North Ottawa CEO

April 17, 2002
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GRAND HAVEN — Mike Funk's sudden resignation as head of North Ottawa Community Health System comes at a time when the health system has just returned to solid financial footing, built a strong working relationship with its physician group, plans to undertake a major renovation and faces increased competition in the market.

Given those circumstances, word of his departure came as a surprise to many in the health care community.

To Horizon Medical PC Administrator Ray Brieding, the big question going forward is maintaining the strong relations and goodwill that Funk helped to build with the primary-care physician group since he became North Ottawa's president and chief executive officer in September 1998.

"Hopefully that will outlast any one person, but whenever you have a change like that there's always going to be a concern," Brieding said. "We obviously are concerned about who's going to replace Mike."

In announcing the CEO's resignation last week, North Ottawa board Chairman Ted Poulton cited a need for a different "skill set" going forward, rather than the "fix-it" skills that made Funk the right person for the job in 1998 when the health system was suffering deep financial losses that threatened its survival and was at deep odds with its local physicians.

North Ottawa, after engineering a major turnaround under Funk's tenure, now needs to transform the CEO's position to a "strategic positioning" function that focuses on long-term strategic planning, Poulton said. While complimentary of Funk's abilities and his accomplishments, the board saw a need for a leadership change, Poulton said.

"Mike's tenure in our community came at a very important time. He saw us through many challenges and put us in a position to move forward with a strong management team," Poulton said. "We began to look at the future with a little more intensity. The industry is changing. If we're going to be successful in that industry, we're going to have to change ourselves."

Funk was hired based on his experience in "turning around financially troubled organizations, fostering positive physician-hospital relations and creating a high quality service mix," a statement announcing his resignation said.

In looking to the future and the upcoming search for a new CEO, North Ottawa directors want to maintain and build upon the strong ties that have been built in recent years with Horizon and specialty physicians in town, Poulton said. A change in North Ottawa's leadership "does not reflect any change in philosophy, direction or commitment," he said.

"Maintaining those relationships is important to us," he said. "We value them."

Funk's decision to resign came quickly following a desire among North Ottawa directors to pursue a direction that was outside of his particular expertise, he said.

North Ottawa's board is looking to move on to delve into further integrating the health system with local physician practices and technologies. Funk describes his abilities as focusing on finances and fiscal turnaround, people and working relationships, and medical and clinical services.

With the board feeling that North Ottawa's turnaround was complete and the groundwork laid for the future, and that it was a time to tackle new issues that he was not as well equipped to handle, Funk decided to step down, he said.

"It became fairly evident that to get where they wanted to go, they had to get some expertise the organization didn't have," Funk said.

Funk's resignation was announced Feb. 12 and his last day was Friday. He made the decision to step aside quickly because he didn't want North Ottawa to go through a lengthy leadership transition that left the health system languishing.

"I'm very satisfied professionally that the things that needed to be done immediately and in the near-term have been accomplished," Funk said. "Simply stated, I worked myself out of a job."

The board appointed Michael Payne, vice president of operations, to serve as interim CEO.

Funk came to Grand Haven after working several years at Presbyterian Healthcare Services in Albuquerque, N.M. He arrived on the heels of deep cuts in hospital staff, low morale, massive financial losses and a consultant's report that recommended major operational changes. Just three years ago, North Ottawa netted a $3 million loss that led to the elimination of 19 percent of the health system's work force.

In the 2001 fiscal year that ended June 30, North Ottawa recorded a modest 2 percent operating margin, or $989,206, on revenues of $43.7 million.

Funk, 52, is also credited with helping to improve staff morale and mending relations with Horizon Medical, which consists of most of the primary-care physicians in town. In an interview last year, he described North Ottawa and Horizon as being "at war" when he came to town in 1998.

He quickly worked to repair relations with Horizon, which at the time was building its own medical offices and diagnostic clinic. Horizon's facility, if built, would have taken away a substantial revenue stream from North Ottawa.

The improved relations culminated last August with the opening of the $12.1 million Harbor Dunes Health Center, a 50-50 venture with Horizon that was built adjacent to the hospital and is helping to lure several specialty medical practices to open local offices. Horizon and North Ottawa also came together on a shared strategy designed to guarantee local control over health care services and ensure accessibility and affordability by requiring participating physicians to accept the same health plans as the hospital.

With the partnership solidified, North Ottawa began planning for a major first-floor renovation that will enable the health system to expand its cancer treatment, emergency department, women's health services and outpatient surgery. The project is expected to cost upwards of $7 million.

Funk and Poulton not expect the CEO's departure to derail or even delay that project.

The ongoing planning for the renovation, coupled with the significant strides North Ottawa has made in three years under Funk's watch, made his resignation surprising to Lody Zwarensteyn, president of the regional health-care planning agency Alliance for Health.

"Given where the hospital has come from and where it's going, I'm quite surprised," Zwarensteyn said. "The suddenness of this thing kind of takes your breath away. It's difficult to understand, given the substantial progress that has been made in that community."

Even with that progress, North Ottawa faces its challenges, including increased competition in its core market. Holland Community Hospital in the past year has aggressively stepped up marketing in the Grand Haven-Spring Lake area.

Mercy General Health Partners in Muskegon also has a small foothold in the market, with a physician practice in Spring Lake and the Shore Haven-Mercy Living Center nursing home in Grand Haven.

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