Health & Family

Nearing retirement, Carolinas HealthCare CEO talks about system growth, health care change

Michael Tarwater talks about the creation of Levine Children's Hospital

Michael Tarwater, CEO of Carolinas HealthCare System, is retiring in June. Tarwater talked about arriving in Charlotte and his relationship with Leon and Sandra Levine.
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Michael Tarwater, CEO of Carolinas HealthCare System, is retiring in June. Tarwater talked about arriving in Charlotte and his relationship with Leon and Sandra Levine.

Michael Tarwater, chief executive officer of Carolinas HealthCare System, will retire at the end of June, after 14 years at the helm of the region’s largest hospital system.

Tarwater, 62, came to work at Charlotte Memorial Hospital, now Carolinas Medical Center, as a junior executive in 1981. He and his mentor, then-CEO Harry Nurkin, led the transformation from a single charity hospital into a two-state, 40-hospital system that offers some of the most sophisticated health care – from heart and bone marrow transplants to clinical trials for cancer treatments.

Over 35 years, the system has gone from a money-loser to financially sound, with $8 billion in revenues and $3 billion in cash reserves.

In Charlotte and beyond, Tarwater has been recognized for his leadership skills. He served as chairman of the Charlotte Chamber of Commerce in 2014 and will become chairman of the board of Queens University of Charlotte on July 1. He’s also past chairman of the board of the N.C. Hospital Association and previously served on the board of the American Hospital Association. The World Affairs Council of Charlotte gave Tarwater its World Citizen Award in 2014.

Last month, the Carolinas HealthCare board named Tarwater’s successor, Texas hospital administrator Gene Woods, who expects to start working in May. But before Tarwater leaves his corner office in the Metropolitan building, with a panoramic view of uptown Charlotte, he sat down with The Observer’s health reporter Karen Garloch for an hour-long interview about his career, the health care climate and his future. Here are some excerpts, edited for brevity and clarity:

About the early years in Charlotte:

Charlotte Memorial had a wonderful reputation (but) the surroundings did not match the technical competence of the people who worked here. … The place had been losing money. It was not very attractive. ... (When) I moved to Charlotte I began to hear, “Uh, why would you want to work there?”… (A businessman from southeast Charlotte) explained to me that: “If you have insurance, you go to Presbyterian. Unless you’re Catholic. Then you go to Mercy. And if you don’t have a choice or if you’re black, I was told, you go to Memorial.” He thought for a second and said, “Unless you’re afraid you’re going to die. (Then) you should go to Memorial.” That verified the confidence in the clinical and technical capability that I had heard about. …

(We began) turning it around from a financial perspective. Had that not happened, the mission would have had to erode over time, and the access that the population of Charlotte enjoys, particularly the under-served population, would not have been possible. We were able to give the people that worked here a place to work that they could be proud of, that matched their capabilities.

On his long tenure in Charlotte:

I figured I’d be here about five years, get the experience required to continue to move up and one day be a COO or CEO of a large hospital. … I was 27 and (Nurkin) was almost 37. I didn’t figure he was going anywhere anytime soon. But it turned out different because we grew. We added hospitals and eventually physicians started wanting to join the organization. With that growth came increased responsibility, which I enjoyed. I loved the team. I don’t know when it was, but at some point I realized I’d like to finish my career here. Thankfully, I’ve been able to that.

On important achievements:

I’m extremely proud of the quality, and I would argue, world-class services that we brought to this community. People who could, used to go elsewhere (for) transplants, heart surgery, cancer (treatment). Then something happened. At those places, they’d be told, “Well, Dr. So-and-So is right there in your backyard in Charlotte. I’d be happy to treat you, but why aren’t you going to him or her?”

We just kept adding to that. We had really good cancer doctors. We had really good pediatricians. …We gave them a place to work (Levine Children’s Hospital, opened in 2007, and Levine Cancer Institute, opened in 2012). We gave them a place to attract people from some of the name institutions across the country. So now, for people who live in Charlotte, there is very little they need to travel for.

On donations from the Leon Levine Foundation:

(Tarwater got to know Levine’s wife, Sandra, when she served on hospital boards from 2001 to 2005. But he hadn’t met Leon Levine.)

One day I was sitting in my office, in the early stages of planning the children’s hospital, and Leon called me and said … “What would you think about a gift from the Levine Foundation, for a naming opportunity?” It kind of caught me off guard.…(Former board chairman) Jim Hynes and I went to see him. He wanted to make sure it was a good investment of his philanthropic gift. … History reveals what happened. They gave $10 million for the Levine Children’s Hospital.

