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Close-up: Larry Anderson

Skilled negotiator steering Tri-City out of troubled waters

When Larry Anderson walked in the door as interim CEO of Tri-City Medical Center in January 2009, the Oceanside hospital was losing $1.5 million a month, paying 17 percent interest on debt of nearly $70 million and staring at a 2013 deadline to close its doors, since its buildings were not compliant with state earthquake standards.

To top it off, that same day 65 doctors belonging to one of its three independent practice associations announced that the group had been purchased by Scripps Health and renamed the Scripps Coastal Medical Group.

He discovered that the hospital did not have a vascular surgeon on call, and the deadline to shutter its doors made recruitment difficult.

So Anderson's first priority was to negotiate a reprieve for the earthquake retrofit and convince the state that the buildings were safe. The second issue he tackled was renegotiating the debt.

Larry Anderson

He worked on reducing the rate and then focused on refinancing the debt -- a challenge due to issues with health care law. His persistence paid off just recently, when he closed on two large loans in early February and generated $20 million to finance expansion.

Anderson has also replaced seven top executives, bringing in new blood and promoting from within.

He quickly arrived at a landmark agreement with the non-nursing ancillary staff, Service Employees International Union (SEIU), speeding up negotiations that had dragged on for a year by supporting the patient care staffing ratios they wanted.

As a result of these steps, Tri-City declared its first profit in December last year, with $228,000 that put it back in the black.

Deciding that this skilled negotiator was the best man for the tough job, the board gave up searching for a new CEO and gave Anderson an 18-month, $480,000 per year contract, which began last September.

Bonuses have been eliminated from contracts for top executives, including Anderson, because they proved controversial with critics and the public. Tri-City is a community hospital with a publicly elected board.

USPS veteran, collective bargaining expert

Anderson, a native Californian, grew up in the Los Angeles and Long Beach area. After graduating from CSU Long Beach, he began working at the U.S. Postal Service.

He was a mid-level manager in charge of the largest unit within the finance department when he graduated from Loyola Law School. He then moved to the labor law division in Washington D.C., handled employment cases across the United States and became indoctrinated in collective bargaining negotiations.

"After a while the cases all looked the same and I became tired of lawyering, so I went into management and ran safety and health," said Anderson, who worked for several years in northern and southern California, Connecticut and D.C., overseeing occupational health and employee assistance programs for 850,000 postal employees.

This was how he got into health care. Part of his job included testifying in front of Congress on employee health and safety issues.

Among his achievements is a prestigious award he won for saving the USPS $2 billion in workers' compensation by bringing back to work 10 percent of the employees who were on long-term disability.

He retired after 32 years, at the age of 52.

No stranger to crisis, controversy

Anderson then relocated to Orange County, where he joined Alta Healthcare, a distressed hospital group with a chain of seven hospitals, as the executive vice president of human resources.

He came up with a plan to close two hospitals and handled the closings himself, handing out pink slips and shuttering its doors, since the owners were too close to the situation, having owned them for 16 years.

"It was like a gangrenous arm -- it was a matter of dying or cutting off the arm to survive," he said, describing the tough decisions he made.

Anderson left after less than a year because he did not have a share of the profits and because he wanted to own his own company.

He started Integrated Healthcare Holdings in 2005, reverse merged it into a shell, and raised funds to buy four hospitals from Tenet Healthcare Corp. (NYSE: THC).

The hospitals were located in Santa Ana and Anaheim, where more than a third of the population was in the low-income bracket and received Medicaid. The facilities were losing over $3 million a month when Anderson took over, along with another executive from Alta and an investor who was a Riverside surgeon.

"We turned it around, stopped the bleeding in a year, by controlling labor costs, redesigning the payroll, increasing business development and knocking dramatic costs off the insurance portfolio," he said.

But controversy dogged the takeover from the beginning, since his main investor, the surgeon, had previously owned a network of clinics that went bankrupt. The investor eventually backed out and doctors at the four hospitals put up the money needed.

However, the discord remained and Anderson eventually parted company, when the doctors filed a lawsuit against him and other executives at Integrated.

Asked how he dealt with controversy, he said, "If you put the facts in front of people, they can see both sides. I think you talk through issues and get everyone on the same page, by setting priorities."

He said he achieved that with Integrated, and is using the same method at Tri-City, which has seen its share of controversy and court action. In his quest to rehabilitate Tri-City, Anderson has locked horns with rivals including Scripps and most recently Palomar Pomerado, over issues such as patient poaching and territory encroachment.

"You can't be at the top and dictate. I am a participative manager."

Resolving stonewalled issues

Anderson was focused on buying hospitals in Los Angeles when stakeholders at Tri-City appointed him interim CEO, after placing the former CEO on paid leave.

"It was losing money; we had been asleep at the switch before I got here," he said.

The board had been led to believe it was impossible to extend the deadline for earthquake retrofits, but Anderson did just that by launching a two-pronged plan.

He convinced OSHCal that the buildings were safe, using research results gathered by a team of engineers. He then went after a legislative solution, asking assembly members to give them breathing room.

With the help of local assembly members, AB 411 was sponsored and Anderson went to Sacramento to lobby.

"We were told AB 411 was dead on arrival, since there was a Democratic majority. We worked with the SEIU and the nurses union. SEIU was instrumental in helping us convince the members of Tri-City's vital criticality to the North County," he said.

"This is endemic of my management style," he added. "When I see a problem, I attack it from as many fronts as I can."

He obtained a 17-year reprieve on the retrofits.

By working with the two independent practice associations, Anderson has managed to repatriate nearly 25 percent of the patients who left when the 65 doctors left.

He is working on bringing back high-end business such as neurosurgery, buying new equipment and recruiting surgeons.

His goal is to make the hospital vibrantly profitable, increase communication with the community, seek bond financing once its rating improves and create centers of excellence inside the hospital in critical areas such as cardiology, neurology and obstetrics.

The board has approved a five-year plan that aims to make Tri-City a top 10 hospital nationwide (it is in the top 40 percent now) and obtain a 10 percent rate of return, with half of that money to be put toward building a new hospital.


Nagappan is a San Diego-based freelance business writer.

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