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Paynesville Press - October 2, 2002

"Proven Visionary"

By Michael Jacobson

Willie LaCroix Willie LaCroix, who is retiring this fall after heading the Paynesville Area Health Care System (PAHCS) for over two decades, got started in health care almost by accident, or by fate, depending on how you look at it.

LaCroix grew up in Manistique, Mich., a small town on the south coast of the Upper Peninsula, bordering Lake Michigan, where his parents operated a resort for 34 years. After graduating from Central Michigan University in 1965 with a major in business administration, LaCroix returned home to help care for his ill mother. He took a job as a hospital orderly, for $220 per month, and got hooked on health care.

"Caring for Life," said LaCroix, echoing the words that would become the motto for PAHCS. "That's what intrigued me."

Fast forward 35 years, and LaCroix is the CEO of PAHCS, a job he has held since the fall of 1981, when it was still just the position of hospital administrator. He is the boss of nearly 450 employees, which has multiplied sixfold from the 75 he had when he took the job here.

"He is the father of this medical system," said Dr. Ray Lindeman, who practiced medicine in Paynesville from 1949-1994. "He is really the person who made PAHCS work."

"I made the comment one time that he was a man with a brain and a heart," said Dr. Allan Solum, who came to Paynesville to practice medicine in 1985. "What that means is he had the brain to see the problems and their solutions and also the heart to realize that we're in an industry that cares about patients and employees."

It hasn't always been easy, but LaCroix has persevered. With his replacement on board in new CEO Steve Moburg, LaCroix has two months left on site at PAHCS before he and his wife, Karen, retire to Florida. LaCroix will continue to consult with the CEO and the hospital board of directors for 13 months, until Dec. 31, 2003.

On Sunday, an open house retirement party will be held for Willie and Karen LaCroix at 700 Stearns Place, one of the many innovations at PAHCS that occurred during his tenure. The open house starts at 2 p.m. and ends at 4 p.m., with a program starting at 2:30 p.m.

Karen LaCroix, a registered nurse, is retiring as head of home health care and 700 Stearns Place.

Starting in Administration
After getting practical experience in health care as a hospital orderly, Willie LaCroix moved into administration thanks to a college friend, who was the hospital administrator in Cozad, Neb., another small town on I-80 in western Nebraska. In the late 1960s, being a hospital administrator meant paying bills, writing checks, doing payroll, and sending in Medicare forms, a program that was still in its infancy.

Within six months, his friend had left Cozad, and LaCroix was named the interim administrator. He stayed there for 10 years, until 1975.

After that he spent three years in Mountain Lake, Minn., and three years in Shenandoah, Iowa, where he got out of health care for a year, before returning to be the administrator for two nursing homes.

Coming to Paynesville In 1981, following the sudden death of the hospital administrator in Paynesville, LaCroix - informed of the job by a classmate from the University of Minnesota, where he earned his master's degree in health care administration - applied and got the job.

He has worked at PAHCS for almost exactly 21 years. But when he first arrived, it wasn't anything like it is today.

During his first two months on the job, LaCroix filled two legal pads with things to do. At the time, the hospital had 33 pages of deficiencies. The equipment was mainly from the Veteran's Administration, and some of it dated back to the Korean War in the early 1950s.

LaCroix can still remember Letters to the Editor charging that the hospital was little more than a first aid station. He remembers the windows that leaked and the blankets that were used against them to stop the rain and snow from getting inside. "It was that bad," he said.

"I had to expose it," he added, of his first task in Paynesville, "to get (people) to realize that either you did something or you locked the doors."

Public confidence in the facility was low. "You couldn't expect them to come to a sub-par facility," said LaCroix. "Nobody wanted to be part of a dying organization," he added.

"Once any public facility gets a bad reputation, it takes a long time to turn around," said LaCroix. "It's not one thing that could do that. It takes a whole bunch of people: board members, physicians, and employees."

One of the things that LaCroix did for years was what he calls "management by wandering." He purposefully chose to have an office without a window because he doesn't like to spend time in his office. Instead you could find him talking to employees and visiting patients and residents. This trait came naturally to him, as the son of resort owners he grew up visiting with guests on cabin porches, developing the "gift of small talk," he said. In the beginning at PAHCS, wandering helped him gain the pulse of the community, and it helped him determine the problems and solutions. "If you don't listen," he said, "it does you no good."

The First Step
"When I started talking about spending $2.5 million to remodel the hospital in 1981, they got pretty damn nervous," LaCroix said of the hospital board at the time, which still reported to the city, as the hospital was still city-owned at that time.

The 1983 remodeling project reduced the number of inpatient beds at the hospital, creating a modern "pod" system that is still in use. And it created new space in the hospital for outpatient services, a new surgery, and a new labor/delivery room.

"There have been several key things," said LaCroix of PAHCS's growth. "The district is huge in my mind. But that was key for the long term. In the short term, that 1983 project was key. That made us a legitimate provider of health care."

