Till Death Do Us Part
For half a century, in sickness and in health, the marriage of Baylor Medical School and Methodist Hospital produced first-class medicine for Houston and the world. But money, egos, and backstabbing came between them, and now both institutions—and all of us—are the poorer for it.
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Robertson was a doer—he liked to walk and talk, not sit and talk—but as Baylor’s new chairman, he was walking into a wall: Methodist’s intransigence. Meanwhile, Baylor had internal problems as well. DeBakey had given up the position as president in 1979. He was succeeded by William Butler, who resigned in 1996 and was followed by Ralph Feigin, a highly-regarded pediatrician who ran Baylor while keeping his executive position at Texas Children’s Hospital. Unfortunately for Baylor, pediatricians get little respect from other doctors, and despite Feigin’s considerable accomplishments, he was no exception. Starting in 1990, Baylor began losing faculty—179 physicians to date—to local private practices and to better schools and more-prestigious institutions, like the Mayo Clinic and the Cleveland Clinic. Young doctors at Baylor were tired of working for chiefs who made enormous salaries but didn’t carry their weight anymore. Adult medicine, crucial for the patient income it brought in, had declined; only 40 percent of the patients admitted to Methodist had Baylor doctors.
Robertson knew that Baylor couldn’t attract new stars if it couldn’t promise more support for salaries and research. Baylor needed more money, and he felt that Methodist should chip in. The hospital was already contributing $50 million for academic services every year, including $15 million in unrestricted funds, but Robertson wanted much more. Otherwise, he would have to find a new way to generate revenue, such as a Baylor-owned clinic, with Methodist having a minority share. Methodist had rejected that proposal, viewing it as competition for its main hospital.
Tension between the longtime partners was growing, and some in Houston questioned whether Robertson had the street smarts to take on Methodist. He was a courtly man, who rose when a woman came into the room and pulled out a chair for her at the table, but also an impatient one—not an ideal attribute for a negotiator. He didn’t like being questioned. Behind his back, people suggested that his polish and his politesse obscured a person who expected others to ask, “How high?” whenever he suggested they jump.
The pressure, the suspicion, the past all had to weigh on Robertson as he looked at ways to revitalize Baylor. Worse, the thirty-year affiliation agreement with Methodist was due to expire in 2003, only two years away, and negotiations for a new one were not going well. He had seen the tensions from both sides, having been on both boards in his life—but things seemed more fractious than ever. Instead of Methodist and Baylor working like a team, they hardly seemed to be working together at all.
Just a football field or so away, John Bookout wouldn’t have disagreed, and he too was unhappy. Like Robertson, the chairman of Methodist wasn’t a man to be kept waiting. There were, in fact, a great many businesspeople in Houston who were downright terrified of the retired CEO of Shell Oil, even if he was approaching eighty. He was a tall, thin, red-haired, ruddy-faced man who looked less like a corporate CEO than a wildcatter of old. He spoke in a sure, soft Texas accent, but no one mistook Bookout for a bumpkin. He had strategized and schemed his way to the top of Shell, leaving fear in his wake. The word in Houston was that if you crossed John Bookout, he’d put you out of business. To him, Methodist was less a health resource for the entire community than a cutting-edge hospital, where money went to creating medical breakthroughs. What was good for Methodist was good for Houston but not necessarily vice versa.
By the time Robertson became chairman of Baylor, however, there were many people who objected to Bookout’s view of Methodist, and they weren’t just people in the medical center. Many in Houston’s government and charity communities felt that the hospital had lost sight of its mission as a nonprofit to care for all people, not just those who could pay.
The turning point in the hospital’s history had been the arrival of managed care in the eighties. The days when elite doctors could charge huge fees, knowing that insurance companies would pay the claims, came to an end. The revolution in health care caused such a fiscal crisis that Methodist considered a merger with its perceived inferior, St. Luke’s, in 1994. When that proved impossible, it purchased a large private practice, which would bring more doctors, and thus more revenues, into the hospital—and did so without Baylor’s knowledge and in clear violation of the affiliation agreement, infuriating school leaders. Baylor’s status would be threatened if it had to put ordinary doctors on its faculty. The split almost occurred then, in the mid-nineties, but a compromise was reached: Baylor didn’t have to take the private-practice doctors. Still, Baylor felt taken for granted, but Methodist didn’t care. It had won.
It was also during this time that Methodist completed a makeover. The hospital’s then-CEO, Larry Mathis, had decided in the mid-eighties that the way to ensure Methodist’s survival was to convert it into a luxury hospital. Instead of investing in Baylor, which would have raised the prestige of both institutions in the long run, he went for the quick fix. Mathis invested some of Methodist’s cash in the stock market (the hospital thrived with the tech boom) and poured the rest into amenities like valet parking, doormen, laundry and dry cleaning, hot tubs in guest rooms, and that glamorous new lobby. Hospital executives got chauffeurs, while patients who couldn’t pay were directed elsewhere. Mathis believed that medical care was a privilege, not a right. As one surgeon told me, “He thought he was running GE.”
That attitude eventually landed the hospital in trouble with watchdogs at the state attorney general’s office, whose job is to make sure that nonprofits contribute to the community rather than hoard their wealth. Attorney General Jim Mattox sued Methodist for failing to provide adequate charity care as its nonprofit status required, claiming that Methodist grossed more than $2 billion from 1985 to 1989 but during that time spent only $17 million on the poor, less than one percent of its gross revenues. Methodist quietly sold its private hunting lodge, settled the lawsuit, and increased its charitable expenditures. But this wasn’t enough to satisfy its critics, who say that the hospital still takes precious few patients whose costs are not paid by the government or insurance companies. As one doctor who had been with both Baylor and Methodist from the early years wrote in a letter to the medical community, Methodist “fell off its pedestal then and has never recovered.”
Now there were three reasons why relations between Baylor and Methodist were strained: In addition to governance and financial issues, there were serious differences in the way Baylor and Methodist perceived their roles in the community. Baylor was teaching doctors to save the world. Methodist was catering to the rich. Throughout the nineties, Baylor’s prestige had soared and, with it, its endowment, which by the late nineties had reached $300 million. A consultant’s study suggested that, partly because of tension between the leadership of the two institutions, the time had come to part ways. But neither board—and some members served on both boards—could see what was to be gained. Baylor and Methodist were better together. They had always been able to work out their differences.
From Bookout’s perspective, the problem was, simply, control. He didn’t mind giving Baylor money—well, maybe a little—but he wanted to know what Baylor was doing with it. He shared Baylor’s desire to have a “world-class medical center,” but he wanted an accounting of the money Baylor had previously received from Methodist before he shelled out more. Methodist had given Baylor $150 million in the mid-nineties for “creating new centers of excellence,” plus the ongoing $50 million a year for what was called “academic services”—doctor’s fees, for instance. Bookout’s demand for an accounting was not well received at Baylor, nor was his accompanying letter. “We are concerned that our resources are being used, whether intentionally or otherwise, to further increase the College’s dependence on nonoperating funds to subsidize operating shortfalls,” he wrote. Bookout would later say, “There was a trust issue and a control issue.”
Notwithstanding his concerns about Baylor, he had a directive from his board, and he was determined to abide by it. Bookout recited it to me as a chant: “Number one, work it out with Baylor. Number two, work it out with Baylor. Number three, work it out with Baylor.”
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