Universal Health Services CEO suggests ways to fix health care

Alan B. Miller: "The electorate doesn't want to hear bad news. Until the fire gets up to the first floor, they don't want to deal with it."
Alan B. Miller: "The electorate doesn't want to hear bad news. Until the fire gets up to the first floor, they don't want to deal with it." (CLEM MURRAY / Staff Photographer)
Posted: May 12, 2011

Alan B. Miller does not lack confidence. The chief executive officer of Universal Health Services Inc. sat in a conference room last week at the company's King of Prussia headquarters and was a bit surprised at the simple question of how his Fortune 500 company produced an operating margin of 18 percent last quarter.

"Well," Miller sniffed, "we've been in business for 32 years and we've had a lot of good quarters."

Miller's company runs and builds hospitals, with efficiency and acquisition being the path to profitability. UHS has acute-care hospitals, ambulatory centers, and behavioral facilities. It acquired 95 more in November when it bought Psychiatric Solutions Inc. for $3.1 billion, bringing the total to 218 facilities, including 10 in Pennsylvania and two in New Jersey.

Miller wrote a book in 2009, Health Care Reform That Makes Sense: A Detailed Plan to Improve America's Health Care System from the Country's Leading Health Care CEO.

Not one of the leading health-care CEOs. The leading health-care CEO.

Last Thursday, Republicans in control of the U.S. House said they were pulling back from Budget Committee Chairman Paul Ryan's proposal to turn Medicare into a voucher system. As the intent of Ryan's proposal sank in, the populace pushed back.

Miller was not happy.

"The electorate doesn't want to hear bad news," Miller said. "Until the fire gets up to the first floor, they don't want to deal with it."

Health care is, perhaps, unlike any other business. When people walk into a hospital bleeding, the law requires them to receive treatment even if they are penniless. No such law helps those walking into an Apple store in search of an iPad. The health-care debate in America has many pieces, and people usually like the parts that benefit them and dislike the ones that cost them money or time or service.

Miller is no different. Half of his company's revenue comes from the government through programs such as Medicare, which covers the elderly, and Medicaid, which covers the poor. But he doesn't like that those programs have been paying less over time, government regulation, or what he perceives as inefficiency. He also doesn't like that penniless and uninsured patients cost his business 12 percent to 20 percent a year.

He was asked how he would fix American health care. Mind you, he doesn't want to run for office and he and his family are controlling shareholders of his company. The first unhappy group, under Miller's plan, would be the lawyers.

"Let's fix the system, not throw out the system and not go to socialized medicine," he said. "Let's not make a system where the average person - no, even a very smart person - can't understand what they are supposed to do. We can't fix the system without addressing tort reform, where we're just giving money to lawyers and burdening hospitals with incredible insurance premiums."

UHS has 65,000 full- and part-time employees, with 561 in the King of Prussia headquarters and 2,146 in five facilities in Philadelphia and its Pennsylvania suburbs.

Miller held 615,866 shares of UHS stock as of March 24, which was worth $34.1 million, according to Bloomberg. Company shares closed Wednesday at $55.47, down 94 cents.

According to Federal Election Commission records, in 2010, Miller gave $5,000 to America's Foundation, former Republican Pennsylvania Sen. Rick Santorum's political action committee. Santorum is on the UHS board and is considering a run for the 2012 GOP presidential nomination.

Miller also wants insurance companies to be able to sell across state lines to increase competition and prevent one carrier from dominating a market.

"It would be nice if people bought their own insurance," Miller said. "Nobody spends your money better than you do for yourself."

The Organisation for Economic Cooperation and Development released a report in late 2009 that compared health-care statistics across 34 countries. In 2007, the last year for which data were available, the United States spent 16 percent of gross domestic product on health care, the highest rate among member countries and nearly twice the average. On average, it had higher rates of infant mortality and obesity, and lower life expectancy than other countries the organization studied.

Steve Filton, chief financial officer of UHS, has seen those or similar numbers and understands the general idea that Americans don't have the best care in the world despite what they think. He argues that the efficiency through which UHS succeeds can be applied to more parts of the system with better care being the result, especially if primary care can be pushed so catastrophic conditions develop less frequently. And even if some recoil at calling patients consumers, somebody has to be the judicious consumer, he said.

"I don't know why that is offensive to people," Filton said, quickly acknowledging that people can't realistically shop for emergency care and that health-care pricing is rarely obvious. "We rely on people to go to the grocery store, and we would all believe that food is every bit as much an inherent right as health care."

Marc Miller, UHS president and son of the CEO, said one way the company tried to be more efficient was by increasing the use of electronic medical records, although up-front costs are hefty. Those costs are higher, in part, because companies are competing (and paying more) for information-technology people. Unemployment in other sectors has given the company a deeper pool of candidates for most jobs.

Marc Miller is involved in much of the company's higher-level hiring. Given the family holdings, he might be the next Miller to run UHS.

"Most of all," he said of what he looks for in job candidates, "we want to see a passion for working with hospitals."

Contact staff writer David Sell

at 215-854-4506 or dsell@phillynews.com.


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