Legislated out of existence Featured

9:50am EDT July 22, 2002

Few things are more painful than the death of a business. Closing the doors — or having them closed for you — is something no business owner wants to consider, much less experience.

In May 1998, SBN magazine brought you the story of Gwendoyln and Eric Johnson, co-owners of Geric Home Health Care Inc. The Johnsons founded Geric seven years ago with $1,000 in the basement of Gwendoyln’s Shaker Heights home.

Within five years, Geric was a $12 million a year operation with more than 400 employees and 300-plus patients. Besides the home health care business, Geric ran a nursing school, which helped inner city welfare recipients get off the rolls and back to work. It also launched a nonprofit foundation, which worked with inner city school kids.

The Johnsons were known by their peers for their devotion — they often loaned employees money in tough financial times and made house calls on clients at any hour.

Last year, the future seemed bright for Geric. The duo announced plans to acquire other home health companies and moved into new headquarters.

And then in August, Geric closed its doors. A victim of financial woes.

So what caused the sudden shift in fortune? A combination of things, but first was regulations included in the 1997 Federal Balanced Budget Act which changed the way health care providers were reimbursed by Medicare. The changes increased paperwork, added more gatekeepers to the process and resulted in delayed — and sometimes no — reimbursements. The uncertainty stretched smaller providers, like Geric, to the limit.

But another issue contributed to the company’s death: the Johnsons, like many of their peers, were unable to adapt to the changes in their industry.

The tale is a vivid reminder of how the quickly shifting health care industry affects not only individuals, but the business owners who work within it. The story, however, runs deeper than that.

From a macroperspective, success in the business world relies on many skills, and the ability to adapt is one of them, especially when the fate of your company hangs on the votes of legislators who can put you out of business with the passage of a single law.

That is a difficult truth to swallow, but it helps explain why corporate donors lead the list of political campaign contributions. Who wants to stand idle on the sidelines and have no say in the future of a business built on hard work and sweat equity?

About 10 years ago, I cut my journalistic teeth as an intern, rifling through campaign finance reports for a major Ohio metro daily’s political reporting staff. At the time, my fascination with politics made me pine to be a politics reporter. Like every other young aspiring journalist, I’d read Woodward and Bernstein’s All The President’s Men, and believed I would be the one to break the next great political scandal.

Instead, my labors led me down a different path. Within those campaign finance reports, I found the names of big corporate donors. Many were in industries that relied on laws which allowed the company to operate without overly restrictive paperwork or legislation. Others simply wanted the benefits lower corporate taxes offered.

Each donor had the same goal: To influence legislation by putting their candidate in Congress.

As I synthesized this information as a 20-year-old college student, suddenly the light went on. Business owners were a very real part of the political process, doing what they could to ensure their company’s survival.

Closings such as Geric’s drive that point home.

But they also do another thing. They cause you, as a business owner, to wonder if that ever-shifting pendulum in your industry will swing back and force sudden changes within your own company. That’s not to say change is a bad thing, because it’s not. However, when you have little say about how or when those changes occur, it begs the question: Will you be prepared to adapt?

If you’re not, you’ll find yourself facing even tougher decisions that will either make or break your company’s future. Just like the Johnsons. Dustin Klein (dsklein@sbnnet.com) is editor of SBN magazine.