As his board nears naming a successor, the longtime CEO of a South Florida public hospital looks back on more than four decades of service that started in housekeeping.
This article first appeared in the April 2016 issue of HealthLeaders magazine.
Frank V. Sacco, Memorial Health Care System's president and CEO, took a pay cut in 1974 to take a job as one hospital's assistant director of housekeeping. He will leave the same South Florida organization (he hopes) in 2016 as the CEO of a six-hospital public health system that no longer relies on its community for tax support.
The board is 60 to 90 days from naming his successor, and in addition to being younger, that person will need to be more patient and tolerant than he is. When asked how he views his impending retirement, his one-word answer, delivered without hesitation is telling:
"Eagerly."
"I made my decision over the summer to retire. I'm still passionate and engaged, but I felt it was time to step aside and let someone younger and with more patience and tolerance than I have to take over."
Certainly, given his long and distinguished history at the organization, no one was going to tell Sacco, 68, that it was time to go. Certainly not after having grown a taxpayer-supported health system from one hospital with $115 million in revenue to a thriving $2 billion integrated delivery system with no need for local tax assistance.
Indeed, who's going to tell a guy like that to go other than the man himself?
Sacco left a management training program outside healthcare to join the South Broward Hospital District, dba Memorial Hospital, in 1974, after a tour of Korea in the army as a medical supply officer.
"I was going to take any position to get me back into the hospital," he says. "I had to take a pay cut, but I said if they would give me the chance to prove myself, I'll take a chance too. Two and a half months later, they made me director of safety and security and kept giving me additional assignments."
Building a Continuum of Care
Eventually, after getting his master's degree in health administration at Florida International University, and rising through the ranks, Sacco took over as president and CEO in 1987. That's when the real transformation of the health system began.
Memorial Health Care System got to work on building a continuum of care, partly through taking direct responsibility for its uninsured population. To do so, Sacco says the system had to grow not only in the pieces of the care continuum it owned, but also toward the suburbs, where a better payer mix could be obtained.
It built a nursing home in 1989, opened Memorial West Hospital in 1992 and designated the Joe DiMaggio Childrens' Hospital. In 1995 it acquired through Columbia/HCA, what is now Memorial Hospital Pembroke. It opened Memorial Hospital Miramar in 2005 and in 2006 purchased Hollywood Medical Center from Tenet Healthcare. That's now called Memorial Hospital South, and the original Memorial is now known as Memorial Regional.
"So what we've done is create an adult tertiary and quaternary hospital, a pediatric tertiary and quaternary hospital, and adult rehab hospital," Sacco says. "We added home health in 1992 also."
Sacco downplays the strategic genius of the many moves now, saying that healthcare's business model is slowly shifting to the model Memorial was forced to adopt when it took over care for the uninsured from the county.
Tax Subsidies Eliminated
Still, one accomplishment is almost unheard of: Over the course of Sacco's tenure, the health system has eliminated the local tax subsidy it had previously relied on. That's a big deal, especially for a public hospital downtown in competition with several for-profit operators more advantageously located in the suburbs.
Since Sacco has been in charge, two such hospitals in the county went out of business, Memorial acquired two, and built three more, if you include the DiMaggio Children's Hospital.
"We have a strong management team, we have fiscal discipline, and basically we just kept concentrating on putting the patient first and our volumes kept increasing and eventually we became the provider of choice," he says.
Many, if not all, public hospital administrators would love to see that fairy tale repeated in their markets. It's true that South Florida, generally because of its demographics, is a good place to run a hospital. But for-profit operators couldn't make a go of it in many cases.
Sacco argues that the only reason his tenure has lasted as long as it has is because of his insistence on running the organization as a business that needed a margin to survive. In the case of Memorial Health Care System, that meant taking risks and adding business locations and lines.
"If we had stayed isolated as a 700-bed public hospital, we'd have had an erosion in our pay-mix because the area was getting poorer. So we needed to go into the suburbs. It was a big part of our strategy to make us less dependent and ultimately nondependent on taxes," Sacco says. "When it got approved, then along the way we also had a strategy of building a children's hospital and becoming a really full service health system."
He calls the development of the children's hospital critical as well to the organization's long-term balance sheet because most children have some type of health insurance coverage.
"Those parts gave us ability to leverage our managed care skills and make us a big frog in small pond. We did population health 20 years ago," he says. "There's risk-based reimbursement for Medicare in South Florida, and primary care physicians are driving that through contracts with Humana, CarePlus, [and] Summit and you basically range anywhere from capitation to risk-sharing of part B and part A. We have a lot of those in our market."
'Tons' More to Do
The health system also created Memorial Health Network. Now in its third year of a commercial shared savings contract, has shared savings contracts currently with Aetna and Florida Blue Cross, and Sacco says it is "getting close" to similar shared savings contracts with United Healthcare and Cigna.
Sacco says there's "tons" left undone for the next CEO, and when asked to reflect on any major mistakes he survived in his lengthy tenure, he claims both were personnel-related.
"Without mentioning names, they were the two people I did the most vetting on at the executive level," he says. "One was a hospital administrator and the other a system CFO. The system CFO cost us dearly. It was the only year in my 28-year tenure that we lost money."
The reason for all his vetting, which ultimately came to naught, was that those people were from outside the health system—he didn't know them.
"The best hires I made were people we grew or people I knew," he says.
Despite the success of his long tenure, Sacco is glad to hand off his "evolutionary" progress to a successor who faces a "revolutionary" future environment, he says, adding that reimbursement models will be in a constant state of change as the federal government pushes value and as the commercial market continues to consolidate.
"I predict there will be deregulation of state certificate of need (in Florida), leading to greater competition," he says. "There will be greater transparency in pricing and quality—a ton of challenges."
For now, Sacco will be glad to watch those challenges from a distance of 150 miles or so—he plans to retire to Ormand Beach to spend time with his first grandchild, born last fall.
"Also, my son's getting married in April," he says. "Then I'll wait and see."
Philip Betbeze is the senior leadership editor at HealthLeaders.