July 27, 2007 at 1:00 am

Tough medicine: DMC's comeback is latest success for Duggan

Center's CEO, who restored Wayne Co.'s finances, brokered arena deals

DETROIT -- Striding to the front of a packed auditorium on the Detroit Medical Center's campus, Mike Duggan couldn't contain his enthusiasm.

The hall full of new hires gathered on a recent morning was a testament to the revival under way of a hospital system that was hemorrhaging cash and buckling under mounting debt four years ago. Duggan shared a story about his first days as CEO in January 2004, when he was presented with a consultant's plan to cut 1,000 jobs.

"I made the first decision as CEO -- I kept the workers and fired the consultants," he said to cheers and applause. "But not in our wildest dreams did we think we would have 185 people starting new jobs in one month."

The story of the DMC's comeback is the latest improbable success in the career of Mike Duggan, who first came to prominence as a take-no-prisoners Wayne County political operative and prosecutor, and has since built a reputation as a turnaround man and a savvy negotiator.

As the pugnacious and pit-bull-like prodigy of the late political kingpin Ed McNamara, Duggan helped restore Wayne County's finances. He brokered the complex deal to build Comerica Park and Ford Field in downtown Detroit, and he negotiated with Northwest to build the McNamara terminal at Detroit Metropolitan Airport.

But Duggan's most impressive feat yet may be steering the DMC out of red ink. The eight-hospital health system is on track for its best year yet under his leadership. By the end of December, he expects the DMC to earn more than double the $26.8 million from operations it earned in 2006. The health system has hired about 1,200 employees since January to serve a growing number of patients, and expects to add 100 to 200 employees each month through the end of the year.

Add to that a successful lawsuit to keep Karmanos Cancer Center on the DMC campus, and the health system's selection to host a satellite campus of Michigan State University's College of Osteopathic Medicine, and Duggan has a lot to celebrate.

"I have a lot of respect for Mike and the job that he's done for the DMC," said Nancy Schlichting, president and CEO of Henry Ford Health System.

It's a far cry from December 2003, when Duggan quit as Wayne County prosecutor to lead the debt-laden and deeply troubled DMC, the health system that provides most of the medical care for Detroit's poor.

In Duggan, the DMC board saw a savvy politician who knew his way around Lansing. He had no experience administering hospitals or health systems. But what he did have was a knack for getting things done and turning things around.

But skeptics saw a man without hospital experience, a blunt lawyer who bruised egos and made enemies. They questioned whether a longtime politico had the right personality to head one of Detroit's most important nonprofit businesses and speculated about his political aspirations.

So far, Duggan has mostly proven the critics wrong. There have been some bumps on the road, notably the contract dispute with Wayne State University's medical school. But in the past 3 1/2 years, cost-saving tourniquets have stopped the bleeding, stemming the threat of closing two downtown hospitals, and measures to attract more paying patients have started to work.

A fast start

When he took the reins in January 2004, Duggan didn't waste time putting people on the spot. He immediately charged hospital leaders and department heads with increasing the number of patients they were seeing.

Results were posted weekly on dry-erase boards in the conference room where executives met, for all of the team to see, in blue for those who met goals, in red for those who didn't.

That made some folks uncomfortable, said Richard Cole, DMC chief administrator from 2004 to 2006 and now chairman of Michigan State's department of advertising, public relations and retailing. He still consults for the DMC.

"Sometimes he would say things in meetings and I would cringe," Cole said.

Duggan shrugs off criticism -- a characteristic, along with a drive to win, that friends say he started developing in high school, on Detroit Catholic Central High School's debate team.

"He absolutely wanted to win at everything he did," said Andrea Fischer Newman, senior vice president of government affairs for Northwest Airlines, who debated against him. "He was as tenacious then as he is now."

An early win

By late spring 2004, Duggan made his first bold move as president and CEO -- a 29-minute emergency room guarantee. Inspired by Oakwood Healthcare System's 30-minute promise, the move was critical for Duggan.