Without that remodeling in 1983, "I'd say we probably wouldn't have a hospital anymore," said Carolyn Swyter, a hospital board member since 1986.

After his first few projects turned out to be successful, LaCroix gained credibility, said Lindeman. That credibility grew because "he was right all the time."

"There's no question he's a visionary in health care," Lindeman explained. "If there's one word to describe him, it's visionary. He's a proven visionary, too."

With the hospital now boasting modern facilities and equipment, the next step in LaCroix's plan was to staff it. "Staff is all important," he said. "Nobody wanted to work in that old dump. Good employees can practice medicine in a barn. Bad employees couldn't practice medicine in a castle."

Growth in the 1980s
Driving his vision for expansion in the 1980s was the realization that having three or four or even five doctors wasn't going to work. LaCroix figured that that many doctors, in the years to come, wouldn't be able to provide emergency staffing for a hospital 24 hours per day, seven days per week.

What PAHCS needed was a medical staff with eight to ten doctors, which would reduce call time to a more manageable one night per week and one weekend every two months. "Then the problem was: Where are you going to get the patients to feed eight to ten doctors?" he explained.

The answer was they needed to generate more patient volume, to have work for a larger medical staff, and to be able to afford modern equipment.

Even before he could successfully recruit doctors, though, he had to recruit other health care professionals: nurses, medical technicians, etc. One of the benefits of the remodeling project in 1983 was the space for outreach, and LaCroix started by recruiting specialists to come to PAHCS.

Paynesville has always had visiting surgeons - itinerant surgeons, they used to be called - who would come and perform operations, with the assistance of the local doctors, said Lindeman. In the 1980s, PAHCS added all sorts of specialists. "As close as St. Cloud is, if Paynesville doesn't offer a service, it's going to die off," said Lindeman.

"Just name it," he added. "It's there."

Providing space for specialists at PAHCS illuminates another part of LaCroix's philosophy. He couldn't hire that many doctors on staff here, so rather than lose patients to St. Cloud, Willmar, and the Twin Cities, he got the specialists to come here.

"I can't have it all, but I'll take the part I can," said LaCroix.

Lindeman believes the expansion of services has benefitted local patients. His first wife endured a four-and-a-half-year battle with cancer. During that time, she only had to leave PAHCS three times, getting most of her medical care within two miles of her home. "People love to stay at home," said Lindeman.

All the growth at PAHCS hasn't always come easily. LaCroix has had his battles and has his share of scares. "He was shot at many, many times," said Lindeman, "but he was never shot down."

The proposal to build 700 Stearns Place in 1987 was even more controversial than the hospital remodeling project in 1983, recalled LaCroix. Spending $2.4 million on the hospital, which so desperately needed it, was easy in comparison to selling the idea of senior apartments.

This project, which also included a new kitchen for the hospital, cost $1.4 million and had doubters, including some members of the city council.

The project was part of LaCroix's plan to increase the base for the local physicians, with a nearly captive market of seniors who could access the hospital and its services without going outside.

The project was approved by voters in a referendum, voted down by the council, approved by voters again, and then passed reluctantly by the city council.

With 23 people on a preregistration list, 700 Stearns Place was full in a month and has remained nearly always fully occupied for 15 years.

Lindeman said that the success of projects like 700 Stearns Place have proven LaCroix correct.

Growth in the 1990s
LaCroix said the controversy over 700 Stearns Place laid the seeds for the formation of a hospital district, as it became clear that that the hospital should be able to make decisions without having them turned down by the city council.

A board is supposed to run the place, without anyone looking over their shoulders, according to Don Anderson, who was appointed to the city's hospital board in 1990 and has served on the independent hospital board since its inception. The hospital is "much better now that the hospital district board has final authority," he said.

"It was really a cumbersome way to make decisions," said Anderson, of the previous system, where the hospital board would make recommendations but the city council had final authority. "I'm not faulting those folks. That's the way the system was."

The formation of the hospital district was needed for another reason, too: to fund the continued growth of PAHCS. "We wanted to grow the system to the point where it could always be a stand-alone institution," Anderson said. " So many small hospitals have been gobbled up by larger organizations, but you couldn't (grow enough) with the limited valuation (of the city)."

Caring for Life - the motto of PAHCS - is a lofty goal, said Anderson. "You've got to be able to do it financially," he explained.

The Paynesville Area Hospital District, which has taxing authority but has never used it, was formed in June 1991 with seven member entities: the city of Paynesville, the city of Regal, the city of St. Martin, and the townships of Paynesville, Roseville, Union Grove, and Zion.

