Universal truths Featured

6:04pm EDT October 20, 2004
Alan Miller performs a routine check-up of Universal Health Services' corporate vitals. The balance sheet is healthy and kicking plenty of returns to investors.

Growth spurts are nourished by revenue that rises each year. The hospital management company's reputation is squeaky clean. And its backbone -- talented people -- supports a skeleton of 100 acute care, behavioral health, ambulatory surgery and radiation oncology centers.

"Business involves three keys: good people, access to capital and opportunities," says Miller, the health care giant's founder, president, CEO and chairman of the board. "If you have those ingredients, you will do well."

Miller figures he passes his own test with flying colors. He coaches his staff to succeed and provides a workplace where employees flourish, investors profit and business thrives, even in an economic landscape pitted with challenges.

Many independent hospitals struggle to fund technological upgrades, retain physicians in the face of costly malpractice suits and deflect rising insurance costs. Miller's chain approach, on the other hand, embraces strength in numbers. A national web of health centers shares best practices, enjoys purchasing clout and gains access to technological resources, allowing it to provide quality service at a profit.

"The key to any business is profitability," Miller says, a statement underscored by UHS' $3.6 billion revenue in 2003. "If you provide great service on an honest basis and take care of your patients, they will send you more business. If you have a lot of business, you can maintain a profitable profile, and then everything else rolls in line. You get good credit, you can buy additional facilities and you can raise money through equity markets."

UHS' facilities were founded on quality service, affordability and community relationships, Miller adds, illustrating a healthy business pyramid of sorts, with integrity and people at its foundation.

"But it all goes back to how well you do your job," he says.


Healthy choices

Miller is uncomfortable with any job that isn't well done. He is uncomfortable with adequate. When he helped found UHS in 1978, he shifted gears from the advertising world, where he worked at New York City firm Young and Rubicam.

His college roommate from the Wharton School at the University of Pennsylvania told him community hospitals represented a lucrative career path. At first, Miller wasn't so sure.

"During the transition, I came home and said to my wife, 'I don't know what I'm doing here. I went from knowing a lot to knowing practically nothing,'" he says. "But the basic business skills were there. And three years later, I ran the company."

Miller credits his military background for his orientation to the board room.

"The basic skills of communication, motivating people, leadership, building trust and having integrity are an integral part of someone's character and personality," he says. "You can apply these skills to any business."

With his experience as chairman of American Medicorp from 1973 to 1978, Miller wasn't a complete novice in the medical field. And heading up a health care chain like UHS was an enticing proposition for the driven businessman, a chance to fast-forward his career and pave paths for others.

"I was a young man, and I saw an opportunity to have equity and build a company," he says.

Miller didn't stall in the start-up of the company, purchasing four hospitals in Texas, Florida, Nevada and California right off the bat.

"We connected the dots and filled in the map," he says of the company's rapid expansion into suburban markets.

Success in the first hospitals earned UHS attention from investors, who noticed the management group's aggressive growth.

"If you do well with your first hospital, there are plenty of people out there who are anxious to back a high-quality management group," he says. "Just as we need [investors'] capital, they need us. They need to put their money to work effectively -- it's a two-way street. If you have a solid management team and you can communicate your goals and measure your performance, you will do well, people will believe in you and you will have a following."

Interest in the company ballooned and so did its business. Investors fed the organization, and UHS continued to perform, increasing revenue at an average of 11 percent each year. Miller reverted to his three basic principles.

"If you are a good management group, you won't have problems accessing capital," he says, referencing an auction four years ago when Charter Behavioral Health Systems LLC closed its doors. UHS purchased 13 of its hospitals for cash.

"Many of the other buyers were unable to pay cash; they wanted to give bank notes," Miller says. "They were on the phone calling their investors and venture capital groups trying to get investments."

Bidding closed at 4 a.m., and UHS walked out with the top facilities and no debt.

"There you go," Miller says. "That's good management and access to capital. The opportunity was there, and we capitalized on it."

Chain reaction

Access extends beyond board room buying power. Miller sets up a winning match by acquiring and building in markets where growth is a given.

"For the most part, the United States grows about 1 percent each year," he says. "Our markets grow at about 2 percent each year. We are well above the U.S. average; therefore, our markets will have more people, and that is what we are looking for."

UHS settles in suburban environments of all sorts: booming exurbs, crowded inner ring metro areas and planned communities, such as its most recent debut in Manatee County, Fla. -- Lakewood Ranch Medical Center.

