SUNDAY EDITION | Retiring Norton Healthcare CEO looks back on two decades of growth
Norton Healthcare CEO Steve Williams led the organization to become the biggest healthcare provider in Louisville. Set to retire soon, Williams looks back on his career in an interview with WDRB.
LOUISVILLE, Ky. (WDRB) -- If you were treated at a hospital in the Louisville area recently, odds are it was owned by Norton Healthcare.
For the first time, just over half of the hospital services in the metro area were provided by Norton in 2015, either through its five facilities in Louisville or Clark Memorial Hospital in Jeffersonville, which Norton acquired in a joint venture last year.
Norton’s “leading market position” – a share twice as high the closest competitor, KentuckyOne Health – helped compel Fitch Ratings to upgrade its opinion of Norton’s debt in a June report.
Under longtime CEO Steve Williams, the nonprofit Norton system has more than doubled in size to a $2.4 billion enterprise. It’s taken over hospitals and built a new one; constructed outpatient and urgent care centers and established a medical group employing more than 600 doctors and nurse practitioners.
Williams, 66, said in August that he would retire at the end of the year after 39 years with Norton, including 23 years as its top executive.
In a wide-ranging interview last week, Williams said it's the right time to cap his 50-year career in health care, which started when he – as a high school sophomore -- became an orderly at the county hospital near Lola, Ky., where he grew up.
“Professionally, Norton is in in great condition – financially, strategically,” Williams said, adding that he began planning to hand over the reins to No. 2 Russ Cox about four years ago.
Norton brings in about $2 billion in revenue a year – a more-than four-fold increase, adjusted for inflation, than when Williams became CEO in 1993.
That’s on par with its main competitors, KentuckyOne Health and Baptist Health System, but Norton’s activities are much more concentrated in the Louisville area.
With nearly 11,000 employees as of 2015, Norton was Jefferson County’s third-largest private employer and second-largest source of payroll taxes, according to Louisville Metro government.
Under Williams, however, Norton also hit rough patches and ginned up some controversy as it became a big player in the local market.
In the last few years, the company went to battle with two longstanding partners -- the University of Louisville and Kosair Charities.
After protracted court fights, Norton repaired its relationship with U of L, but parted ways with Kosair, giving up about $117 million in support over the next few decades for Norton’s downtown children’s hospital.
Norton had other spats before that. In 2009, Norton got into a stalemate with health insurer Anthem, which affected the benefits of about 250,000 people in the area.
Earlier that year, Norton hired away all eight of U of L’s faculty neurosurgeons, threatening the staffing at University Hospital’s emergency room, according to a Courier-Journal story from the time.
In the mid-2000s, Norton gave up on trying to make the former Southwest hospital on Stonestreet Road viable and transferred its bed licenses to Norton’s new facility off Brownsboro Road in more prosperous eastern Jefferson County.
Built in 2009, Norton Brownsboro Hospital was the first new hospital in the area in more than 25 years. Norton then added a children’s outpatient center in the same Brownsboro development, helping cement its near monopoly on the area’s pediatric services.
The ‘suburban strategy’
Williams said Norton’s expansion over the years has been “very intentional and very planned” – the result of adding facilities, growing its existing services and expanding into physician groups and urgent care.
“We weren’t looking to make something happen overnight or in the next 24 months; we have taken a very longitudinal view,” he said.
When Williams took over in 1993, Norton leaders realized the organization needed to diversify its business beyond the high-level services – neonatology, cancer care -- that it offered downtown at Norton Hospital and what was then Kosair Children’s Hospital.
That meant “filling out the system geographically” by adding facilities in what Williams called “the suburban strategy.”
“We understood that for the long term, we needed to grow and we needed to have a more regionally dispersed organization … Otherwise at some point in time, we would be threatened,” he said.
In 1998, Norton bought Audubon Hospital off Poplar Level Road, what was then Suburban Hospital in St. Matthews (now called Norton Women’s and Kosair Children’s Hospital) and the former Southwest Hospital for nearly $200 million.
A 2003 story in the newspaper declared that Norton’s “hospital gamble” had paid off. It said the facilities -- starved for resources and flailing under their former owner, the for-profit Columbia/HCA – had become “better equipping, better looking and better staffed” after Norton poured about $92 million into them.
