CFO Profile: Bob Hudson, Henry Mayo Newhall Hospital

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After serving as chief financial officer of Henry Mayo Newhall Hospital since 2001, Charlie Robert (Bob) Hudson retired at the end of June. Hudson’s career in healthcare financial management included consulting stints up and down California, with KPMG and Ernst and Whinney, and management positions with medical groups and hospitals. At Henry Mayo, Hudson was CEO Roger Seaver’s first hire 16 years ago. When they started, the hospital was in dire financial straits. They led the hospital through bankruptcy to a period of sustained growth, as evidenced by a new patient care tower under construction out Hudson’s window during this conversation with SCVBJ Editor Patrick Mullen.

SCVBJ: How did you choose a career in health care finance?

Hudson: When I was young, I was in a bad motorcycle accident, and was laid up for quite some time. I had to think and read, and saw an article that the top college degree for the future was accounting. Another article said one of the industries of the future, and this was in the early seventies, was health care.

SCVBJ: How did you get your start here at Henry Mayo?

Hudson: Jim Yoshioka, the CEO at the time, was going to leave and Roger Seaver, who had been here as a consultant, had been offered his position. He needed a CFO because there wasn’t one here. He called me.

SCVBJ: Why did you take the job?

Hudson: He described the job as a massive challenge and I always liked a challenge. People always asked me why I go to places that are in trouble and have problems. I figured out a long time ago that if you go into a well-run organization, the best you could hope to do is to maintain. If you go into a place that’s got problems, you can’t help but make it better.

SCVBJ: What were the challenges in 2001 for this hospital?

Hudson: The day I walked in we had no money, our accounts were overdrawn, vendors were screaming, and the hospital had just unionized. We had just cancelled some unbelievably bad contracts with employers. The reality is that a lot of people worked really hard for a long time to mess it up and they did a really good job.

I’ll give you an example of the situation I found. When I was at KPMG, I had an office in Valencia for over two years. When I first got there, I said to the person I worked with that I was going to go meet the people at the hospital. He said, “Oh no, you can’t do that. There’s bad blood between the hospital administrator and KPMG. I don’t know what it is from but we have very specific instructions.” The only way any of us could set foot on this campus was in the back of an ambulance.

So I’d never been on campus. I walked into the hospital for some interviews a couple of weeks before I started. I stood in the front entrance of the hospital, looked around, and I had been doing this for more than 20 years. I said to myself, there’s no way this place can’t make money. I just knew it. It was small. It wasn’t really as nice looking as I would have liked but it was okay. The people didn’t look all that happy. But having lived for two years off and on in the Santa Clarita Valley, I got to know the community a little bit. First of all, there’s no other hospital in town that you have to beat.

SCVBJ: What were the first few things you had to do to right the ship?

Hudson: I started on April 1. On April 15, I called our finance director and said, as of today we don’t pay any invoices dated before today. I was struggling to figure out how to stop the bleeding. I had to meet with all the vendors and let them know I was going to do everything I could to take care of the past but I had to look at the future. I negotiated some reasonably good settlements but I had three vendors that I just couldn’t get to talk to me.

One had the attitude that they would end up owning us. The second one had the attitude that, well if that’s the position they’re taking, that’s the position we have to take. And the third group was a collection agency down in Orange County. So I went down to meet with the owner. He’s an attorney and he handed me his business card and the front of his business card said, number one litigator in Orange County. I thought, this is not really going well! He had gotten an attachment order that basically meant that they could go in and attach the hospital’s checking account. If I would have let them take the checking account, it would have caused all sorts of defaults and the state would have come in and probably closed the hospital. I wasn’t going to let that happen. It just wasn’t right.

So we were basically forced into filing Chapter 11. Even today, based on all of the information I have, we’re the only hospital to ever go into Chapter 11 and come out of Chapter 11 as the same organization. Everybody else gets reorganized, bought, or restructured, but not as the same organization.

SCVBJ: What happened here?

Hudson: We ended up paying our bills. We owed twelve and a half million dollars and we ended up paying our creditors 100 cents on the dollar plus seven and a half percent interest plus nine and a half million dollars of bankruptcy costs. And during that whole process, we started growing. We started adding programs. During the bankruptcy we started a breast-imaging center. The community support was there. We made commitments to foundations, to community boards, to the organization.

Other than a little bit of knowledge, the only real thing that I bring to the table is my integrity. So if I tell somebody I’m going to do something, I do it. When I say no, it means no, but if I say yes, I mean yes and I’ll do what I said. So it worked pretty well. Even during those worst times, nobody ever came into my office with a need that I wasn’t ever able to find a way to meet.

We have been in growth mode since the day I got here. I’m leaving and as you can tell by looking out the window [at the new patient tower under construction], we’re still in growth mode. This is just the beginning of what’s next.

SCVBJ: What’s next?

