Global South Metro Exchange
Featured In Issue: CLT.biz Insights 16.10.08
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Harry Nurkin didn’t particularly want to come to Charlotte. In the spring of 1981, though, out of courtesy to a headhunter, he took a weekend off from his job as chief financial officer at the University of Alabama at Birmingham (UAB) Hospital to meet with the Board of Commissioners of Charlotte Memorial Hospital.
Although it had a decent medical staff, Charlotte Memorial lacked adequate facilities, was low on morale and was barely getting by financially.
Nurkin, a 36-year-old Durham native and Duke University graduate, shared his vision of transforming the moribund hospital into a first class healthcare facility with a distinguished board, which would include such rising business stars as Hugh McColl and Ed Crutchfield. They liked what they heard, and today, nearly twenty years later, Nurkin’s vision is finally being fully realized in the form of Carolinas HealthCare System (CHS), a diversified $2 billion enterprise with nearly 5,000 hospital beds and a reputation as a top healthcare provider in the U.S.
“It sounded like an interesting opportunity,” says Nurkin. “But my wife Jarleth and our boys and I had planted roots and didn’t want to leave Birmingham.” Before he left for the interview in Charlotte, he asked the dean at UAB what he knew about Charlotte. “He said the medical community may be the best in America for a region that doesn’t have a medical school,” recalls Nurkin. “They were pretty strong words from a guy who didn’t brag too much.”
Nurkin took the job. “The deciding factor was that, for all their wonderful parts, universities are impossible to manage. There are so many layers of interests that getting something accomplished takes months,” he explains. “Selecting people can take years. In Charlotte, there were teaching programs for physicians and nurses, but decisions could be made quickly; therefore we could be more competitive and really see if our decisions were efficacious in the short term. What I saw was the best combination of a community hospital and a university hospital.”
At the time, Charlotte Memorial was the number three hospital in a three hospital town, languishing well behind Presbyterian and Mercy hospitals. Because it was losing money, the hospital had to rely on general obligation bonds from Mecklenburg County just to make capital improvements. Nurkin knew this going in, but he had a few aces up his sleeves.
“We had an up-and-coming city in Charlotte, a very good medical staff, and a board that, person for person, was – and still is – unsurpassed in their understanding of business, their understanding of the need to care for human beings and their willingness to serve,” he points out. Nurkin credits former chairman R. Stuart Dickson for much of the progress made by the hospital over the past two decades. “No single individual has had as much impact on our healthcare system as Stuart. He pioneered the transformation of Charlotte Memorial Hospital from a lethargic, suffering facility into Carolinas Medical Center – the dynamic cornerstone of Carolinas HealthCare System,” wrote Nurkin in the CHS annual report.
Board members are quick to return the compliment. “Harry Nurkin was the best thing that ever happened to the Carolinas HealthCare System, or as I used to think of it, Charlotte Memorial Hospital,” says board treasurer and Bank of America ceo Hugh McColl. “When the board brought Harry to Charlotte, we had high hopes he could improve the results of our hospital. He transformed it from a much-maligned public facility into the preferred medical provider, not only for this county but for dozens of others. He brought administration which produced profits, something unheard of before. He provided more and better medical attention to the public at a lower cost. In short, he has been a phenomenal success.
“What he did was bring a vision to the board. We embraced it – he executed it.”
Nurkin’s plan to revive the hospital was a fairly simple one that involved improving both the facilities and the morale. “I felt that if we could pump a little intellectual and emotional juice into the place and give the employees a vision of what it could be, we could decide if we could get there in a short period of time or not,” he relates. “We wanted to draw more talented people and improve the facilities so when people went home from our hospital they would say, ‘The people were really attentive; they were compassionate and competent, and it was a nice environment.’ “
A complete overhaul of the hospital’s facilities was essential. “This building we are in now [the Rush S. Dixon Tower] was the cornerstone for our organization,” he says proudly.
During the 1960s and ’70s, patients were placed in different sections of the hospital based on socioeconomic status. “I thought that if we were ever to become competitive we had to have a wonderful environment where nobody could tell if a patient had heavy insurance or no insurance,” says Nurkin.
“So we built a building with all private rooms. When we opened this building, it enabled us to treat all God’s children in exactly the same way without any concern for age, race, sex or socio-economic status. It was a powerful statement that says this organization treats everybody in the same fashion.”
The building was also designed to appear decidedly non-institutional. When patients and visitors enter through the front lobby, for example, they encounter a two-story atrium full of light and space that resembles an upscale office lobby more than a hospital. Says Nurkin, “When people step through the door, you can see them relax just a little because the environment is designed to be soothing and reassuring, not intimidating or clinical.”
The building is also quite efficient. For example, nurses’ stations are circular hubs with hallway “spokes” that lead to patient rooms “so the nurse has something like 39 steps maximum to any patient,” reveals Nurkin. “It’s better for the nurses and allows for better patient care.”
In addition to the facilities upgrade, Nurkin had to change the management culture at the hospital. He started with some underlying tenets. “We believe that there is a value system in almost every human being that is positive if you can tap into it,” he says. “We also believe that people like to work but do not work at full capacity. So if you provide a pleasant environment and give employees the opportunity to learn more and grow, they feel very positive.
“We want them to have that positive feeling when their feet hit the floor in the morning. How do you do that? You listen to them – what makes their life miserable at work, what makes it fun. It boils down to open and honest communication. If you work here, we’re not going to communicate with you by memo, and you’re not going to find out things in your paycheck. We’re going to listen to you and you’re going to become part of the organization.”
All managers and administrators are required to spend considerable time on the hospital floor. “Basically we are saying, ‘You’re going to have a nice work environment and we’re going to do everything we can to make your life pleasant, understanding that you have a very critical, difficult and at times scary job.’ It sounds rather simple, but not everybody does it. We do.
“Some companies issue pink slips around Thanksgiving and Christmas when they see their end of year numbers not looking so good. We just don’t do that. The emotional downturn reverberates throughout the entire organization so the next time somebody’s treating a patient in the emergency room, in the back of his or her mind is ‘Am I going to be laid off next?’ I don’t want people thinking about that. I want people thinking about the person on the stretcher.”
It has taken longer to create the kind of organization Nurkin envisioned 20 years ago. “The process that I thought was going to take five years was really a 20-year process,” he admits. “I was a young guy – just 36 years old – and thought we could do this in a heartbeat. I learned that it takes longer to take people’s hearts and minds and move them in a new direction. Even if they are enthusiastic, they still have to change.”
The Road to Charlotte
Harry Nurkin did not plan to be a hospital administrator. Growing up, he wanted to be Mickey Mantle. When it became clear that wasn’t going to happen, “I wanted to go to Vanderbilt and become a sports journalist, but our family couldn’t afford that.” Nurkin’s father had died of diphtheria when Harry was just four years old. “As a senior in high school, I got a job at the Veterans Hospital in the summer, and got to see the environment in a heart research lab.” Later, while at Duke studying political science, he went to work as a ward clerk at Duke Hospital to earn some additional money. He happened to meet Ray Brown, a pioneer in the field of healthcare management, who turned Nurkin on to the field of hospital administration.