"In any turnaround situation, you have to deliver an early big win. That's how you ultimately get people's confidence in you," he said in a wide ranging interview with The Detroit News. The move motivated employees and attracted more patients. It was accomplished, Duggan said, by streamlining administrative processing.

Duggan's team found other ways to trim fat that not only sped up processes but saved lots of money. Notably, they decreased the system's malpractice payments by about $23 million a year by taking a cue from rival health systems that aggressively settled cases before they went to court. Better record-keeping also improved the DMC's ability to fight lawsuits and decreased their numbers.

DMC ties run deep

Duggan's DMC odyssey started years before he became president and CEO. Then-finance committee member Charles O'Brien reached out to him in 1999 to discuss the top job, a leadership role Duggan said he secretly coveted. The DMC board selected Dr. Arthur Porter instead, but when he resigned amid turmoil a few years later, O'Brien, then with the clout of board chairman, again reached out to Duggan in 2003, while he was running for re-election as Wayne County prosecutor.

Duggan had the job in days, but the board's vote was not unanimous. On the board and in the broader community, people were concerned about his lack of experience and his political connections.

But the board also wanted someone with political clout to mend relations and advocate for the system in Lansing. Newly elected Gov. Jennifer Granholm, also a protege of McNamara's, had agreed in 2003 to give the DMC $50 million to keep Hutzel Women's Hospital and Detroit Receiving open. The board saw Duggan as a good person to fight for the DMC in the state capital.

Health system leaders typically grow up professionally in the health care industry, but more are coming from other sectors, said Rick Wade, senior vice president at the American Hospital Association. More than knowing how a health system works, a hospital leader needs "an understanding of complex organizations and complex challenges," he said.

For Duggan, there was a family bonus to entering the private sector. "My wife hated politics and was thrilled," he said.

At the DMC, Duggan said he drew upon his past professional experience to figure things out. "It really doesn't matter what the business is," he said. "The formula for a turnaround is the same."

Talk to lots of people. Identify and align with the rebels (who have usually been fighting the establishment for years). Set up a strategy. Then, don't listen to excuses and reward those who perform.

Duggan doesn't care if the strategy has stepped on a few egos and earned him a reputation for being a bit harsh. "If the ones that it rubs the wrong way are the people who have been obstacles to DMC's success, that doesn't much bother me," he said.

A rocky road

The road to the DMC's recovery under Duggan's leadership has had its conflicts. The biggest is the DMC's long-running scuffle with Wayne State University over the terms of contracts that pay doctors and residents who teach and train at its hospitals, and care for many of the city's poor and uninsured.

University leaders and several health system executives chose not to comment. But Wayne School of Medicine Dean Dr. Robert Mentzer Jr. in a past interview said Duggan's lack of communication and reluctance to iron out differences with Wayne State represent a "failure in leadership"

"We've got an approach here by the CEO of DMC which wishes to silo itself as opposed to be a part of the greater community," he said.

The sour relationship between Wayne State and the DMC is a key reason southeast Michigan business leaders formed a panel this spring to look at the medical education and health care needs of the region and improve collaboration between local health systems, doctors, schools and research facilities.

Leading the effort is former congressman and state Sen. Dr. Joe Schwarz, who says helping Wayne and the DMC mend their relationship is critical to Detroit's health care safety net. The DMC needs Wayne residents to help run Receiving Hospital, he said. Unlike private doctors, they are on call 24 hours a day and fill critical staffing needs.

Even as his critics fret the Wayne dispute, they acknowledge the difficulties Duggan faces. "That is a very difficult job in an area where the patient base is shrinking and the patient mix is slanted heavily towards Medicaid and towards no payment whatsoever," Schwarz said.

To keep the DMC healthy, Duggan's strategic plan looks inward, to bring paying patients back to downtown Detroit with a campus of specialty hospitals. That income will prop up the DMC hospitals -- Hutzel and Receiving -- crucial to the health care of Detroit's poor.