That was the beginning of a relationship with Sandra and Leon. When we were talking about building the cancer institute, I approached them to ask if they were interested. I knew that he had an interest in that, just as I knew he had an interest in behavioral health. (The Levine foundation donated $20 million for the cancer institute and $3 million for the Mindy Ellen Levine Behavioral Health Center in Davidson.) It got to the point where Leon would ask me, “What’s next?” If it’s something that he’s interested in, he lets me know.

(Last fall, the foundation donated $3 million to establish a psychiatric residency program at CMC.)

On hospital consolidation and whether it increases health care costs:

It’s not as cut and dried as some people would lead you to believe. There are pressures on hospitals in all kinds of different ways to do things that they don’t get paid for. At the same time society is demanding the best, right now, close by, the smartest docs, the latest equipment … and up until very recently, didn’t care what it costs. Now we do because it’s gotten to the point where it costs more than we can afford.

The industry’s reaction to that, in part, was this consolidation. I know that I can buy supplies (and) equipment a lot cheaper in huge volume. Consolidation is just one way to bring your expenses down.

On whether consolidation raises prices for patients:

The American Hospital Association has all kinds of data that has showed the price curve leveling off even though expenses continue to go up. There’s this middle man involved on the insurance side. There’s margin and overhead there. … A consumer’s understanding of the word “price” bears no resemblance to how hospitals get paid. Now, do we need to be working to bring the cost of health care to society down? Yes, we do. Is the best way to do that just to cut what you pay to hospitals and doctors? Absolutely not. What you need is to change the incentives to encourage us to accelerate faster to a different way to deliver care.

On changing health care delivery:

We’ve got to figure out better, more efficient ways to deliver care without sacrificing quality or safety or even the patient experience. … If I can take one doctor and serve hundreds of patients with virtual medicine versus having one doctor in that same day cover 20, I’ve just reduced the average cost for that visit. …

Levine Cancer Institute is a great example. You’ve got people in some of the more rural parts of the state that would have trouble recruiting an oncologist. …Through the strength of (Carolinas HealthCare) and the volumes that come through – 15,000 new cancer diagnoses a year – we can make clinical trials available to people (across) this region. Now, is that consolidation? Yeah. Is it bad? Not by my standards.

(Another example is the decision to build the mental health hospital in Davidson even though it is projected to lose $3.5 million a year.) It was the right thing to do. In the long run, if we can get a handle on some of our behavioral health problems, it might help us with physical ailments and maybe even societal problems like homelessness. Wouldn’t that be cool? We wouldn’t be able to do things like that if we hadn’t grown and consolidated and had the synergy (and) the scale to do that.

On his 2015 compensation of $6.6 million and if that’s appropriate for a nonprofit hospital system:

It’s not my decision. It’s something that the board is responsible for. … The process they use is solid and proven and correct and best practice. That’s what they would tell you if they were here. Any further comment ought to come from them.

On his successor, Gene Woods, and what lies ahead:

I don’t want to speak for him. … Gene’s been preparing for this his whole career. I think he’s ready for it. The good news is this organization’s in good shape. There are plans and strategies in place. What he is inheriting is structurally very sound and positioned well for the future.

On retirement plans:

I’ve had so many people tell me when they retired that they’re busier than they were when they were working. I don’t want that to be me. … I’ve got some board work that I’m doing. (He’s on the boards of Queens University of Charlotte and Piedmont Natural Gas.)

I’ve got five grandchildren that I’d like to spend more time with. And I am blessed to have a wife in Ann that actually enjoys spending time with me and me with her. And I want to see what’s possible with my golf game before I really do get too old to play it. I think I’m going to be plenty busy.

Karen Garloch: 704-358-5078, @kgarloch

Michael Tarwater

Family: Wife Ann Rosemond Tarwater; daughter Kathryn Tarwater Pittman (husband Daniel Pittman) and three children, Alice, 8, Jack, 6, and Lib, 4, of Dothan, Ala.; daughter Allison Tarwater, Spanish teacher in Charlotte Mecklenburg Schools; son Michael Tarwater Jr., Charlotte attorney, (wife Julia) and two children, Michael “Tripp” Tarwater III, 3, and Eleanor, 1.