Upon receiving his graduate degree in health administration, Nurkin headed to Baptist Memorial Hospital in Memphis, Tenn. After about three years he went to work for Memorial Mission, a smaller hospital in Asheville, N.C. Then in early 1980, Nurkin came to a conference in Charlotte and met a manby the name of Rush Jordan. “He offered me a job with the Baptist Hospital in Birmingham,” says Nurkin. “I went for a visit and met with the head of the 800-bed university hospital at UAB.
We struck up a friendship and I became chief operating officer at age 27.” Nurkin was nearly finished with his doctorate from the University of Alabama in Tuscaloosa when he took the job in Charlotte. He completed it in 1983.
While Nurkin loves his work, he admits, “I do worry about the fact that I have been ceo for 20 years. I don’t want my style to become stale. I’m 56 so I’ve got a few years, but we will be looking at a succession plan on an ongoing basis.”
When that time comes, Nurkin does not have any grandiose plans. “We’re homebodies,” he says. “I like to spend time with my family” which includes five boys, two of whom are still at home at ages 12 and 14. Together the family enjoys spending time boating at Lake Norman and going to the beach.
Until he does retire, Nurkin will continue to face the challenges of modern healthcare management. He does not need any external motivation, though, and tells this story to illustrate why.
“There was an 18-year old girl who was brought to the emergency room one day, unconscious with no symptoms. At the time it seemed pretty clear that she was going to die, and the family was told as much. But one of the physicians in our emergency medicine training program figured out the problem and talked to the family’s attending physician. After some awfully difficult surgery, we moved the patient back to the intensive care unit to try to keep her alive. She was on dialysis, extra corporeal membrane oxygenation, a ventilator to breathe, and multiple IVs just to maintain blood pressure.
“She was here for over a month. After going through rehab, she left our institution with a couple of scars, but alive and with a long life ahead of her.
“I know who received that person, who diagnosed her, and who cared for her in the ICU. I know the surgeon who was called in the middle of the night to do an awfully difficult surgery. And I know the people in rehab who sent her home.
“The knowledge that we can do those kinds of things on a routine basis would get anybody out of bed to participate. My participation is vicarious, but it’s exciting to know that people who I know are doing this stuff every day. We fail sometimes, but the process of using technology and science and people’s minds and hearts is extremely invigorating.
“My job is to give them the environment to do that and to recruit the right people and make them happy. And to make sure that when they turn for something in the heat of battle with a patient that the right supplies are there, the right nurse is there, the right operating room is available. To me, I am assisting the physicians and the nurses and that feels pretty good.”
It also feels pretty good to have someone like Dr. Harry Nurkin around, too. As Hugh McColl puts it, “All of the citizens of this county and this region should be thankful that Harry Nurkin chose to come here to carry out his life’s work.”
But only early-stage companies need apply. As the fund executive and an investor for Charlotte Angel Partners (CAP), Kulman is steering Charlotte into a world of investing once reserved for Silicon Valley. “A lot of new companies have emerged in the Charlotte market over the last couple of years,” says Kulman. “The timing is ripe for an angel group in this area.”
What exactly is an angel?
Although the word conjures up images of heavenly hosts, an angel investor is someone who has enough discretionary wealth to significantly invest in high-risk, early-stage companies; has a strong interest in helping those companies succeed; and can wait several years before seeing an investment pay off. Angel investors like using their money (and sometimes their experience) to help young companies succeed. They also like being “on the ground floor” of an exciting new venture and reaping the tremendous returns possible when it is sold or goes public.
Unlike venture capitalists, angels are high net worth individuals who invest their own personal money in start-ups. Angels will invest money at a company’s earliest stages, usually before a company is mature enough to attract venture capital investment. Venture capital firms tend to raise money from institutional investors – corporations, insurance companies, pension funds, university endowments – and invest it on behalf of those groups. Although some venture capitalists are early-stage players, most focus on companies in the later stages of growth with bigger financing needs.
While this organized angel fund is new to Charlotte, it has an 11-year old counterpart in the Triad. Tri-State Investment Group or TIG, is CAP’s sister fund in Research Triangle Park. Charlotte Angel Partners is closely modeled after the highly successful TIG funds.
Bill Whitley is the chairman of Charlotte Angel Partners and one of the fund’s founders. He is passionate about start-up companies, having launched several successful enterprises himself. His most recent venture, Mind Blazer, is an interactive Webcast developer. A member of the Tri-State Investment Group, Whitley organized Charlotte Angel Partners to address the growing deal flow in his backyard.
But even Whitley was astonished by the interest from the investor community. “It took about four months from the time we got the concept to the time we had interested investors signed up,” he shares.
According to Whitley, Charlotte and the surrounding area are bursting at the seams with investment opportunities. “There’s got to be literally hundreds of technology start-ups happening here in Charlotte right now,” he stresses. “Each month, we get about twenty business plans.” Charlotte Angel Partners includes the area’s most successful businesspeople and is a savvy group of investors. The average member, however, is anything but typical. Kulman shares, “Our members are CEOs, attorneys, investment bankers, executives, retirees – a broad range of people.”
One thing that is common in the group is a demonstrated level of financial might. The dollar commitment is definitely not for the faint at heart: a $50,000 minimum per member, with opportunities for add-on investments. Despite this barrier to entry, the first CAP fund has already closed to 100 investors, with demand far exceeding the number of available spaces. “We took investors on a first-come, first-served basis,” Bill Whitley explains, “and wound up having to turn some investors away.”
Charlotte Angel Partners has a unique hands-on approach to investing. “We are a member-managed entity,” Kulman explains, “so every one that has invested plays a role other than just putting up money.” CAP is member-driven, with formal committees that explore each investment opportunity. Members review business plans and determine whether or not to further screen companies.
CAP’s Executive Committee selects two companies to present at the monthly general membership meeting. Following presentations, the membership votes to enter into due diligence on the companies. CAP then forms ad hoc committees of five or six members who conduct due diligence activities. One month later, the ad hoc committee returns to the general membership to recommend an investment. On average, CAP’s investment ranges from $300,000 to $700,000 per round of financing. Kulman points out, “But we can invest two or three rounds in a single company.”
Although CAP is still in its infancy, Kulman anticipates members lending their expertise where it counts most. “Our counterpart in Research Triangle Park, TIG, has members on the board of directors of companies, or involved as advisors. I’ve seen them go in as acting CEOs of new companies, and I expect CAP to eventually do the same.”
According to Kulman, venture capital firms are often overwhelmed processing the deal flow, making it tough to get involved beyond board-level strategic advice. Thus, Angels can offer distinctive advantages for entrepreneurs. “Some of our members can add value to almost any company we invest in,” he says. “In addition to the money, we have people who can add value either as a tried-and-true entrepreneur, or they’re in a market that the company wants to sell to.” Another advantage of Angels is that a company usually doesn’t have to give up the huge chunk of equity a venture capitalist typically demands.
Although CAP is based in the Queen City, “We aren’t confined to Charlotte in terms of our investment focus,” Kulman clarifies. “But we generally like to do early stage investments within a reasonable geographic area. We’ve set up CAP to focus on companies within a three-hour radius of Charlotte.”
