CEO Carl Gerlach on the job.
Ryan lely/Sonoma Valley Sun
Picture a boat, sailing toward a distant island in a stormy sea. There’s a leak in the hull, and just a bucket to bail. What to do? Hoist the jib to get there faster? Keep bailing, just to stay afloat? Find some way to fix the leak? If the boat is day-to-day hospital management, and the jib is attracting new physicians, and the island is the new facility, then Carl Gerlach, Chief Executive Officer of the Sonoma Valley Hospital, thinks he’s right on course.
“For the last 11 years, this community and the board and the management of the hospital were in pursuit for the site for the new hospital,” he said, in an interview about the up-coming bond measure and the options he and the hospital face. “You could say you had to do that, because there’s a seismic law, but if you focus solely on the long-range vision, what happens to the day-to-day management?” He knows the answer quite well, because the boat he stepped into a year ago was taking on water, fast.
Gerlach had been in such a position in the 1990s, in Pittsburgh, California, for a hospital named Los Medanos, which in Spanish means, the dunes. “Which turned out to be an ironically appropriate name,” he said wryly, “as in unstable foundation.” The hospital had suffered an administrative scandal and was losing money, and indeed had never made a profit or enjoyed a positive cash flow in its history, even with property tax support. Gerlach turned it around, “largely by expense management and building a very, very high powered team.” These were not new people he brought in himself, but people he discovered who were already there. “Like here,” he said, referring to his Sonoma team, “these were great people who knew what to do, and maybe had been frustrated by not having been able to do it.” The solution, to him, was natural. “It’s a management thing.”
“My bias is always operations management,” he said, and here, too, management–bailing and plugging the leaks–was primary. “It was clear to me that we were going to have to be in this existing facility until a new hospital gets built–five to seven years from now. They had to focus on operations management. This is a turnaround business plan. Once you get stable, then you can get on with other stuff.”
About that business plan: “I believe it will work, regardless. That means you go to the expenditure side and you manage your expenses and get a good bottom line and start financing this stuff with a good bottom line. Either with the cash flow you generate with revenue bonds or with loans that require that you can repay them.
“There are lots of reasons for the turnaround,” he said, “one is just for survival—to make sure we’re still here to deliver the health care. But the other reason is that no one wants to affiliate with a floundering organization.” In this market, a small, independent hospital can’t make it alone. Gerlach cited Los Medanos again, as an example–but this time, not a happy one. Once they had accomplished the turn-around and had a year of solvency, he advised that they work on affiliations, but they felt affiliation was not the way to go. By 2003, they were bankrupt, and Gerlach had moved on. “You can’t survive in this market without affiliation,” he said. “Period.”
So, for Gerlach, the shining new facility is not the only goal. Equally important is the network of affiliations and relationships that will keep the hospital viable on the way to the new facility, and beyond. “You need to be a great partner. You need to be able to say, ‘We know what we’re doing; we know how to manage.’”
Finding new doctors is a key part of the plan. “The question I asked the coalition over and over again was, ‘What will it take for a doctor to come here to practice? And what would cause them not to?’” The qualities are familiar ones: Cost of living. Market size. Are there enough other doctors with whom they can work? Is it the right kind of community? “Some doctors don’t want to see their patients at the market, but others do. Those are the ones that thrive here. They’re looking for what we have to offer.”
Philanthropy is important, too. Physicians draw confidence from the confidence the community has in the hospital. Gerlach mentions the Women’s Health and Wellness Program. “This is a group of women who want to have services they need in this community and are putting together a business plan, with our help.” For doctors, such as gynecologists, the existence of such a group means the potential for thriving practices and rewarding professional associations. “Because of their numbers, their age, they are perfect for that particular specialty, and also they’re out raising money for equipment and facilities. So you almost have built in marketing.”
Then, of course, there is the bond measure, Measure F. Passage would be a major indication of community support, and that would strengthen the entire network of associations while making the job of fixing the leak–both metaphorically and in some cases literally–manageable enough so that planning for the long term can actually begin. “Regarding Measure F,” said Gerlach, “there’s two giant issues. The first is replacing, repairing and renovating the infrastructure,” and by this he means the physical plant– boiler, pump, HVAC–and the all-crucial replacement of the ancient computer systems. The second is recruiting the physicians. Without them, the boilers and pumps and computers will be for naught. “The question to ponder then is what would be the interpretation, on the part of prospective doctors, of a possible No’ vote?”
Go back to the business plan, says Gerlach: ”This business plan will work, regardless.” He is unfazed about the negative possibility. “The computers must be done; it must be financed. If the bond measure doesn’t pass, we will find a way to finance the conversion. Period. That’s just absolutely clear. The second point is infrastructure. We’ve applied for a California Energy Commission loan. We’re now at $1.3 million, and we could go to up to $3 million. We’ll use as much of that as we can to fix as much as we can.” Certainly passage of Measure F greatly increases the odds of survival of the hospital. But, if it doesn’t pass, “I’m getting back into the ring,” he said. “We’re all going to get back into the ring and we’re going to make the turnaround work, but, you know, it’ll be, like, ‘Please, help!’”
Then he said, with a smile, “Think of it. If a person came up and asked what he could do, and we said, ‘Please just contribute as much as you would have been charged through the parcel tax.’ And he said, ‘How much is that?’ And we said, ‘Well, if your house is assessed at $1 million, that’d be $90–per year.’ He’d say, ‘Are you kidding! $90 is it? For the year?’ And he’d reach in his pocket and hand us some bills and go away laughing.” Gerlach shakes his head. “It’s a small price to know that people you love, like, work with, are safer, physically, and that their families are not likely to incur the kind of suffering that might happen if they should die for lack of proper or urgent care.”
