With more empty beds than ever, profits dwindling and recent budget cuts having cost almost 200 employees their jobs, university officials turned to an outsider to stabilize the Medical Center’s financial operations.

Kenneth D. Bloem was named Medical Center CEO in 1996, and he brought to the job a Harvard education and 25 years of experience as a healthcare administrator, including a term as president and CEO of the Stanford University Hospital, where he led a major structural overhaul.

Despite his experience and a new Medical Center operations plan, the Georgetown University Medical Center’s deficit grew each year of Bloem’s term. By the time he resigned in April 1999, the facility had lost almost $200 million.

As the Medical Center’s ailing finances strained budgets throughout the entire university, school officials next turned to then-Senior Vice President John J. DeGioia, the consummate insider, to confront the problem.

DeGioia’s work over the next year led to a complex partnership with the healthcare management company MedStar Health, Inc., an arrangement that has drawn unanimous praise from the board of directors.

Medical Center administrators say DeGioia made the deal happen; members of the presidential search managerial talents that helped him earn their confidence.

“He showed in those negotiations that he clearly had administrative abilities that were not ordinary,” said the Rev. Brian McDermott, S.J., a member of the board of directors, the presidential search committee and the Jesuit rector.

“Look at all of the issues: faculty, tenure, construction . that had to be worked out to create that deal. There’s the evidence that he’s a gifted administrator,” McDermott said.

Indeed, DeGioia helped create a deal with MedStar that split the university’s Medical Center into two branches: the clinical enterprise, which MedStar bought, and the research/academic enterprise, which Georgetown keeps.

Medical Center administrators have long blamed the facility’s mounting losses on the clinical enterprise which includes the hospital, a faculty practice group and a network of community practice physicians. Under the terms of the agreement with MedStar, any clinical losses are the company’s responsibility, while Georgetown would share in any profits.

“[DeGioia’s] role was to represent the university’s interests to MedStar. He was present in every part of the finance and real estate negotiations,” said edical Center Executive Vice President Sam Wiesel, who was in charge of clinical negotiations.

Under the terms of the agreement, MedStar paid almost $100 million up-front to the university, which the university partly used to help retire the clinical enterprise’s debt. MedStar now owns all clinical facilities, including the hospital, while it has a long-term lease on the land the facilities occupy.

Wiesel said DeGioia’s work helped secure a favorable deal for the university.

“Jack DeGioia is a unique person and he was invaluable,” Wiesel said. “These were tense negotiations and Jack was unflappable. He approached them in methodical ways and proposed compromises that would benefit the university.”

All the while, he maintained his sense of humor, Wiesel said, remembering the time DeGioia said, “When you pull everything down to the bottom line, it all comes down to money or parking.”

DeGioia handled negotiations over issues such as parking, including any of the space and facility issues that would arise when two companies share a campus. These issues ranged from faculty compensation to heating and air conditioning supply.

Also, DeGioia had to help figure out how the university would run without the Medical Center’s revenue, which could account for as much as one-third of the university’s operating budget.

Wiesel said the deal has been an “excellent story” for the university – in the first fiscal year under the new arrangement, the research/academic branch of the medical center lost substantially less money than its budget predicted. He said it will take a few years for the enterprise to turn a profit.

Members of the search committee say that success was fresh in their minds when they recommended DeGioia to the board of directors.

“Members of the [presidential search] committee were very impressed with the ultimate resolution of that episode and how [DeGioia] brought everyone together,” said Pietra Rivoli, a professor in the McDonough School of Business and a member of the committee.

While the members of the committee say DeGioia could have been selected without having been the university’s point man on the MedStar negotiations, they also say the negotiations were perhaps his best chance to show off his managerial and administrative talents.

As he articulates DeGioia’s strengths, board of directors and search committee member Anthony Arend says DeGioia’s proficiency as a manager is among his greatest assets. He turns to the MedStar negotiations as evidence of the talent.

“You look at the implication of the deal for the rest of the university, and how the rest of the university goes on without the medical center revenue. You look at how he interacted with all kinds of people . It’s certainly a factor,” Arend said.

The search committee members say they were especially looking for candidates with strong administrative and managerial talents.

“Administrative experience is critical,” Rivoli said. “A university is a big, complex organization that requires someone with management and administrative skills,” she said.

McDermott agreed. “These skills are very important because of the financial condition of a university right now. Issues like finances, faculty and facilities are very demanding.”

Rivoli and McDermott said the nature of Georgetown University has changed in the last 12 years, since O’Donovan was named president with almost no administrative experience.

“The choice of president shows that there are seasons in the life of an institution. You tend to choose a successor who is different. It’s never a totally similar person,” cDermott said.

“Georgetown was a much different place 12 years ago. Now the challenges are much different – it is a much bigger, more complex and diverse place with increasing financial challenges,” Rivoli said.

According to McDermott, “The university keeps getting more complex. It is preeminent as an undergraduate institution and wants to become even stronger on the graduate level . O’Donovan increased the ambition of the university and 12 years from now it will be another animal.”

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