Business plans land on Kulman’s desk through a variety of channels. “In some cases, CAP members are already investors in the company, and the company is doing a subsequent round of investment.” He continues, “We also learn about opportunities though other venture funds seeking participants in the transaction.” Kulman, however, doesn’t rule out a more direct route. “Occasionally companies themselves will approach us. Other times we learn about a company and contact them.”
Of course, not all-new companies fit CAP’s criteria. While Kulman confirms that CAP is seeking early-stage venture returns, or roughly ten times the investment over a two to five year period, there are no hard-and-fast rules. Charlotte Angel Partners carefully considers a company’s management team, its uniqueness or propriety offerings, barriers to entry, and financial models.
As Kulman explains, though, the most important component for CAP is the value created. “The business plan must portray a significant market opportunity that can grow and create value to shareholders. There are good companies that don’t really generate enough value for equity investors-value that is worth selling or going public.
So you can have a company that meets all the other criteria, but it’s only a nice lifestyle business, not necessarily a good venture investment.”
Kulman, 44, former managing director of investment banking at Interstate/Johnson Lane (now Wachovia Securities), is ideally suited to manage the fund. His extensive career in investments has given him a rich perspective evaluating new companies. A member of both CAP and TIG, Kulman offers important advice for entrepreneurs seeking financing. “The biggest problems I find,” he reveals, “are companies that focus on what’s hot right now instead of what really makes sense as a business.”
These days, it seems as if everyone is on the fast track to launching a company , but Kulman notes, “It still takes more time than people realize to raise money and execute a business plan.”
He anticipates the $5 million proceeds from CAP’s first fund will be distributed within two years. And after that? The next fund: CAP II.
Together, the two companies create a soccer news service with a global reach. TeamTalk.com, which went public in April and trades on the London Stock Exchange under the symbol “TTK” will continue to develop its European customer base, while internetsoccer.com will now focus its customer acquisition strategy on North and Latin America.
As part of the deal, TeamTalk.com will keep in place the current management team, led by CEO and co-founder Mac Lackey. For Lackey, a native Charlottean who attended East Mecklenburg High and went to Wake Forest University on a soccer scholarship, the infusion of capital is a welcome relief.
“We were ‘fortunate’ victims of the market crash,” says Lackey. The company had a $15 million round of financing lined up with a New York firm but could not close due to the shifting valuations in the market. “While we were going through all this, we started getting acquisition offers out of Europe,” he adds. After traveling to Europe to meet with three potential suitors, Lackey thinks he has found the perfect match in his new parent company, TeamTalk.com. “They are market leaders in Europe, the number one traffic sports site there, and they do a lot of work with wireless devices. We’re the market leader here and are more focused on the Internet,” says Lackey. “By joining forces, we can accelerate our goal to becoming the world’s largest soccer property on the Internet.”
Lackey is also glad that the sale will allow his company to remain in Charlotte. “We’re committed to this market, even though for the past year venture capitalists have said they would fund us if we moved to New York or California.”
He adds that while it has been frustrating at times, “We feel this is a terrific time to be here, and we think we can have a positive impact in the market here. We’re going to be hiring a lot of people” – likely doubling the company’s size to 60 employees by the end of the year.
As a wholly-owned subsidiary of TeamTalk.com, internetsoccer.com will remain relatively autonomous. The site has built its market share by combining sheer volume of content on the world’s most popular sport – up to 500 articles per day according to Lackey – with an emphasis on exclusive, original content from over 120 contributors worldwide. “Not only do you get the sort of ‘scrubbed’ news that’s available everywhere,” notes Lackey, “You also get an insider’s perspective from people who are at the games and interviews with fans, coaches and players. Plus we cover 40 countries around the world.”
Internetsoccer.com will also do about 100 audio webcasts of matches this year, including the U.S. national team’s World Cup qualifying matches, and will likely provide video streaming of games and highlights in the future as the broadband market matures. “We consider our network basically a distribution platform. Today that platform is delivering primarily Web pages,” points out Lackey. “Over time, that will diversify based on our customers’ ability to receive different types of information.”
In addition to enabling its basic growth strategy, the capital infusion will allow Lackey and his team to aggressively pursue the passionate, but largely untapped, Latin American market. It’s a natural fit for Lackey, a fan of Brazilian soccer who once traveled there to play and meet soccer legend Pele. Now Lackey has the chance to create his own legend in the world of Internet business.
N. Bradley Thompson, Jr., isn’t your average banker. His hand-tied bowties and engaging manor belie a keen, insightful mind that approaches banking with flexibility and new ideas. As the North Carolina ceo of SouthTrust Bank , he strategically plans market operations throughout the Tarheel state.
But then again, SouthTrust isn’t your average bank. Birmingham, Ala.-based SouthTrust Corporation is the only big out-of-state banking company with branches in North Carolina. SouthTrust entered the state by acquiring a thrift in 1991. Under Thompson’s leadership, the bank has successfully moved into the Charlotte and Triad markets as an aggressive commercial lender with premier customer service.
Despite its hometown feel, the bank is actually a mega-regional enterprise — the 22nd largest banking company in the nation with 623 offices in Florida, Alabama, Georgia, North Carolina, Texas, South Carolina, Tennessee and Mississippi. That “neighborhood touch”, however, is no accident. Thompson points out the bank’s focus on a consistent service delivery across its franchise. “We’ve improved our client focus to help you have that same feel whether you’re in an office in Palm Beach or on Park Road.”
Of course, North Carolina isn’t the easiest banking environment. Competition is fierce in the face of Bank of America, First Union, and Wachovia — not to mention the proliferation of mid-tier and smaller banks. Steering the North Carolina operations is undoubtedly demanding, but Thompson seems to be up to the challenge.
He has grown the “de novo” market from 11 initial retail locations to 36 branches today, directing the commercial and retail functions of five markets. “It is competitive,” he admits, “but we’re here because we can compete.”
Business development is a daily charge for SouthTrust in North Carolina. The bank’s competitively priced products and commitment to service have convinced many businesses and consumers to leave long-standing banking relationships for SouthTrust. Thompson notes, “One of our new clients moved his business here after 42 years with another company.” Thompson adds, “We have great products that are very aggressively priced, and we focus on a lot of the new growth in the market.” Part of that new growth is in entrepreneurship. “We create partnerships with entrepreneurs and nurture the relationship as their business grows.” Customer satisfaction, in addition to pricing, may indeed be the key to SouthTrust’s success. In its June 2000 issue, Consumer Reports rated SouthTrust as the No. 2 bank for customer satisfaction.
Catherine Pulley, spokeswoman for the American Bankers Association , believes that financial services is one of the most competitive industries in the country. “Customers are the most powerful force in the marketplace,” she says. “We’ve found that if consumers shop around, they can find the services they want at the prices that suit them.” Thompson declined to comment on the Consumer Reports story.
Some regional banks have come under scrutiny lately in today’s uncertain interest rate environment. Rising interest rates put pressure on bank earnings by driving up the cost of their deposits, while dampening demand for their loans. Wachovia, for example, is bolstering its reserves for loan losses partly due to an increase in troubled loans.
Although slower earnings growth has been a problem facing the entire banking sector, SouthTrust is in the enviable position of having healthy reserves. John B. Moore, banking analyst at Wachovia Securities says, “SouthTrust’s reserves have actually increased over recent periods, while those of its competitors have decreased.”
