbia, Maryland, outside of Washington, D.C. "My first day driving around, I saw blacks and whites holding hands as couples," he recalls. "I asked my mom, very innocently, 'Is that okay, what they're doing?' "
His own life revolved around the Baptist religion, school, and sports. He credits one basketball coach, "a white guy in his sixties who chewed tobacco and spewed expletives," with teaching him the joys of hard labor. The coach drove the team out to help on his farm. "Today, a white coach taking a truck full of black kids to work on his farm would get fired," he says. "But I got a lot of discipline from that."
He remembers the two months he lived with his father at a YMCA in Schenectady, New York, as the most formative period of his youth. His father had just taken a job as president of the local community college, and the family had yet to move into their new house. A star basketball player, he was greeted at his new high school as what the newspapers called "the Jumping Jack from Wilde Lake," and, according to his father, a red carpet "lined with pretty girls on both sides" was rolled out. Living at the YMCA embarrassed the young Lassiter at first, but he now says it turned into "an unusual bonding experience" that kept him from getting a big head.
"I'm a professor of business ethics," says his father, Wright Jr., 77, chancellor of the Dallas County Community College District. "I've always emphasized he needs to be a good 'servant leader,' someone who's not into work simply for the personal benefit, but for the greater good."
Although Lassiter takes his father's advice seriously, he says that the "servant" idea can be misapplied in a public-hospital setting. "The attitude at a public hospital often is 'We're doing God's work. We get to feel good about being a martyr. Don't worry about execution. Don't worry about service. We're doing God's work.' "
As soon as he made his move from Fort Worth to Oakland, Lassiter made clear that God's work wouldn't get done unless the place stopped losing money and shaped up fast.
ACMC was a poster child for public-hospital dysfunction. The doctor's murder and the patient's suicide pointed out serious operational lapses, but the core problem was financial: Year after year, according to the Alameda County Grand Jury, the place lost millions beyond what it took in from the government, charities, paying customers, and other sources. (California is one of a handful of states that make grand juries the watchdogs of county government.) The grand jury described management as "a shambles."
CEO after CEO failed to stanch the bleeding, even after Alameda County voters passed a half-cent sales-tax hike to stabilize the system's finances. In 2004, the hospital board brought in Cambio Health Solutions to rescue the institution. Cambio's plan to cut 300 jobs and slash patient services was a political nonstarter. A one-day strike was energized by a visit from Jesse Jackson. Highland already was overcrowded; nobody in the community wanted services reduced. After 18 months and a fee of $3.2 million, Cambio departed. When Lassiter signed on in 2005, the place was still losing $1 million a month.
He quickly began building a new management team, including COO Bill Manns, who was hired from Providence Hospital in Southfield, Michigan, near Detroit. At Manns's suggestion, they immediately commenced a grassroots money hunt, which Lassiter now calls "the foundation of our success." The pair gathered the top 85 managers, formed them into a dozen teams, and gave them 16 weeks to find $21 million in cost cuts and new revenue. Lassiter says he told them: "It's up to you. We barely know where the restrooms are, so we're not going to solve this problem. You're going to solve it."
To encourage fresh thinking, Lassiter and Manns devised "odd-couple arrangements," putting together doctors, nurses, techs, and other managers. The teams drilled into vendor contracts and challenged their own habits. Take the kit used to test newborns' umbilical-cord blood, a $96.50 item. A simpler tool does the same job for 29¢. Is the more-expensive device better? How much better does it have to be to be worth the extra $96.21? ACMC had been choosing the premium option, at a cost of $322,000 a year. Now, the teams decided, ACMC could not afford it.
Looking for new revenue, they identified areas the system was especially good at -- like rehabilitation and diabetes care -- and came up with ways to treat more patients more efficiently. Lassiter also pushed the creation of an electronic network that links dozens of community clinics to the health center, significantly boosting referrals to its best services.
Only after the teams had found every dollar in savings and new revenue did Lassiter and Manns consider layoffs. As a result, instead of the service reductions and hundreds of job cuts the consultant Cambio had recommended, ACMC sliced only about 80 positions, found other work for many employees whose jobs had been eliminated, and began expanding services. Together the cuts and the revenue increases amounted to $23 million.
"That's what really got the buy-in" from the unions on layoffs, Manns says. "We looked at everything else first. What can you say to that?"
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