Ten Minutes With David Phelps

BERKSHIRE HEALTH SYSTEMS’ FORMER C.E.O.

David Phelps served nearly three decades as president and C.E.O. of Berkshire Health Systems (BHS). His tenure has been recognized by the Massachusetts Health & Hospital Association, naming him the recipient of the prestigious 2022 William L. Lane Hospital Advocate Award. As head of the Berkshire’s largest employer (a payroll of around 4,000 people) that provides healthcare to 129,000 residents, Phelps played a pivotal role in the well-being of this region. He turned the healthcare system from a failing enterprise to an industry leader, overseeing the merger of Berkshire Medical Center (BMC) with Hillcrest Hospital; leading the expansion into Great Barrington and North Adams; and establishing BMC’s $30 million cancer center. Berkshire Magazine asks Phelps to talk about healthcare, the financials behind healthcare, the community, and his retirement.

PHOTO BY JOCK FISTICK FOR BERKSHIRE HEALTH SYSTEMS

ON TAKING A LEADERSHIP ROLE, AND HIS VISION

How did being born and raised in Pittsfield inform you in your position? People in healthcare, by and large, are very dedicated. But when it’s your hometown and your home county, it does make you even more aware every day when you look across from your office to the hospital. You can be sure that there is someone you know occupying a bed. There is someone in your family or a friend getting services somewhere in the system that day. It does give you a heightened sense of wanting to do the best you can. They are depending on you.

BHS’s facilities include BMC, the BMC Hillcrest Campus, Fairview Hospital, Berkshire Visiting Nurse Association, the North Adams Campus of BMC, and more than 30 BHS provider clinics. It also has an urgent care facility in Pittsfield, as well as imaging and lab services in various parts of the county. You helped transform this network into what it is today. How important was your team, and what was your vision? If you look at organizations that tend to enjoy success in healthcare, there’s usually a core of stability in the leadership ranks and in the board ranks. You’ve got to have people who are committed for the long run. From the beginning, we had a plan, we knew where we were going, and we developed a strategic plan for the whole organization. It set very significant goals and high standards around quality and financial performance. We all knew what we were trying to achieve. You certainly can’t be successful without a special team. I’m grateful not just that they stayed with me, but they were very competent and carried more than their fair share of the obligations.

ON WORKING TO SAVE BHS

Did you know what you were up against when you entered the job? Our situation was well-known throughout the Commonwealth. It was viewed as a considerable turnaround effort. For those of your readers who weren’t here at the time, we certainly were in financial default. Both of our hospitals [BMC and Fairview] were underperforming from any perspective. Our long-term care company was not doing well. Had we not been in our late-30s and not understood just what was ahead of us, we all might have sought other opportunities. But sometimes a little naiveté is helpful. We figured, “We’ll just fix this.”

What were your goals? The first was stability. We needed to settle this down and then have the ability to work long-term. To be successful in healthcare, you have to have a strong financial foundation. It’s one of those businesses that’s incredibly dependent on capital, people, and technology. We had fallen behind considerably. When you can’t make appropriate investments in your people and your technology and your facilities, you’re not serving your community very well, and the stresses fall upon your community for the care they can’t get and to your caregivers who are dependent upon you to meet those obligations. We understood how serious it was, and we charted a course.

What was that course? We needed to be an A-rated hospital. When we started, we were kind of one notch above junk bonds. That’s how we had deteriorated. People in the Berkshires shouldn’t be penalized because they were born and raised or choose to live there. For many in our community, the idea of going to Boston or somewhere else just isn’t a realistic option. The services we provide have to be as good as what someone could get if they walked into a downtown Boston academic medical center. Over the years, we’ve done a good job of meeting that standard, and in some cases, exceeding it. Being goal-oriented and having the right people in the leadership team and on our medical staff have contributed a great deal to our ability to be successful in all the important aspects.

Did you come across anything that was surprising? When you are in a leadership role in an organization that is suffering through the financial turmoil we were experiencing, you always discover that it’s financially worse than you thought, right? There are always things that come up that weren’t clear. Healthcare, by its nature, is complicated. So there’s never a quick fix. It always requires a lot of work and attention from not just your leadership team, but your operating folks. Delivering healthcare in the environment we live in—in the reimbursement mechanisms we have available to us—is very complicated. We take care of a population that requires a lot of attention. Our folks have done a great job.

ON WHAT’S AHEAD

What’s next? To be successful, you need to be able to stay current and make very significant capital expenditures. Our annual capital budget is over $30 million. And then you undertake some special projects that add to that. For example, we built the cancer center at our Hillcrest Campus in Pittsfield. That’s a remarkable achievement. When North Adams had an abrupt closure, we were able to step up and buy the old facility and restore services. That required significant financial resources. Over the years, we’ve made investments on all our campuses. As time settles and we get COVID behind us, there will be more exciting projects. There are operational improvements that we just didn’t get to, but I know my successor, Darlene Rodowicz, and the team will get to them. They include improving the patient experience and providing more support in our clinics.