As the Federal Reserve continues to raise interest rates, SouthTrust, like all banks, is adjusting to changing conditions. “It does require us to look at our processes and find a way to be more efficient,” Thompson says. “And that’s an ongoing responsibility at SouthTrust. Our chairman is very encouraging of us finding new ways to do things.”
SouthTrust Corporation, the bank’s holding company, has turned its attention to the state of Texas. The company is pursuing its growth strategy through key acquisitions in Dallas, Houston and San Antonio. But despite the corporation’s focus on its Texas franchise, North Carolina hasn’t been left out in the cold. In fact, the bank has raised its profile in the Charlotte and Greensboro markets with impressive new facilities. In Charlotte, SouthTrust recently moved into the Prosperity Place development near the University of North Carolina at Charlotte.
The new building houses SouthTrust Mortgage Corp.’s regional operations, commercial loan documentation, deposit operations for North Carolina, sales and marketing and retail operations, as well as training and administrative offices. Although Thompson’s office is officially in the Prosperity Place location, he is constantly on the move, traveling throughout the state and the Southeast.
In February, SouthTrust found a new home for its Mecklenburg County headquarters on Fairview Road. This tower, named SouthTrust Plaza, encompasses 50,000 square feet, with the bank occupying 33,000 square feet. Greensboro, N.C. recently gained its own SouthTrust Plaza, a five-story, top-quality office building — one of the few new projects in its downtown area.
“Our commitment to North Carolina is very strong,” Thompson says. “In addition to the new facilities in the past few months, we anticipate more branch expansion by the end of this year.”
Bradley Thompson grew up in Shelby, N.C., the oldest of four boys. In high school he discovered a flair for numbers and set his sights on the accounting profession. He earned a bachelor’s degree in accounting from Appalachian State University in 1980 and completed the master’s program in business administration in 1982.
Thompson planned to be a CPA, but fate beckoned him to banking. “BB&T offered me an intriguing opportunity out of graduate school,” he recalls. Thompson accepted and his banking career was off and running. That opportunity turned into a twelve-year tour of duty as Thompson rose through BB&T’s corporate ranks. But in 1993, SouthTrust made the young executive an offer he couldn’t refuse. “BB&T is a great company. But I had a chance to work and learn a little closer to the heartbeat of the company at SouthTrust.”
Thompson’s community involvement includes the Charlotte Chamber of Commerce’s Board of Directors, executive member of both the North Carolina Citizens for Business & Industry and the Charlotte Regional Partnership. But his most important commitment is to his family-wife, Amanda, and children Sallie Katherine, eight, and Ellison, four. At only 42, Thompson has his best years ahead. When asked about his professional aspirations, he simply replies, “I’m confident about the future.”
Nethea Fortney-Rhinehardt is a Charlotte based freelance writer.
The Charlotte Chamber of Commerce touts the city as “a national sports hub.” To support its boosterism, it points to the presence of the Carolina Panthers
Certainly the local professional teams provide their share of exciting moments for their fans and contribute to the entertainment diversity that can be found in and around the Queen City. But how much does the city and the surrounding region benefit from having these professional sports here? At a time when city leaders are debating investing in a $224 million downtown arena for the Hornets and the Panthers’ owners are renegotiating many of their sponsorship agreements, the time is right to look at the economic impact professional sports, particularly the NFL and NBA teams, have on the greater Charlotte area.
coming to play
John Connaughton, a professor of economics at UNC Charlotte has conducted several studies of the economic impact of professional sports on the area, and is, perhaps, the local authority on the subject. He estimates the impact of professional sports on the region approaches the billion dollar level.
“In terms of the income created and the jobs generated, the bottom line is that sports have a tremendous impact in dollars and cents,” he says. “While calculating that impact is complicated, there is no question that professional sports, particularly NFL and NBA teams, make good economic sense for the community.”
While NASCAR has by far the greatest economic impact on the region, it is the Panthers and the Hornets that generate the most publicity and give Charlotte its big-league status.
Max Muhleman, a nationally known sports marketer based in Charlotte, says major league sports teams are very important to the quality of life, pride and focus of a city, particularly to medium size markets like Charlotte.
“There is no doubt that sports teams are part of the index of liveliness and attractiveness for cities which aren’t at the very top level of markets,” says Muhleman. “The economic figures, as impressive as they may be, are only about one-third of the value these teams represent to Charlotte.”
Connaughton and Muhleman agree that, of all the professional sports, NBA and NFL franchises are the best fit for Charlotte because they have the best chance of being successful here.
“When you look at the economics of different sports, the NFL is the model for how you create a league with parity between small market cities and large market cities,” says Connaughton. “Because of the hard salary cap and the broad based revenue sharing policy, all teams in the league are on equal footing. It doesn’t matter whether you’re Green Bay or New York.” Or Charlotte.
“We have the right two leagues here in the NFL and the NBA,” says Muhleman. “The NFL is the number one sport in the nation and our great college basketball teams have created an interest and market for the NBA.”
dunking for dollars
The Hornets and the Panthers are more than sports teams of course; they are in business to make a profit. Both earn money from a variety of sources, including ticket sales, stadium rentals, permanent seat licences, broadcast rights, advertising, and corporate sponsorships.
This is a particularly important time for the Panthers because many of their sponsorship arrangements are up for renewal this year. One major sponsor, Bank of America, has just signed a new long-term partnership agreement, estimated at $2 million annually. “Sponsoring the Panthers is great for Bank of America’s identity,” says Todd Lankford, managing director of Banc of America Securities. “The demographics of the Panther client base matches well with our target base. It’s a great association to have.”
For its money, Bank of America receives naming rights to the club level at Ericsson Stadium, the right to place automatic teller machines at the stadium, and a backdrop for Panthers press conferences featuring the bank’s logo next to the team logo. An annual Bank of America Carolina Panthers Caravan Tour takes Panthers players to other cities in the Carolinas, extending Bank of America’s identification with the team throughout both North and South Carolina.
Another major source of revenue is broadcast rights. The Panthers have recently restructured both its radio and TV deals, so the franchise retains more advertising inventory revenue. According to Scott Crites, who worked in Panther radio sales for Capitol Broadcasting, the Panthers generate millions of dollars in broadcasting revenues. On the radio side alone, the annual income is $5.5 to $8 million.
Since leaving Capitol in January, Crites has started his own company, called First in Ten Marketing, which develops events for entertaining clients. He says the business grew out of the relationships he formed when doing business with the Panthers Radio network.
“Corporations have entertainment budgets they didn’t have before professional sports came to town,” says Crites. “The entertainment side of the Panthers is a huge business. It’s also a business which generates business.”
show me the money
Attending a professional sporting event isn’t cheap. Part of the Panthers’ annual revenue comes of course from ticket sales at the 73,248-seat Ericsson Stadium. A 9 percent increase in ticket prices this year will generate at least $2.9 million yearly. Sports Illustrated recently reported that a family of four spends an average of $304.31 to attend a Panthers’ game. For that price, they get four tickets, four hot dogs, two soft drinks, and two beers. The comparable cost, according to SI for a Hornets game, is $183.15. And that’s for regular seats. The real money in stadiums these days is in leasing corporate luxury boxes.
