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How Grady Memorial Hospital skirted death

In 2007, Georgia's largest hospital was $60 million in debt and facing closure. This is the story of its resurrection.

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EARLY DAYS: Since opening in 1892, Grady Memorial Hospital has provided medical care to Atlanta’s poor. At the time, it had a mere 100 beds and 18 employees — and at least two horses.
  • Courtesy Grady Hospital
  • EARLY DAYS: Since opening in 1892, Grady Memorial Hospital has provided medical care to Atlanta’s poor. At the time, it had a mere 100 beds and 18 employees — and at least two horses.

Correll calls the protests "vehement" and says they were "worse than [he] ever anticipated." Some activists called him an "appalling" hospital chairman candidate. He and his wife received death threats and had to hire extra security guards. State Rep. Sharon Cooper, R-Marietta, remembers being called a racist for her role on a committee aimed at reforming Grady.

The business community's decision to rally around the hospital was "the best thing to happen to the Grady Health System," says Agwunobi. "Great hospitals across the country have a mix of high-caliber business-minded individuals as well as clinicians," he says, a fact that isn't always clear to those outside the boardroom.

While the state continued to refuse financial aid to the hospital system without a corporate restructuring, DeKalb and Fulton counties remained committed to it throughout the political clamor. They've helped fund Grady since the early 1940s, including $126.1 million in 2007. With privatization practically certain, DeKalb County Commissioner Larry Johnson hoped that the state and other metro Atlanta counties would finally contribute their fair shares.

"Everybody was on the counties because you didn't want Grady to go under, but we were also under the impression that we were all in partnership," says Johnson. "But when it came back to them contributing because their residents are using it, we never received funding."

Georgia's entire health care system benefitted from Grady staying open, but few wanted to bear the financial burden associated with it. Without state support, and with the cash-strapped counties struggling to navigate an unforeseen economic meltdown, Grady's future looked bleak without the business community's help.

"When the Wall Street debacle happened, [DeKalb] County lost 50 percent of its home values," says Johnson, noting that county officials have slashed nearly $130 million from their budget over the last five years. "We're 60 percent residential."

As 2007 came to a close, more than $360 million was needed to overhaul the dilapidated 121-year-old institution.

"Ultimately, the financial burden was too hard for anybody to ignore," says Matt Gove, a former Grady spokesman. "The place needed hundreds of millions of dollars in capital improvements. That doesn't happen as long as the government-appointed entity operates the hospital."

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In November 2007, the FDHA voted to restructure the hospital's leadership and transfer its oversight to the Grady Memorial Hospital Corporation. The new leadership included Correll and other task force members. It also had the backing of the chamber, which encouraged people to see restructuring's financial advantages. "This is about green — not black or white," Correll said in 2007. "It's about money."

"So because of the alleged threat of the hospital closing, this new board was created," says Daniel Blumenthal, an associate dean at Morehouse School of Medicine. "The Fulton-DeKalb Hospital Authority was disempowered [and] a new board was empowered, so that the people running the hospital were now in the hands of the business community rather than the people in whose hands it was before: political appointees."

Agwunobi, who left the health system one year before the FDHA's vote, saw privatization as a crucial step for the hospital. The move also made Grady more appealing to Atlanta's philanthropic community. Correll says benefactors felt the hospital was a tremendous asset worthy of contributions, but had reservations about donating to an institution that many considered poorly managed and always in the red.

Correll says the Woodruff Foundation had wanted to contribute to Grady for years, but it had three requirements before doing so: a nonprofit corporation takeover, a signed 40-year irrevocable lease for the hospital, and assurances of county funding.

"[Woodruff] said: 'We've been looking for a way to give and we will give this ungodly amount of money,'" Correll recalls. "'If you'll deliver those three things, we'll give you $200 million.'"

In April 2008, the charitable organization made good on its word.

It was at that watershed moment that the institution's turnaround began. The first improvements were long overdue. Physicians boasted to the New York Times in 2008 about "MacGyvering," or making due with what was available. Early spending included $8.3 million on more than 600 beds and nearly another $20 million for new medical imaging devices such as X-ray and CT scanners. The most essential upgrade, however, came in the form of a $40 million electronic records system that streamlined health care procedures, minimized health risks, and made it easier to bill patients.

"There had never been a very good or robust patient information IT system or processes around making that work," says John Haupert, Grady's current CEO and former COO for Parkland Memorial Hospital, Dallas' major safety-net facility. "In health care, just like any business, you've got to get the bill out the door and you've got to get it collected."

Grady's fiscal recovery started faster than anyone expected, due in large part to Haupert's predecessor Michael Young, a Pennsylvania native with more than two decades of experience as a hospital executive. He came from Erie County Medical Center, where he successfully led the 550-bed Buffalo, N.Y., facility to its first-ever operating gain in nearly a century.

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