Carolinas HealthCare CEO Michael Tarwater says growth powers system’s mission

As CEO of Carolinas HealthCare System since 2002, Michael Tarwater has overseen an explosion of growth for the $8 billion hospital system that includes 40 hospitals and more than 530 doctors’ offices in the Carolinas.

But the system’s strategy hasn’t been growth for growth’s sake, Tarwater said. It’s about staying strong enough financially to remain good stewards of the system’s mission to care for all people, with insurance or without.

As this year’s chairman of the Charlotte Chamber, Tarwater, 60, has emphasized the importance of keeping Charlotteans healthy instead of waiting until illness requires emergency care or more expensive hospitalization and surgery.

Last week, Tarwater spoke with Observer reporters and editors about the Affordable Care Act and how Charlotte’s public, nonprofit hospital system is responding to the challenges in today’s environment. His comments have been edited for brevity and clarity.

On the Affordable Care Act:

“The ACA reformed the financing of health care. People talk about it as health care reform, and there are intentions in it aimed at health care reform. But it really is about insurance reform, and reducing spend(ing).

“It did very little to reform the delivery of health care. It’s our job to do that, and we believe it’s our responsibility to lead in that. We want to lead that transformation, and we want people to continue to choose us when they do need care. We do that by working really hard on quality and really hard on service.

“So, has the ACA influenced the things we’re doing? I would say not a lot. Has it influenced the speed with which we’re trying to do those things? More so. Electronic health records is a good example. We were on a path to convert the entire system. ... (But because of the) ACA, we accelerated significantly our rollout.

“One of the features that was really designed to help not only the population but providers (of medical care) was Medicaid expansion. As you know, a lot of Southern states decided not to do that. In North Carolina, for hospitals alone, over 10 years, that’s a $4.1 billion decision. Money that, by the way, taxpayers in North Carolina are already contributing. Where does that money go? I don’t know, but it’s not coming to North Carolina.

“Do I like ACA? It doesn’t matter whether I like it or not. Even if the people who are on the other side of the aisle saying ‘Let’s repeal it,’ even if that were to happen it doesn’t matter because we have to change something. The model that we have today across this country is not sustainable. For many people it’s not affordable. The country can’t afford it.”

About Carolinas HealthCare’s growth strategy:

“We don’t have goals that say that we need to do ‘X amount’ of growth by such and such a date. I can’t remember a time when we ever said we need four more hospitals this year or we need 100 more doctors this year.

“Reimbursement in health care has been declining over the last decade or two. We are looking for ways to take costs out of the system. Growth’s one way to do that because you can take your fixed costs and you can spread that fixed cost over a broader base.”

About the hospital system’s beginnings:

“There’s a long history that really started with Charlotte Memorial (Hospital, now Carolinas Medical Center), which opened in 1940. (When Tarwater came to Charlotte in the early 1980s), it was a dark, dingy place you didn’t want to go unless you didn’t have a choice (or) if you were afraid you were going to die. It was in a death spiral.

“We set out to make the place more inviting, to try to attract people who did have a choice, because that’s the only way we could pull ourselves out of that ditch. Growth was one of the answers.

“We began to take some of that paying market share from some of our competitors. We were entering an era in which technology was just exploding (and) we couldn’t afford to fall behind. We are the teaching hospital. We are the academic medical center. The Level One trauma center (for) the region, not just Mecklenburg. We had to continue to be able to find the resources to invest in this new technology, to have those services available. So (we) then looked to growing outside of Mecklenburg County. Facilities in neighboring counties came to us and said, ‘Look, we’ve watched what you have done. We know who you were when you were Charlotte Memorial, and we see what’s going on now. And we’re beginning to struggle. Can you help us?’ ”

About patient volume and clinical quality:

“You have to have a sufficient population in order to even think about starting something like a bone marrow transplant unit. Pediatric cardiologists are very rare (and) require a pretty sizable population to justify having one or two or three.

“Most of the accrediting bodies in medicine will tell you that with volume comes higher quality. Look what happened when we built the (Levine) Children’s Hospital. Look at the talent we’ve attracted in pediatric sub-specialties so that the kids from this region don’t have to go to Atlanta or Dallas (for care).

“It was a business imperative always aimed at continuing to be able to accomplish the mission, which is not to return value to shareholders. It’s to return value to this community.

“What emerged I think has produced many clinical achievements putting this population clinically and medically on the leading edge of what is going on in health care. And we never abandoned our commitment to the under-served, the uninsured, never. The under-served part of the community benefited right alongside everybody else.”

About lowering the cost of medical care:

“There are a lot of assets on our balance sheet. People say ‘Why don’t you just spend that and give away free care to more people?’ ” If you took the assets on our balance sheet and subtracted the debt, we would have less than 80 days of operating cash. We couldn’t borrow the money to do all these things we’re talking about doing if we did not have those assets on our balance sheet.

“You have to look at the big picture. You’re not going to solve health care by doing little things. You’re going to have to make fundamental changes in the way we deliver the care, the way we organize that care. And we’ve got to figure out ways to keep people well.”

About expanding behavioral health services:

“(Our growth has enabled us) to do things like build a mental health hospital (in Davidson) when everybody else is running away from that.

“Why am I doing that? I am doing that to keep people out from under the overpasses at I-277 at night. I’m doing that to keep people out of the courts. I’m doing that to keep people out of the jails. I’m doing that to keep people out of the emergency room. I’m doing that to keep people with their families. I’m doing that to keep them employed and lower the costs to society of taking care of those individuals who are sick and many of them do not know it.

“Today if I had extra money, I would accelerate what we’re doing in behavioral health. There used to be two private psychiatric hospitals in Charlotte. They were unable to return value to their shareholders, and they closed them.

“Behavioral health is a big enough problem, if we solved it in this country we would see a blip on a cost curve. We would see movement. At least 50 percent of every primary care visit (involves a patient with) an underlying behavioral health problem. So (if) you want to help lower the cost of health care in this country, let’s fix the things we can fix. Let’s do the things that we know will help lower utilization (of medical care).”

Related stories from Charlotte Observer