David Goode of Southern Real Estate says his company shares a box for Panthers’ games with another company. They use it for entertaining clients.
“Are we doing more business because we take them to games? Absolutely,” says Goode.
Lankford agrees that taking clients to games is more than entertainment. It’s an opportunity to spend several hours with a client in a totally different atmosphere than at the office.
“From a client entertainment perspective, it’s great,” he says. “There’s a social environment; everyone’s having fun.”
For William Bray, whose business, Welton Sports, designs custom golf vacations and arranges corporate entertainment, the presence of the Hornets and Panthers has tremendous value.
“Professional sports give a company like mine more venues to entertain clients and more ways to do it,” he says. “I can sell a client in the Triangle area on taking a long weekend in Charlotte. They bring in 20-50 salespeople to play golf on Saturday and go to a Panthers game on Sunday. They stay overnight, eat dinner and spend money.”
Fans come to Charlotte from a 150-mile radius to attend Panther games, and from a smaller geographic area for Hornets games.
“There’s a huge increase in game day business,” says Crites. “All kinds of business around the stadium benefit, from discount shoe stores to restaurants. Eating establishments, transportation companies, parking garages — all of them benefit.”
Goode’s business is commercial real estate. His company has been doing business in Charlotte for 100 years. He says there is no question that Ericsson Stadium has significantly increased the economic value of the properties which surround it. He believes the same thing could happen downtown with a new Hornets arena.
Steve Luquire, a principal with Luquire George Andrews, a local advertising firm that works with the Panthers, agrees the location of Ericsson Stadium has had a very positive economic impact on the surrounding area.
“The stadium was built in an underutilized area,” he says. “It has led to a lot of development in South End and the west side which has led to an expansion in tax revenue and helped rejuvenate the area.”
Charlotte Hornets owner Ray Wooldridge is trying to sell a new downtown arena for the team as an economic development package for the city of Charlotte. In a recent interview he said, “The arena acts as a catalyst for the redevelopment of downtown. There is approximately $250 to $300 million of additional construction that we can identify and associate with the arena placement. And over the years, it’s going to produce a tremendous tax base and a lot of tax dollars for the city of Charlotte.”
One of the biggest economic payoffs of professional sports, and one of the most difficult to measure, is the visibility they give to the region.
“National TV games reach a broad audience of people who watch professional ball,” says Connaughton. “The increased exposure for Charlotte through the Hornets and Panthers helps eliminate any confusion over who and where Charlotte is.” (Of course, sometimes that kind of exposure can backfire when players get into high profile scrapes with the law, as has occurred in Charlotte recently.)
Bray says Hornets merchandising has given Charlotte international name recognition. “I was in Dundee, Scotland recently and was amazed at how many people knew Charlotte because of the Hornets,” he says. “That can’t help but benefit the city.”
Adds Goode, “Everybody who buys a T-shirt or cap and wears it out-of-state is helping to market Charlotte.”
How does name recognition pay off in financial decisions? Luquire explains, “The Panthers, Hornets and NASCAR play an important role in people’s perceptions of this as a growing region. Having pro sports here influences decisions like whether Bank of America keeps its headquarters here and whether we are a hub city for an airline.”
National, even international, name recognition is also an important element in attracting new businesses to the Charlotte area. And, new and expanding businesses are fueling the city’s economic growth.
“Charlotte is no longer recruiting manufacturing firms,” says Connaughton. “The economic development focus is aimed at headquarter type firms. There is a different set of amenities that you need to recruit at this level. Pro sports, while only one element, is an important one. If you don’t have all the amenities, you’re not a major player.”
As the market becomes increasingly competitive, pro sports become an even more important element in an area’s mix of amenities. The presence of pro sports also makes it easier for companies to recruit and retain employees.
Bray is an example of the attraction pro sports have for talented young professionals. In 1993, he had just graduated from law school and was considering where he wanted to practice.
“One of the reasons I moved to Charlotte was the presence of the Panthers and the Hornets,” he says. “I’m a huge NFL fan. Seeing a team here made it a more attractive place to live.”
As evidence of the importance of professional teams on the economic impact of an area, Connaughton points to the example of cities like Baltimore, Cleveland, and Houston, which lost franchises and the price they paid to get one back.
“They spent a lot of money to get a team back because they found that without a major league team, an important part of their economic puzzle was missing,” says Connaughton.
Sports teams provide one other important ingredient to the life and business of a city. A major league team provides an emotional release and a common interest for hundreds of thousands of people. Communities come together to root for the home team.
“Sports teams have a unifying influence on the area,” says Luquire. “They create an allegiance, giving people the ability to connect with one another and to share a common goal.”
Rising out of the ashes of the former Neble hosiery mill in trendy South End is a phoenix: iXL, Inc. The old textile mill has been transformed into a tech-heavy Bat Cave, home to general manager Allan Lackey and his posse of Gen X’ers: a group whose bravado and technological savvy are complemented by the skills and experience of older members of the firm. The goal of this hip outfit? Simply “to be the world’s best consulting company for Internet and e-commerce services.”
Bert Ellis, Chairman and ceo of iXL Enterprises, founded iXL, Inc. (iXL stands for Internet Excellence) in 1996. iXL Enterprises is the parent company of iXL, Inc., as well as of the Consumer Financial Network (CFN) and iXL Ventures. While headquartered in Atlanta, iXL Enterprises, Inc. is definitely not Southern-centric. The company has offices in 20 cities in the United States, Europe, Latin America and Japan, and employs approximately 2,500 people.
The Charlotte iXL, Inc. operation is one of the corporation’s fastest growing outposts. The staff has doubled since December 1999 to 120 today. It has just leased additional space at the same location to house new employees.
Jennifer Lucas, senior marketing manager, says iXL’s primary goal is “to partner with corporations in changing their business. We are a consulting firm whose niche happens to be the Internet.” Ashley Summerlin, senior quality assurance analyst, emphasizes the demand for this type of service: “We’re consulting about something people want desperately.” Lucas agrees and notes the frustration factor so often encountered by businesses wanting to get involved in e-commerce: “Companies are often so structured that they can’t get out of the box. That’s what they pay us for.” General manager Allan Lackey sums up the iXL product this way: “This is a complete soup-to-nuts, cradle-to-grave service. We will help the customer do everything it needs from writing a business plan to delivering the product.”
iXL’s business is composed of 80 percent large corporations with the remaining 20 percent in dot coms. While iXL employees enjoy the rewards of working with the larger companies, they also seem to enjoy the thrill of working with dot coms. Beth Quantz, resource manager, notes, “They [dot coms] are entrepreneurs. One of iXL’s core values is passion for what you do, and it helps us to be around that.” Lucas concurs, “The risk reward factor is intriguing.”
Quantz explains that just a few years ago, bigger companies were resistant to the idea of Internet service companies. “Now, they want it done yesterday. They’ve seen that they have to get on board today. Now, their competitors are all over e-commerce. They know they have to develop that portion of their business.” Lucas points out that Charlotte’s banks were a little ahead of the game “since they had to be nationally focused.” However, “with business to business, we’re still on the cusp. Textile companies are an example of the type of company that may want to sell to their clients online. We help to create a common platform for buyers and sellers to transact business.”
