Funk Resuscitates North Ottawa

May 22, 2002
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GRAND HAVEN — Talk about a tough start.

Two weeks before Michael Funk took over the reins, North Ottawa Community Hospital laid off nearly 20 percent of its 500 workers in the wake of a seriously deteriorating financial picture.

The 81-bed acute care hospital had lost more than $3 million during the fiscal year that ended a few months earlier and was "at war" with the group that represents most of the family physicians in town. A consultant had also recently issued a report that was critical of the board of directors and administration and called for a massive restructuring if North Ottawa was going to turn it around.

Morale around the hospital, Funk says succinctly, "was the pits."

"The hospital was in fairly sad shape and things weren't going well," said Funk, who took over as North Ottawa's president and chief executive officer in September 1998.

"I have to admit, after two hours (on the job) I asked myself, 'what am I doing here?'"

What he was doing was embarking on a new job that matched and challenged his professional skills. Those abilities have helped what is now known as North Ottawa Community Health System rebound financially and set a new course toward the future.

"We ain't out of the woods yet, but we're making consistent progress," said Funk, a Texas native who went into health care administration after running a U.S. Army reference lab at Fort Sam Houston in San Antonio.

That career choice led him to put in 21 years at a health system in Albuquerque, New Mexico. After working his way up through the ranks, he left Presbyterian Healthcare Services when his position as regional vice president was eliminated following a merger.

Funk then began a job search that "covered all four corners of the country." Among the places he sent a resume was a hospital in a small town along Lake Michigan that was in trouble and at the time was run by an interim administrator.

The 52-year-old Funk and his wife, Ellen Kay, visited Grand Haven in August 1998, the week of the city's annual Coast Guard Festival. With all the rooms locally booked for the week, they stayed in three different hotels in Muskegon and Grand Rapids during their three-day visit.

While inconvenienced, the Funks were struck by the generosity of the people they met while he interviewed for the job. He was also intrigued with the position at North Ottawa, where the hospital's needs fit his professional background. He accepted the job when it was offered soon after his visit to Grand Haven.

"The fit was there. The feeling was the professional aspects were exactly along the lines of what I had dealt with in my career," said Funk, who became North Ottawa's third chief administrator in three years.

The enthusiasm of starting a new job in a new community, however, was soon tempered, as Funk had to move quickly to fix the dire problems that loomed over the organization. He faced a tough road turning around an organization and culture that were hardly conducive to change. At a time when it faced new competition coming from other health care providers seeking to tap the market, North Ottawa Community Hospital needed to change — and do it quickly.

"Things were going on in the marketplace, things were going on in neighboring communities, and things were going on with patients' demands and needs that were perhaps being overlooked because of the internal turmoil," Fink said. "The financial situation was in a death spiral."

Seeking to "stop the bleeding and clear the airway," Funk immediately reached out to employees and the medical staff to explain the hospital's situation. He implemented a hiring freeze for non-essential positions and reorganized the administrative inner-workings of the hospital, and began implementing recommendations from the hospital's consultant to restructure North Ottawa.

He also reached out to Horizon Medical PC, the physicians group whose relationship with the hospital had turned sour. At the time Horizon was about to begin construction on a new facility of its own that would house physician offices and, more importantly to the hospital, ambulatory care clinics. Horizon's facility, if built, would take away a substantial revenue stream for the hospital.

"The result would have been a further erosion of the strength of the facility. It would have seriously jeopardized the viability and the long-term capability of this facility to survive," he said.

Funk eventually mended the relationship with Horizon, and North Ottawa agreed to build an $11 million ambulatory care addition that, when it opens this August, will also house primary care physicians and specialists. Horizon and North Ottawa also came together on a shared strategy of basing health care offerings on accessibility and affordability.

"We need to work collectively in the best interests of the community," Funk said.

Two and a half years after he came on board, the bleeding has stopped at North Ottawa. The $3 million loss in fiscal year 1998 was cut to $1.3 million for FY 1999.

North Ottawa then finished the 1999-2000 fiscal year last June $250,000 in the black. The improved financial result came even as North Ottawa dealt with the impact of Medicare payment cuts that totaled $500,000 this year alone.

Eight months into its present fiscal year, North Ottawa is running break-even as it shoots for a 1 percent margin on a $56 million budget, Funk said.

While things are in much better shape than they were that first day on the job in September 1998, Funk says the health system needs to remain vigilant. North Ottawa must stay focused on operating within its means, while delivering the health care services the community wants and needs, he said.

Looking back, Funk says he was confident the hospital and its staff and directors could turn things around.

"I felt comfortable we had the tools and the resources to make the corrections," said Funk, who's optimistic about the health system's future.

"It will continue to be a vital community asset as long as the community supports it, and they will support it as long as we provide a quality product at a reasonable price," he said.

That future, he said, may involve new partners. At a time of consolidation in the health care industry and growing competition, Funk says North Ottawa will look at affiliating with other care providers. One such partnership was recently signed with a Muskegon cardiology group that, in return for the hospital referring heart patients, will place staff at North Ottawa and use its diagnostic labs and clinics.

Further affiliations will be based on whether a partnership maintains local control and strengthens the hospital.

"The partner who is most capable of meeting both of those is the partner we would choose," he said.

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