Norton would eventually give up on the money-losing Southwest Hospital, handing it over to what is now KentuckyOne Health to become an outpatient center in 2007.
Around the same time, Norton led the area’s hospital companies in establishing a foothold in the fast-growing eastern edge of Jefferson County.
“It clearly was the direction the city was moving in, and as we did the research out there, there was support for more healthcare services,” Williams said.
Williams said construction of 127-bed Brownsboro Hospital in the Old Brownsboro Crossing development at Ky. 22 and the Snyder Freeway did not come at the expense of the southwest hospital, which could not have survived anyway.
“We did a very concentrated effort to try to make that little hospital successful,” Williams said.
But the coincidental timing proved expedient for Norton, allowing it to avoid asking the state for new hospital beds by transferring them instead.
Norton Brownsboro Hospital -- the first new hospital in Louisville in decades -- has been a financial win, Williams said, even without the benefit of the soon-to-be-completed East End bridge over the Ohio River.
“We said, ‘Boy, the time the new bridge opens and we get some folks from Indiana, it would probably fill up and be successful,’” he said. “Well, it’s been full for a year and the bridge is not open yet.”
Meanwhile Norton gave its former Suburban Hospital a major redesign in 2014, and it’s now spending $107 million to renovate and expand Audubon Hospital.
Beyond the hospitals, Williams said it’s important not to overlook Norton’s move under his watch to build a large group of physician practices, which in turn bolster the system’s hospitals and outpatient centers.
He said Norton recognized the “direction of industry” – that many doctors would rather become employees than deal with the administrative headache of owning a small business – but that Norton “got the model right” where other hospital systems failed.
Williams added that in addition to Norton’s scale, he is equally proud of establishing a “culture of continuous quality improvement” whereby the organization measures its performance in a regimented way -- not unlike a manufacturing plant measuring how many defective products roll off the line.
On Norton’s website, the company publishes internal statistics from its hospitals on hundreds of indicators, many with comparisons to the Kentucky or national average. Norton makes the information public regardless of the results.
For example, the percentage of heart attack patients who end up dying is higher than the national average (5.6 percent) at Norton’s downtown hospital (7 percent) but lower at its suburban hospital (2.6 percent).
“We started the process of, you can’t improve it unless you measure it,” Williams said.
‘Unfortunate chapter in a long book’
Last month, Norton held an upbeat event – with hundreds of employees looking on – to announce that Kosair Children’s Hospital would once again be called Norton Children’s Hospital.
The change marked the formal end of a 35-year relationship with Kosair Charities, which had agreed to raise $117 million for the facility – the only children’s hospital in Louisville – through 2026.
But in 2014, Kosair sued Norton, alleging its donations were being used to subsidize the broader system and line the pockets of Norton’s executives. Norton counter-sued, accusing Kosair of reneging on its obligations.
After two years of litigation, the two sides called it quits over the summer.
“I think there just was a drifting, if you will, apart from the two organizations,” Williams said. “They determined they wanted to go in a different direction.”
Williams acknowledged that Norton’s ramping up of its own fundraising through its Children’s Hospital Foundation in recent years may not have sat well with Kosair. Randy Coe, president of Kosair Charities, did not return a call for this story.
In a parallel dispute also centered on the children’s hospital, Norton in 2013 sued U of L, which provides pediatric physicians for the hospital under an academic affiliation agreement with Norton.
U of L had threatened to evict Norton from the hospital, which was built on state land dedicated to the university, after Norton had announced it would collaborate in pediatrics with the University of Kentucky and its Kentucky Children’s Hospital in Lexington.
A 2014 affidavit by Williams would reveal that Norton, in turn, was concerned that U of L was going to ditch Norton as its pediatric partner in favor of KentuckyOne Health, which had recently joined with U of L to operate University Hospital.
But Williams said the Norton-U of L partnership is now “cemented” for decades to come after a settlement reached last December.
“I think what we had was a very unfortunate chapter in a long book, that came and went – thankfully,” he said. “We are back on track and we’ve got a very good circumstance now.”
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