As visitors enter the Charlotte office of iXL, they are immediately drawn to a large computer kiosk flashing up synchronized movies of iXL clients and staff at work. Oversized, mod furniture looks like it might have come from movie character Austin Powers’ London apartment. Lucas acts as tour guide: “Bold colors are our corporate standard.” As we proceed through an enormous workspace, Lucas comments: “Everything is set on an angle so staff don’t feel like they are working on top of each other and so they can think more creatively.” All the conference rooms are equipped with state-of-the-art audio-visual gadgets, speakers, remote blinds, tabletop connectivity and teleconferencing capabilities. Giant neon signs that say “Chill” accompanied by HTML symbols point employees to break rooms furnished with pinball machines, video games and a ping-pong table. “People come in here during work and after work to hang out and to talk,” says Lucas.
Like many of their associates, Lucas, Quantz and Summerlin range in age from 25 to 30. Fashionably casual, they reflect a key part of the business culture at the firm. Lackey at age 51 represents the older guard. He comments: “Working with young people keeps you young. Young people are much smarter today than when I was coming along. They have a great knowledge base. However, their problem is that they might not understand the ‘blocking and tackling’ styles that you have to have to turn a profit, serve your customer and so on. Having a little bit of experience from other jobs in other industries helps a lot.” Summerlin agrees with Lackey’s statements: “As we’ve grown bigger and bigger, we’ve needed the experience that comes with age” on iXL’s project management teams.
This staff dynamic creates a relaxed, playful atmosphere at iXL’s Charlotte office. To emphasize this, Lackey cites two concepts employees must buy into: “We try to put the customer first: we continually try to improve on that. The second requirement is fun. I refuse to stay here if it’s not fun anymore…I have purposely hired people with similar mindsets.” The company features themed parties like “Vegas Day” where work is put aside for a turn at the blackjack tables (with fake money, of course!). Monthly staff socials, sports teams and community outreach programs are also an important part of the iXL landscape.
Staff development is also encouraged. Summerlin is enthusiastic about “fabulous training opportunities” and the start of an “employee exchange program” to other iXL offices. According to Quantz, “staff have an opportunity to move to any city, any office.” The challenge, says Lucas, is “recruiting the right people and keeping the right people.” The key component is “concerned managers that work with you to keep you engaged.” Lackey agrees. “We do have turnover, but sensitivity up front can help.”
According to Lackey, the Charlotte office has a reputation for being “a pretty well-run office, very steady. The entire management is experienced at what we’re doing. When corporate wants to try something new, they call us.” Lucas agrees that the Charlotte office is a progressive one. “If a new system is proposed, we’re always the guinea pig. We’ve had a lot of experience, and we like to adopt enterprise projects to see if they’re doing good things. We’re pretty open-minded here, and Allan is a crazy nut!” Quantz has also noticed the office’s willingness to take a risk: “We’re the first ones to say, ‘We’ll try that!’”
Lackey points to the company’s six “Core Values” as key to iXL’s success. “These are the basic rules for life” in this office: Commitment to Client, Commitment to Team, Passion, Accountability, Adaptability, and Effective Communication. Each employee is given a card to carry in his or her wallet with these values as a reminder. Core Values posters are plastered all over the workspace. These commitments help keep employees on track.
In addition, iXL has developed its own engagement methodology known as “iD5,” which Lucas describes as “a melting pot of different consulting strategies. It’s a process and a mixture of the best experiences.” iD5 has five stages: Discover, Define, Design, Develop and Deploy. The methodology directs an entire project from start to finish. Lackey emphasizes that this process can be interpreted in both simple and complex manners.“iD5 is simple enough that most people can understand and explain it. However, it can be very detailed in its complex form.”
The firm features a multi-discipline team approach to strategy and problem solving. Quantz emphasizes, “When you first kick off a project, everyone is present as a team.” Lucas adds that the inter-disciplinary approach is “vertical and horizontal. We want to leverage the enterprise.”
iXL competitors in Charlotte include marchFIRST, Andersen Consulting, IBM, Mckinsey and Lante. What sets iXL apart? Lackey cites GE, one of iXL’s larger clients, as proof of their dedicated approach to customer service. “GE is huge and extremely demanding as a client. They have a very rigorous model that you need to conform to. If you can meet their standards, you can work with anyone.”
One look at iXL’s client list is further proof of their reputation. Companies like AOL, Belk Department Stores, BellSouth, Chase Manhattan Bank, Delta AirLines, First Union, Intel, Microsoft, and Virgin Atlantic Airlines, all come to iXL for Internet advice. Lucas says that iXL is “the biggest consulting firm you’ve never heard of” due to several years of acquiring and integrating so many different companies. The goal now is to make the public aware of this major Internet service resource. Later this year, iXL in Charlotte will launch new media advertising campaign in order to “differentiate ourselves from the rest of the marketplace.” The message? Lucas again echoes the firm’s mantra: “We aim to be the premier Internet services firm in the world.”
Richard Siskey has always had an uncanny ability to discern situations in advance, then devise and implement a strategic response accordingly. He honed those skills while becoming a chess master as a youngster, once even playing 10 opponents simultaneously.
In his arenas of competition, he says it’s the challenge and art form that motivates him.
After college, his game board became the financial markets. Now he’s got all the moves covered and is expanding his mastery of the challenge to other markets.
From the beginning, Richard Siskey envisioned a company that focused on the corporate marketplace. It would facilitate all the financial issues of high net worth individuals and entrepreneurs by providing the talent and skills under one roof.
Today, at age 41, his dream is quickly becoming a reality in Wall Street Capitol, a company that offers financial and estate planning with six divisions that facilitate the financial process. The divisions are insurance, investment, pension plans, employee benefits, investment banking and most recently, real estate.
“Wall Street Capitol offers comprehensive financial services as opposed to having a singular focus,” Siskey explains. “As a client moves between divisions or financial disciplines, it’s a hand-off as far as the talent level and expertise is concerned. Whether clients move between a business consultant and a CPA, or an insurance and pension plan specialist, the expertise is at an extremely high level. The people in each division have been trained in that field their entire lives providing over 25 to 100 years combined experience.”
All The Pieces
When he initially conceived the idea, Siskey found that nothing in the marketplace was comprehensive enough. Ultimately, this type of environment had to be created, he insists.
“No one had the whole picture at this level. When a client moved between financial divisions and areas of discipline something was lost in the talent level and skills set. But 15 years ago, when I would talk about this, people would look at me like I had ten heads.”
Wall Street Capitol targets high net worth and entrepreneurial clients, creating a personal client group. They usually come through referral by other high net worth entrepreneurs.
Stephen Rosenburgh, president of U.S. Land Investments in Charlotte, has been a client of Siskey’s for seven years and has seen the wisdom in Siskey’s vision firsthand.
“Very few small companies have seen this vision of the future — not just managing one product but managing the client’s income strength. Rick knows how to take a client’s income strength and deploy it to the client’s advantage by offering different investment options. But he’s also not a one-man band. He knows how to build a team.”
Rosenburgh sees Siskey’s integrity as the thread that binds the vision together.
“Integrity, without question, has to be number one in financial services. I have personally seen his integrity moved from words to action.”