Keeping the Karmanos Cancer Center on the DMC's midtown campus is critical to that plan, Duggan told a Wayne County Circuit Court judge earlier this month. And the judge agreed in stopping Karmanos from moving across town to the former St. John Detroit Riverview Hospital, saying the move would breach the contract between Karmanos and the DMC and would irreparably harm the health system.

No more politics

As he looks ahead, Duggan sees his future at the DMC and not in politics.

"I would rather break into jail than go into politics," he said. "I look at what they're going through in Lansing and it just looks miserable."

His longer-term goal is to not only continue growing profits at the entire health system, but also pull Receiving and Hutzel into the black.

To achieve those goals, Duggan needs to reverse the negative perceptions of the DMC ingrained by years of financial troubles. Efforts to do just that are under way. Radio advertisements boast DMC's hiring blitz. DMC's has become the official health care services provider for the Detroit Tigers, Detroit Red Wings, Detroit Pistons and the Detroit Shock. Former TV news anchor Emery King pitches DMC medical procedures in Web site videos.

And because word of mouth is essential for growing hospital business, Duggan and his team are focused on improving customer care. From answering calls to knocking on patient doors, new employees are being trained to be considerate and responsive.

In Duggan's address to new employees, his parting message was clear. "The one thing you've got to remember is this. All of your jobs depend on satisfied patients."

You can reach Sofia Kosmetatos at (313) 222-2401 or skosmetatos@detnews.com">skosmetatos@detnews.com.

Key events in Duggan's career

  • 1986: While Wayne County's assistant corporation counsel, Mike Duggan runs Ed McNamara's campaign for mayor. McNamara served as Livonia's mayor for 16 years.
  • 1987: Duggan becomes deputy county executive under McNamara's administration as Wayne County executive. They work on a solvency package the state legislature passed to bail Wayne County out of near bankruptcy.
  • 1991: Duggan takes over as interim general manager of the SMART bus system serving Wayne, Oakland and Macomb counties, which was broke and about to shut down.
  • 1995: Duggan orchestrates the creation of Wayne County's Health Choice, a health plan for the county's uninsured. The county and state funded plan helps the county clamp down on uncontrolled health care costs, primarily for indigent care at Detroit Receiving Hospital.
  • 1996: Duggan negotiates with the owners of the Tigers and the Lions to build new stadiums downtown and bring the Lions back to Detroit. DMC starts losing money from operations.
  • 1997: Duggan negotiates deal with Northwest to bring a new terminal to Detroit Metropolitan Airport. The $1.2 billion McNamara Terminal opens in February 2002.
  • 1999: Dr. Arthur Porter appointed president and CEO of the DMC.
  • 2000: Duggan runs for Wayne County prosecutor, wins four-year term.
  • 2003: DMC secures a $50 million bailout in emergency public funding from the state to keep Detroit Receiving and Hutzel Women's hospitals open. Porter resigns from the DMC in August. Duggan resigns as prosecutor in December.
  • 2004: Duggan starts his new private sector job as leader of the DMC.
  • 2005: Karmanos Cancer Institute and DMC negotiate contracts that make Karmanos independent organization but require them to provide cancer services on DMC's campus.
  • 2006: Wayne State University School of Medicine and DMC negotiate, with the help of a mediator appointed by the government, contracts that govern how teachers and residents are paid for services at the DMC.
  • 2007: DMC wins approval to host a satellite campus of Michigan State University's osteopathic school on its downtown campus. Karmanos tries to buy the closed Detroit Riverview Hospital, but loses a lawsuit waged by the DMC.

  • DMC's Mike Duggan speaks to new employees July 16. Some questioned whether ... (Daniel Mears / The Detroit News)
    Mike Duggan talks with new employees Diamond Jackson and Julie Rodrigues. ... (Daniel Mears / The Detroit News)