Growing up with MedStar

Health system's new CEO did part of his graduate work there in 1982

January 25, 2008|By M. William Salganik | M. William Salganik,Sun reporter

Kenneth A. Samet and MedStar Health more or less grew up together.

When Samet was a graduate student in hospital administration in 1982, part of his training was to work with John P. McDaniel, who was then running Washington Hospital Center in the District of Columbia.

As Washington Hospital Center grew into seven-hospital MedStar and the region's largest health system with McDaniel as chief executive officer, Samet moved into positions of increasing authority. He was chief operating officer for the past 10 years and president for five.

Samet became MedStar's new CEO this month after McDaniel retired.

"He basically was being groomed to take over the position," said Kenneth W. Rodgers, a hospital analyst for Standard & Poor's who follows MedStar. "They've been giving him exposure, over time enhancing his responsibility. So, in effect, there was really no transition."

But Samet's career-long tie to MedStar doesn't mean he'll keep things the same.

"I'm proud of building the MedStar of today," Samet said, "but any time you have new leadership you get an opportunity to bring new focus."

Samet and others believe he is taking over at a time when health systems - hospitals combined with physician groups, outpatient centers, rehabilitation facilities and other ways of delivering care - will be growing again, in size and in importance. Several systems such as MedStar lost money during recent years because hospital rates were squeezed and some of the physician groups operated in the red.

MedStar was formed a decade ago, when some were predicting that three or four large systems would come to dominate the region, offering HMOs the one-stop shopping for care that they would want.

Three large systems formed - Johns Hopkins, University of Maryland and MedStar. Based in Columbia, MedStar accounts for 18.6 percent of the regional market, compared with 10.2 percent for Hopkins, according to a report last year by Rodgers for Standard & Poor's.

The MedStar system includes 53 primary care doctors at 18 offices through the region. It has a home health agency that makes 200,000 care visits a year, two nursing homes, two senior living centers, a Medicaid HMO, pharmacies, ambulatory surgery centers and an adult health center.

The growth of the big systems, however, came to a halt about 2000, when MedStar added its seventh hospital, Georgetown University Hospital. The HMO market didn't develop as expected. Some large hospital-owned physician groups, including the one owned by MedStar, lost money, and cut back in size or folded. Several hospitals decided they could thrive on their own. MedStar had financial challenges, posting losses as recently as 2003.

But big hospital systems may be making a comeback.

"We're at the heart of how our field is continuing to evolve," Samet said.

Chester Burrell, new CEO of CareFirst BlueCross BlueShield, has said he is looking for new forms of payment that will let large systems such as MedStar, Hopkins and University of Maryland manage the care, with less review by CareFirst.

Samet thinks MedStar's home care unit and outpatient facilities will be crucial - and are likely to expand - as changes such as this develop.

At the same time, more doctors, stressed by squeezes in reimbursements and rising costs for liability coverage, are looking to leave private practice and be employed by hospitals. The hospitals, in turn, are looking for more capital so they can take over physician practices and update their facilities.

Those were factors when Montgomery General Hospital, in Olney, decided recently to end 87 years of independent operation and become MedStar's eighth hospital, said CEO Peter W. Monge. On Feb. 1, when it is slated to join MedStar, Montgomery General will also break ground on a $30 million renovation. Monge said the hospital, although solid financially, didn't think it could generate enough capital on its own without joining a bigger system.

Besides MedStar's acquisition of Montgomery General, the other two big systems have resumed growth as well. The two-hospital Shore Health System merged into the University of Maryland system in 2006. And last year Anne Arundel Medical Center joined Hopkins, although through a collaboration agreement, rather than a merger in which Hopkins would assume ownership.

MedStar is back in the black, with revenue exceeding expenses by $196.3 million in the fiscal year that ended June 30 - 75 percent more than in the previous fiscal year. Rodgers, who upgraded MedStar's outlook from stable to positive last year, said: "I fully expect we will raise their rating soon in light of their continued strong performance."

Beyond growth, Samet expects changes in development of electronic medical records, secure but accessible to different doctors trying to coordinate care for a patient. In November, MedStar announced it was becoming a test site for Microsoft Corp.'s HealthVault data system.

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