Rank and File
According to Siskey, his clients are looking for a personal touch. “We’re a boutique and privately held. We think there’s a certain niche of the marketplace that wants a high touch approach. It’s like preferring a community bank to a national bank.
“In most business models, the financial consultant has to be all things to all people. There’s not enough meat on the bones there. Our financial counselors have six divisions to work amongst at any given moment.”
To accomplish this daunting task, Siskey brought his wholesalers inside.
“We identified the rainmaker wholesalers — the ones who make things happen — and brought them here. In the early days, I used to outsource 80 percent of my extra business. Now we insource 80 percent. It allows a great deal of control over the culture and environment.”
Siskey sees his team at the level of their clients, understanding their financial issues.
“We’re business-planning specialists applying for primary financial advisors. If Wall Street Capitol is doing its job correctly, we will receive the first phone call in any financial area.”
For Craig Cass, president of Casco Inc. of North Carolina, that’s a given.
“When we started working together five years ago, I found Rick’s key trait
to be his ability to understand our needs and help us move in the right direction. He’s also an entrepreneur at heart and is constantly bringing dynamic and fresh ideas to us. Then Rick follows through on those ideas. You don’t find that often today, and in my business it’s priceless.”
In April Siskey moved the company to their new 75,000 square foot, four-story building at 4521 Sharon Road. Wall Street Capitol occupies 17,000 square feet on the fourth floor.
“The office has everything I ever wanted,” Siskey smiles. “This should be an extension of our client’s businesses and homes.”
That includes lots of marble, mahogany and leather. But, as is his trademark, Siskey does it like no one else. For example. the media room, with stadium style seating and international satellite capabilities, and the conference room both offer touch of the button controls. Soft recessed lighting creates a soothing and peaceful environment along with lush carpeting to capture any escaping sounds, a harmony of subdued color, a 350-gallon saltwater fish tank and a distant view of the downtown Charlotte skyline.
Although the company is just a year old, within the next 90 days it will open offices in Atlanta, Ft. Myers and Chicago, giving the regional firm anational presence. By 2001, Siskey anticipates offices in Nashville, Boston, New York City and Dallas as well.
“Taking Wall Street Capitol to the national level is the biggest challenge I’ve faced in my career,” Siskey confides. “I’ve had this vision for 20 years. The greatest challenge now is how to maintain a version of Wall Street Capitol in each location.”
The key is finding local talent. Greenough doesn’t doubt other top-level producers will readily join the teams.
“I met Rick while I was a wholesaler trying to fit a lot of square pegs in round holes because we didn’t have the scope of the products that are available here or the ability to creatively mesh them,” he confides. “What impressed me most was Rick’s insight. He reads the lay of the land well.” Greenough figures they’re starting their national push from solid ground.
“Rick has brought continuity to our business. Our team doesn’t change.
This is a place for people who have outgrown their current business model as a financial consultant, and need extra services for their clientele. It’s for those looking for something deeper.
“If I have a client sitting in the conference room and a problem comes up involving another financial area, I can walk down the hall and pull in the people who can solve it.”
It may appear that building a new age financial empire would take all of Siskey’s time and attention. Not so. In fact, business is several items down on his priority list.
“Attainment of a goal is a second value. That fades,” he philosophizes.
“What it makes of you in the pursuit of it is of primary importance. What you make and get is temporary. What you become is permanent.
“Whatever you are going after, make sure you are creating something unique and special and you’re touching people’s lives. At the end of the day, that’s the only thing that’s gonna be remembered.”
Cass says that philosophy is lived out in Siskey’s life. “Rick’s one of a kind,” observes Cass, who values Siskey as a friend as well as business associate.
“In spite of how successful he is, he’s the type of guy you’d invite to a barbecue and enjoy sitting and talking with. He’s a person you’d introduce to your folks.
“Once I really got to know him, what stood out was that he is such a family guy. His wife Diane is a great partner for him and he obviously loves to be around her and his kids.
“Rick is a giver and our community benefits from that.”
All the Right Moves
Siskey has been involved in the YMCA, Queens College, Mecklenburg Area Catholic Schools, United Way and numerous other non-profits. He says he specifically picked them because of their far-reaching impacts.
Dr. Billy Wireman, president of Queens College, met Siskey as a student while he and his wife Diane were attending the McColl School of
Business Executive MBA program.
“Rick issued a challenge to our alumni that he would match $1 million to help build the Sykes Learning Center. He understands the responsibility of wealth to reach out to strengthen those institutions like churches, colleges, hospitals and such that constitute the fabric of our society. And he has a special partner in Diane. She’s a very high-minded and decent person who supports him in all this. I’m proud to have them in the midst of our community.”
Their reason? “It’s important for any entrepreneur, professional and executive to be active in the community to make it a better place now and in the future,” Siskey says. “The level of leadership drives everything — home, churches, community businesses…their success is based on the leadership.”
“Rick has a tremendous reputation,” Greenough remarks. “In business, there are two or three main line players in town and people know him. He’s plugging into the fabric here.”
In April 30, 2000, the Nalle Clinic, Charlotte?s venerable medical clinic, closed its doors after nearly 80 years of serving the community. Plagued in recent years by financial difficulties and unable to find a financial savior, the clinic had no choice but to cease operations. Its closure left 175,000 Charlotte-area patients wrought with anxiety about their future care, the security of their medical records and the possibility of having to look for a new physician. But on May 1, Nalle doctors saw patients as scheduled. In fact, aside from a few minor inconveniences, it was business as usual. How? Novant Health/Presbyterian Healthcare ? in the midst of its own troubles ? aggressively stepped in and negotiated deals with physicians, obtained patient records and absorbed the bulk of Nalle?s physicians? practices. How Nalle failed and why Novant rescued its patients paint a dramatic portrait of the state of health care today.
Anatomy of a Decline
The Nalle Clinic once boasted 140 doctors, 11 satellite offices and an eight-story tower on Randolph Road. But its growth took a toll on the clinic?s finances. High overhead and sizeable investments in satellite operations cut into doctor pay, resulting in many physicians taking flight. The money crunch was exacerbated by an error-ridden billing and collections system that couldn?t handle the growing complexities of managed care. These internal difficulties, combined with cuts in reimbursements from Medicare and managed care companies. finally brought the weakened practice to its knees. In 1990, Nalle had turned to PhyCor, Inc. for financial management expertise. Nashville, Tenn.-based PhyCor, one of the nation?s largest and most successful physician practice management companies, agreed to step in for 12 percent of net profits. PhyCor purchased clinic assets, poured cash into satellite offices and beefed up medical equipment purchases. But as the rules of health care continued to change and evolve, profits shrank and even PhyCor could not find a way to stem the tide. Pricing pressures in the healthcare industry continued to chip away at doctor compensation. Physicians were paid only after expenses ? including PhyCor?s 12 percent management fee, overhead, and salaries for other staff ? were met. To make matters worse, the clinic?s financial system didn?t incentivize doctors to perform. As more physicians continued to depart, there were fewer professionals to shoulder the enormous overhead. Bill Michalak, a former health care analyst and currently CEO of Georgia-based Meridian Medical Group, says, ?Cuts in managed care pricing made it harder to manage medical practices and reap the benefits of consolidation. PhyCor was a great consolidator, but just couldn?t efficiently manage the clinic?s operations in that environment.?