How has the transition gone? The good part of having a team that stays together is you get to do this work together, and everybody’s on the same page. The downside is as you get older, you age together and decide to retire in proximity of each other. Over the past three or four years, we’ve rebuilt the leadership team. Half of it is folks that have been with us for some time, and half are new and have had a significant amount of experience in other institutions, many bigger. They are a tremendous asset for the team going forward.

ON MANAGING CRISES

You’ve had to think on your feet on certain challenges. How did having a solid foundation help? We had to respond quickly with North Adams, because once the closure happened, that meant a whole lot of doctors and clinicians were just going to go. Within a few days, we offered employment opportunities to a lot of physicians. We had to look at services that we had to sustain and hold them together by being there, quickly offering employment to folks. We had a broad understanding of what we were stepping into, but it wasn’t the kind of fine-toothed business analysis you might have done if time had allowed it. We also had the financial strength and knew what was the right thing to do. I must say the board was incredibly supportive, even though we couldn’t answer every question. And we knew we’d have time to make appropriate adjustments later if they were required.

And with COVID? Darlene was our lead executive, and we were able to do a fine job for our community and be supportive of our staff. If you think back to the early days of COVID—this wasn’t a decision we made but it was made by the state—half our business was just gone. If it wasn’t urgent, it wasn’t happening. The entire focus was going to be caring for community members with COVID. We kept all our employees, and they helped us contribute to the work at hand. We lost a lot of money doing it. In the long run, we got some of that back, but we never worried about the financial exposure. Our view was that our 25 years of being prudent had left us with a financial foundation that allowed us to just step up and do what’s right for our community. That was not only providing the care they needed, but figuring out ways to help other providers in the community that weren’t as fortunate as we were financially. We wanted to be as helpful as we could be to other local public health departments, who had a huge responsibility through this. And we were.

In what other areas did you provide support during other crises? The folks at the Brien Center would tell you we have been an incredible partner, both clinically and financially. In the middle of the opiate crisis, when there were all these gaps in treatment capabilities, we knew we needed more residential homes after we discharge folks. They needed a place to go where they could have a step before they were discharged to the community, to help them prepare for sustaining their recoveries. The Brien Center does that very well, but it’s an expensive process. We supported nearly $500,000 in investments to help create a home in North Adams—Keenan House North—that they could operate and use for mental health and substance use programs. With the Community Health Program (CHP), we’ve donated money for them to provide clinics. We’ve always been there to help others who provide necessary services to our community.

ON THE BERKSHIRES

How is it more challenging in the Berkshires? It has a lot of geography, but not a whole lot of population. The population base is getting smaller and older. That has tremendous implications for a healthcare provider. It means more and more of the people you’re caring for are dependent upon government payers for their source of payment for services. Government payers are notorious for under-compensating for the care that’s deserved. As this trend continues, it becomes a bigger and bigger challenge. There are also few corporations headquartered here. As the largest employer in the region, we have to also be a good corporate citizen and find ways to be as helpful as we can be both directly and indirectly. When I first started, we tended to focus internally. That’s not the case today.

How has the landscape changed in healthcare in the Berkshires over the past 30 years? Because of the demographics that I shared with you, it’s becoming more and more challenging. The reimbursement system is particularly cruel to the private physician. In a market like ours, it is virtually impossible for most physicians to survive, and it becomes tremendously challenging for them as they age and decide to recruit replacements. The old model of care, which are these private groups, knew when it was time to bring in someone. The economics worked then. As time went on, and their practices were financially deteriorating—notwithstanding the fact that they were incredibly busy and providing great care—young physicians graduating had starting salaries that were more than one could earn in the Berkshires, given the reimbursement system. It’s not a very good formula for success, if you can’t attract physicians. Places like BHS become the sponsors of more and more physician practices. It becomes a way for the doctors to continue to practice and recruit to meet the long-term needs, at salaries that are market-based.

How do you shoulder that financial responsibility? You’re always working to get better at things you do, to find new revenue opportunities, to become more efficient when you can. We’ve been able to do that and manage it. There aren’t many doctors left in the Berkshires who aren’t employed now by BHS, so now it’s a matter of taking all these pieces and making them as effective as they can be.

How does our geography make us different? We don’t feel that our location is as remote as it is, because we have a view of the Berkshires as “perfect.” We love where we are, and it’s close enough to drive to New York and Boston. But it doesn’t work that way in healthcare when you’re trying to recruit top doctors. It’s a niche. There are a lot of folks who trained in academic centers, and they want to be in a big academic center. They may have fellowships and be into research. Because we are a teaching hospital, it is an attractive place for some, particularly if they’ve gone through our training programs and they realize it’s a pretty sophisticated place. We offer a good experience, and the lifestyle of the Berkshires is a good one, too.