(It was at this time that the facility switched its tradename to PAHCS.) While the hospital district did not tax, the expansion of its tax base allowed it a larger credit line, which it has used to finance its expansion in the 1990s: the building of a new hospital-based clinic in 1994; the addition of four satellite clinics, including a new clinic in Richmond in 1999; the current $7.5 million remodeling and expansion project at its main campus; and the recent purchase of two nursing homes from the Good Samaritan Society, including the Good Samaritan Care Center (now Washburne Court) in Paynesville.

Since the formation of the hospital district in 1992, PAHCS has expanded greatly, going from $6.34 million in total revenue in 1992 to $14.8 million in 2000.

By the early 1990s, PAHCS started having success in recruiting additional physicians. Throughout the 1980s, LaCroix relied on the two main medical practices in town to recruit new doctors. But either the new physicians didn't want to buy into a medical practice partnership or for other reasons did not stay in Paynesville for long.

Finally, Dr. Julie Youngs agreed to come to Paynesville in 1992. After that, with another young doctor on staff, PAHCS became a desirable location for physicians, said Solum, who worked with LaCroix closely in recruiting. "Once we got the fourth, it was really easy to get the fifth. Then the sixth and the seventh," said Solum.

In 1993, PAHCS joined a Physician-Hospital Organization (PHO) with a group of local doctors. This freed the doctors from ownership and the business responsibilities of private practice. Instead, PAHCS basically contracts with the physicians' group, paying them a sum of money which they disburse to their members.

PAHCS, which at one time had ten doctors, now has eight doctors on its full-time medical staff. It is currently recruiting again, trying to meet the demand it has created.

Outside Perspective
The 1980s and 1990s were extremely turbulent times in health care, according to Tom Evans, who was the administrator at St. Luke's Hospital in Duluth for 15 years, who developed a rural hospital network for the Sioux Valley Health Care System, and who has been the hospital administrator in Starbuck for nine months.

Cost increases and technology needs hit rural providers especially hard, as their smaller volumes made their cost per encounter higher. These pressures caused many facilities to close and many more to reduce their services. "It really caused everyone to reconsider how they are going to restructure and deliver services," he said.

Even Medicare is more expensive for smaller institutions, particularly rural institutions, said John Diehl, an attorney who specializes in health law. In the late 1970s, Medicare switched from cost-based reimbursement, which favored rural hospitals, to a fee schedule, which paid a set amount and put an emphasis on keeping costs low, thus encouraging volume. "That has hit rural hospitals very hard because they don't have high volumes," said Diehl.

As an example of the slim margin of health care, in part due to Medicare, so far in the 2002 fiscal year, PAHCS has charged $26 million in services, but has had to write off $8 million as uncollectible, largely Medicare, yielding net revenue of $18 million.

Diehl served for eight years as general counsel to the University of Minnesota Hospital and in 20 years of private practice since then has represented most of the metro hospitals and over half of the rural hospitals in the state. His biggest project with PAHCS was helping to form the hospital district in 1992.

PAHCS - with a hospital district and a PHO - is a model, said Evans. "I think he had the vision to see it," added Evans. "Put your services out there where people can see them and access them. It used to be easy to run these places. You opened up the doors, and people fell into the beds."

While PAHCS hasn't been the first to implement any of these things, it has been very successful at picking ideas that work, according to Diehl, and LaCroix has been "the first and most successful at doing them all. Each of these parts is now part of a well-organized and integrated whole medical system."

"He was willing to innovate and try new ideas," said Diehl. And, he succeeded where others did not. "He got them done when other placesÉfailed," added Diehl.

Retiring to Florida
That PAHCS now provides a continuum of services, that it stands as an independent health care system is the culmination of LaCroix's 20-year efforts. "Living in our area you will be affected by our system," he said. "That was by design. The more reasons that you can get people in and use it, the longer you're going to survive."

Solum believes it took a great deal of effort by LaCroix to make this all happen. "He didn't work eight hours per day. He thought about PAHCS every waking minute. He thought about ways to improve it, ways to expand it," said Solum.

"As soon as one thing was accomplished, he was thinking about what else needed to be accomplished," he added.

Even in the 18 months since he announced his retirement, LaCroix, and PAHCS, have been busy, undergoing the current remodeling project, purchasing the two new nursing homes, and looking to address long-term care with future construction projects (creating assisted living and adding a new wing to the Koronis Manor with more single rooms, private bathrooms, and other amenities.

The current construction project hasn't gone smoothly and is running late, LaCroix admits, but he will leave the facility with a completely new infrastructure and with an average facility age of 6-8 years, well below the national average.

People shouldn't worry about PAHCS once he retires, said LaCroix. Having an educated, dedicated board of directors helped make his job easy. "They run the hospital," he explained. "Everybody is worried about Willie LaCroix leaving, but I'm not out there doing anything the hospital board hasn't authorized me to do."

Willie and Karen LaCroix have built a new home in Florida and hope to be enjoying the Floridian sun by Thanksgiving. They plan to stay active in retirement and are considering working for the National Park Service during the summer.

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