Last year, Nalle Clinic management turned to Presbyterian Healthcare for a way out. Paul Wiles, CEO of Novant Health, Presbyterian?s parent company, recalls, ?We looked at a joint venture arrangement with PhyCor. We also considered buying 100 percent of the clinic.
But the economics didn?t work for us.? By January, Presbyterian had completed the due diligence process and decided not to buy the clinic. But Wiles was still willing to help the physicians purchase the clinic themselves from PhyCor. In the interim, he assembled a team of Presbyterian professionals to address the ongoing crisis. Led by Steven Burke, senior vice president of physician enterprise services, officials stayed in close contact with the clinic?s leadership and physicians, monitoring their negotiations with PhyCor. Burke remembers, ?As the negotiations kept going longer and longer, we began to have some concern. Maybe things weren?t working as well as we had thought. So we developed a contingency plan for the different scenarios that might play out. We all wanted the Nalle Clinic to continue in some shape or form.? Burke spearheaded planning sessions with key managers throughout the Presbyterian organization: Carl Armato, vice president of finance for Novant Health; Sandra Williams, chief operating officer of Presbyterian Healthcare; and Dr. Dan Hagler, medical director of Presbyterian Regional Healthcare Associates. By early March, when it became apparent that the clinic would not survive, Presbyterian?s team was galvanized into action. Burke launched a series of meetings with physicians, often as early as 6 A.M. and after hours late into the evening, gathering information and opening the lines of communication to better respond to the doctors? needs. Armato and his staff painstakingly ran projections, creating scenarios for private practice and other options. They helped doctors determine what they could afford for staffing, salaries and other costs. ?We took the information shared with us by PhyCor and put it into financial reports so the doctors could do some what-if scenarios. They could have some idea of what to expect in order to make decisions that would be good for them and for their patients. As doctors changed assumptions, we re-ran the models.? Hagler oversaw primary care specialties ? pediatrics, obstetrics, family practice and internal medicine. Williams worked closely with the hospital-based specialists ? surgeons, orthopedists, gastroenterologists, plastic surgeons and pulmonologists. ?Our guiding principle was to make sure the continuity of care was there for patients and the physicians would be able to stay here to practice,? she relates. ?We just worked through all the issues.? Within a few short weeks, their exhaustive efforts paid off. By May 1, the plan was in place.
Why Presbyterian launched its rescue plan
Over the years Presbyterian Healthcare had developed an informal relationship with the Nalle Clinic. While the clinic was independent, most Nalle doctors traditionally referred patients to Presbyterian. Presbyterian also owned the $33 million, 8-floor tower occupied by the clinic. And Presbyterian ran the Nalle lab and jointly owned the clinic?s MRI facility. Certainly, Presbyterian had a lot at stake regarding the future of Nalle?s physicians and its 175,000 patients. It couldn?t take the chance they would move to Carolinas HealthCare System, the hospital?s chief competitor. Carolinas spokesperson Alan Taylor agrees, ?Presbyterian had more to lose. Nalle doctors not only sent more patients to Presbyterian, but leased space in their building.? So Presbyterian fashioned a plan that offered Nalle doctors the option of working at other hospitals. According to Steven Burke, this surprising measure of goodwill goes beyond the bounds of self-interest. ?One of the reasons we exist as a healthcare organization is for the community?s benefit. We valued the physicians and the physician-patient relationship. It was important to us that the community win.? Whether or not Presbyterian?s philanthropic effort will pay off in the long run remains to be seen.
Presbyterian provided three alternatives to Nalle physicians seeking to remain in the Charlotte area. Burke explains, ?We tried to give the doctors a tremendous range of flexibility, recognizing that there isn?t a one-size-fits-all type arrangement.? He points out that some Nalle doctors declined assistance and went into private practice on their own. Presbyterian focused its attention on three main options.
1. Private Practice Model To assist physician groups in returning to private practice, Presbyterian offered back office functions and cash flow loans. Presbyterian also acted as a liaison between Nalle doctors and local banks for other financial tools. The Presbyterian loans were completely free of restrictive covenants, allowing doctors the flexibility of selecting hospital services at will. Dr. Hagler elaborates, ?We set up the management organization to allow doctors to purchase the services to run their own practices. We negotiated on their behalf with PhyCor, eliminated their non-compete agreements and allowed them the option of staying in their current various locations. We guaranteed loans to allow them to borrow the money to start up.?
2. Affiliated Practice Under this alternative, physicians became employees of Presbyterian Healthcare, albeit with autonomy in operating their practices. Dr. Hagler adds, ?The practice gets to control itself. Doctors choose their partners and decide on a compensation plan. We would help them with the business, but it is their practice to run. We did offer them some guarantees to get started because we knew there would be some dislocations in terms of compensation.? Three major Nalle family practice groups chose to come under this affiliation: Randolph Family Practice, Matthews Family Practice and Medical Plaza Family Physicians.
3. Presbyterian Healthcare Associates In a select few cases, specialists joined existing specialty groups already a part of Presbyterian Healthcare Associates. Dr. Hagler explains, ?We made an employee offer to a small number of specialists where we had a need in an current office.? Presbyterian also:
- Released PhyCor from its lease agreement for the tower
- Bought clinic assets (to be sold or leased back to physicians)
- Began operating Nalle?s Urgent Care (as Randolph Urgent Care) and the radiology department in addition to the lab and MRI
- Worked with real estate consultants to ensure that Nalle doctors could remain in their locations
- Assumed responsibility for maintenance, information technology, phone, copier and other services
- Provided capital to Mike Zucker, former Nalle financial officer, to establish MedMetrics, a billing, collections and accounting organization for the newly evolved practices
- Assumed custody of Nalle?s 300,000 medical records
? In March, Dr. John Tracy, a Nalle family practice physician, wondered what would become of his partners, nurses, 25 member staff and nearly 5,000 patients. He remembers, ?We talked to other hospitals, but Presbyterian offered us the best arrangement without a non-compete contract.? His office now operates under the name Randolph Family Practice, with Presbyterian?s tax ID and benefits structure. Tracy is pleased by the outcome, ?We got to stay where we were, keep our equipment and maintain our staff. We even have the option of leaving the system [Presbyterian Healthcare] without penalty. We couldn?t get that anywhere else.? Dr. Carol Rupe, of the newly named Medical Plaza Family Physicians, concurs, ?They [Presbyterian] made it so much easier for us. They sent people out immediately to explain compensation plans and worked with us through the paperwork. They?ve given us a grace period to work our way through the red, until we?re in the black.
We?ve received a lot of support. Presbyterian greased the skids and made sure our employees didn?t go without pay.? Alan Taylor of Carolinas HealthCare System, concedes, ?Presbyterian actually came up with a financial plan to assist the doctors; we chose not do that.? ?But if a physician was interested in coming to work for us, we were happy to talk to them,? he offers. ?Some of them have come under our employment. Others are in private practice but have privileges here.? Steven Burke sums up Presbyterian?s leadership role this way, ?We wanted to do everything in our power to keep the Nalle doctors in town. It was the right thing to do.?