The patient mix at its facilities varies depending on demographics, and UHS caters its facilities to communities' needs. Core services -- heart and lung care, for example -- are constants.

"We are all alike," Miller says, explaining why the chain model is effective. "We all have the same hearts and the same lungs. We are all subject to the same diseases and injuries, and we all give birth. Hospitals treat all of these, but we tailor the facilities, the services and the size and number of rooms and equipment based on the amount of business we expect the hospital to do in that market."

UHS constructed the 120-bed Lakewood Ranch facility -- whose opening Miller attended in late August -- with the option of expanding to 300 beds if necessary to meet demand. Ancillary areas, labs and emergency rooms can be super-sized to fulfill the area's forecasted population surge. This is just the type of growth UHS expects to model corporately, sticking to its pattern of steady increases.

But Miller is more satisfied with integrity than statistics. By opening the doors at Lakewood Ranch, he fulfilled his promise to the community. After planning, construction and preparation, he delivered health care to the area's families.

That matters.

"We are going to be members of that community," he says. "We know that we are going to do what we promise to do. Unfortunately, the world is such that when that happens, people are overwhelmed with the fact that you did what you said you were going to do. We don't change because times change."

Though simple and altruistic, this philosophy captures a key advantage of operating a hospital network. When times change for the worse in one community, business booms in another.

"You spread your risk around," Miller says. "It's like any investment portfolio. You have 20 stocks, and if one goes down and it is worthwhile and you hold on to it, you can still have money to pay your expenses until it comes back up."

Besides balance, there is sharing. A hospital in Washington, D.C., can learn from a facility in Laredo, Texas.

"We disseminate best practices so all hospitals can take advantage of our empire," he says.

Then there are financial rewards and cost savings associated with being part of the "in" group. UHS employs specialists for every arm of its operation, from construction and legal to accounting and purchasing. And having in-house help pays off.

"We have the economies of having all of these specialties in our organization," Miller says. "And we get purchasing economies."

Meanwhile, holding the No. 1 or No. 2 rank in every market it' is in positions UHS to secure competitive arrangements with insurance and equipment providers. Maintaining this status requires service -- and, of course, a job well done. Miller isn't interested in performing any other way.

"You have to provide great service, and you have to be able to attract a lot of business," he says. "Therefore, you have to have the latest in equipment and a very talented staff."


Key character

Miller glides through his team's accomplishments like a proud father rehashing his child's first steps.

"Many people have been here more than 20 years --you can go through the line," he says.

The 25-year-old company employs 30,000 people and has groomed a sizeable class of performers.

"We have people who are in charge of hospital groups who started out as assistants," he says. "The head of development has been with the company for 25 years -- he was our first employee, and he started out as a purchasing assistant."

The company's CFO climbed to his position from the accounting department. His treasurer started as a clerk. The head of the behavioral health division moved up from marketing.

"That is what the plan was all about," he says. "Give people room to grow the company, let people go as far as they can, and watch them develop. They can go as far as their talent carries them if they work hard and exhibit a solid character."

UHS' numbers back the story.

"If we did not have the best record over the last 12 years in terms of total return, you'd say, 'There are a lot of underperformers, and they are still working at the company -- big deal. Lots of companies have people who have been there for years, and they don't perform,'" he says. "But in our company, put together the profitability and employee longevity, and you have a collection of performers who produce the best results in our industry. They stay with the company."

Miller is a hands-off manager, but he believes in goals and measured performance.

"I work hard, and I'm always available," he says.

Show him integrity, and he lends his trust. Prove skills with results, and he offers reward.

"You have to believe in the people you hire," he says. "Provide them an avenue to grow."

He illustrates his point with an observation he made at a Villanova basketball game, where the coach was hassling a guard, spouting orders at him mid-game.

"I thought, 'This is not going to work,'" he says, laughing. "Do that in practice. Tell them what to do, show them what to do. But when it's time to play the game, you can't run along the sidelines."

Trust and integrity produce a winning record -- a sustainable brand. Miller notes that UHS' name hasn't changed since its inception, an exception in the health care industry.

"We are proud of our name and our record," he says. "When all is said and done, you want to have accomplished something with your career and life, and we all want to have that feeling that we have added measurably to the quality of people's lives in the community. That is a good feeling."

How to reach: Universal Health Services, (610) 768-3300 or www.uhsinc.com