Hudson: Infill of the existing hospital and new programs. The main hospital is 40 years old, and at some point in the future that has to be replaced. Also, we’re alway trying to improve relations with physicians.

SCVBJ: How do you achieve that?

Hudson: There’s two ways to achieve it. One is to have a long-term very positive working relationship with medical staff that makes the changes that are needed to move along. The other way is to outlast them. We’ve outlasted them. We have 500 members of our medical staff today and less than 50 are active. By active I mean they get to vote based on the medical staff bylaws. It’s an extremely long complicated process to bring back an active staff, but it will be addressed over time. We’ve got some excellent physicians who are part of some great independent medical groups. So we’ve got a good medical staff. It’s taken a long time but I think they finally are believing that we really do want to work with them and move the hospital forward.

SCVBJ: What are the factors that will decide how long this hospital remains independent?

Hudson: I’m not the decision maker or the expert on that. This is my opinion and please understand it is just that. A hospital needs to find a partner when it can no longer do a few things: serve the needs of the community, obtain capital to continue growth, continue to recruit staff and physicians, and add services to become what the community wants and needs. As we sit here today, we can meet all of those requirements. We have no trouble recruiting staff. Certainly we’re financially viable. We’re a great community that’s growing and we are the only hospital in the community, and I don’t think that’s going to change. We’re at the end of a 15-year master plan and it was agonizing to get to where we are. I can’t imagine how long it would take somebody coming in from the outside to start a second hospital, if they can find the land, which really doesn’t exist, and if they had the money.

When we were doing our master plan, and the numbers have probably gone up since then, hospitals cost two million dollars a bed. And the smallest you can build today is a 100-bed hospital. That’s $200 million. Then it’s going to be 10 plus years before you see your first paycheck. By anybody’s definition, that’s a barrier to entry. So I don’t see another hospital coming into the valley in the foreseeable future, as long as we can grow and expand and add programs and improve our care.

SCVBJ: What are some of your strongest memories of your time here?

Hudson: Well you know, this hospital saved my life at least twice already. I was at work 14 years ago or so and full of stress as you can imagine, and I ruptured my colon. If I had been out on a boat sailing or in the mountains camping or hiking, I probably wouldn’t have had the outcome I had. Then in December of 2015, I had a mild heart attack. It was also just stress. Cholesterol’s good, my blood pressure’s under control, all that kind of stuff. Just stress, which is why I’m retiring. My body just won’t take it anymore.

SCVBJ: It’s safe to say you’re leaving things better than you found them.

Hudson: Yes. We’ve got a nice investment portfolio and a strong bond rating. We’ve got nice financials. And as I say, I can look out my window and see the tower under construction.

SCVBJ: So for someone going into healthcare management these days, any words of advice?

Hudson: One issue today is so many young people get into careers before they really know what it’s about. I didn’t go to college straight out of high school. I believe nobody should. I think they should all spend a couple of years doing something. It could be the Peace Corps or some sort of volunteer work. I served in the Merchant Marines. And once you get in a career – and so let’s say you decide you want to be a health care finance person like I did. In this case now you’re a finance guy. You’ve got you know debits and credits, you’ve got the books to balance and checks to write. Remember that sitting in this office does not teach you one thing about what goes on out there on the front lines of delivery. Before I came here, the years I worked in different aspects of the industry whether it be acute, skilled nursing, psych care, I always put myself in position to learn different things.

I spent time in the operating rooms and at the emergency room. I actually registered patients. I spent time working with radiologists and radiology techs and observing people in the laboratory and with housekeepers and dietitians and cooks and engineering people and everybody else.

As a result, when I sit down to do budgets or people come in and ask me something, I know enough to ask the right questions. I often think that’s missing in the profession, because the job’s not the numbers. The numbers are the end result. I jokingly say I’m a bean counter but I don’t count beans. I hire people to count beans. I’m much more of an operations person. I always felt that what I could bring to the table is a perspective of focus and make sure we kept on track. Make sure that people got what they needed, not necessarily what they wanted.

Always keep in mind what we’re here for. It’s not to make a bottom line or to increase my salary or build my ego. It’s to make sure that everybody who walks into this hospital gets the best possible care they can. I’ve received it, and I know many other people who have. Now does that mean we’re perfect? Of course not. Nobody is. The people who work in this hospital are people. But not one of them to my knowledge ever woke up in the morning and said, I’m going to go hurt somebody today.

SCVBJ: Any closing thoughts?

Hudson: I want to say thank you to this community, to the people who live here, to those who have been involved in our board of directors and our foundation board. I’m grateful to those who donated and contributed their time and their wealth, to the management that has allowed me to work here – to Roger Seaver, the president and CEO, and to all of the absolutely unbelievably fantastic staff that works at this hospital. It’s been a true pleasure and an honor to be able to work in this community at this hospital with these people to make it to where we are, and where it’s going to go. I will leave with my head held high.

SCVBJ: Thank you.

Henry Mayo’s outgoing CFO Bob Hudson

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