Why did you retire? If you look at the challenges faced today, I think the organization is better served by someone who’s well-prepared and has a time horizon that they can commit to that’s longer than mine. When I got the job, I knew I was the right guy; there was never any doubt in my mind. I have all the confidence in the world in Darlene and the team. It’s a good time for me to go do something else; it’s a great time for her and the team to move forward and do the things that they now need to do. Each year, we’re going to just get better and build on the successes of the years before us.

ON RETIRING

With homes in the Naples and Pittsfield, will you continue to spend time in the Berkshires? The Berkshires is still home, and I will continue to be committed to the Berkshires and help in any way I can. I’ll take some time off because I’ve not had a period of time in my life without significant responsibilities. I’m looking forward to just kind of doing nothing for a little while. My friends here in Naples tell me the transition can be tough. I get up every morning and I say to my wife, Madeline, I don’t know, it doesn’t feel that tough. Maybe that’s later, a few weeks from now or something, but so far, so good. I was talking to Darlene this morning, and I have to say that I miss my colleagues terribly. We spent so much time together.

What do you enjoy doing while you’re in Naples? Are you a golfer? I’m not a golfer, because I’m just terrible at it. We live in a golf community in Naples, which is ironic, but it’s primarily because so many of our friends are here. One of them is in for a rude surprise. He’s an avid golfer, and he texted me that he was cleaning out his garage and had an extra set of clubs that he wanted to give to me. He left them on the front porch, and I got them. So they’re encouraging me to play. But I have a history.

What is that history? BMC has this annual golf tournament. There’s this place in the center of the golf course at the Country Club of Pittsfield where all the people pass multiple times during their 18 holes. I always stayed there because I’m such a bad golfer, and I would greet everybody and have a drink with them or something. One year, this guy says to me, “Look, people appreciate it if you just go out and swing a club.” I said, “You don’t know what you’re in for.” That year, it just didn’t go well. We ended up two hours behind. The truth is that anybody who’s ever invited me to play has never invited me a second time. So the guys here, they don’t know what’s in store for them by giving me the clubs. I like being active. I’m a Type 2 diabetic, and I also have a couple other minor diagnoses. My doctor told me that I’ve done everything I can do from a lifestyle perspective. I had to eliminate some stress. With the retirement, I have noticed a change in glucose level. I’m 69. Having time to take care of myself is important at this point. We start our day off with a five-mile walk.

Are you in touch with Darlene a lot? I’ve worked hard with her over the years, and she’s smart. My guess is that we will always be in touch. It’s about the relationships you build, and healthcare is a game of relationships. It’s always good to have someone to talk to, and I suspect Darlene and I will stay close, both personally and professionally, throughout her career there.

ON HIS LEGACY

What are you most proud of? There are things we’ve done that have greatly enhanced the care available to the people in the Berkshires. One of them is the development of the cancer center and the relationship with Dana-Farber Cancer Institute. But we were going to spend a lot of money making a state-of-the-art cancer center and wanted it to be affiliated with a top-shelf academic research center. Part of the motivation for me was personal. I had a sister-in-law who was more than just a sister-in-law. She was my friend. She was the first of my wife’s family that I knew, and she introduced me to my wife. She got a terrible diagnosis in Rochester, and her husband called and asked what he should do. I said, send me the information. She was given six to eight months to live. My folks [at BHS] said pretty much the same thing. But one of the surgeons said, “Take it to Boston.” I made a list of all the things I wanted to do with my sister-in-law. One of them was to consult with a neurosurgeon who was at Brigham and Women’s, and the other was that I wanted to get her to the care team at Dana-Farber. And we did. (This successful treatment enabled her to live another 12 valuable years in which she watched her children grow and graduate from school.) We experienced what well-coordinated cancer care meant for a family.

What is it that you wanted for the Berkshires in terms of cancer care? I wanted to have a center so care wouldn’t be so fragmented, so we could offer a kind of guarantee to our patients that if they walked in the door, it was as good as they could get anywhere. If they needed something we couldn’t provide, we would make it easy for them to get somewhere that could provide them a second opinion and work with physicians here to meet their needs. We asked Dana-Farber if they could look at a model like this. It was a loose affiliation where we could work together, share their protocols and their standards of care, and have some involvement. Our patients would know that when they walked through our doors, they weren’t just getting the care we think is good, but Dana-Farber was collaborating. It took a year and a half to develop the collaboration. The process we went through was eye-opening for them and for us. They sent a team of 18 people from Brigham and Women’s and Dana-Farber. They spent two days going through every policy, every procedure, every protocol, every outcome, the physical plant and all. I remember the exit interview. They said, “We don’t have a lot of recommendations. There’s a couple little things. You guys are remarkable.” Through the collaborative, we now have really good mechanisms for moving patients back and forth. Sometimes the patient doesn’t have to leave Pittsfield to get a second opinion, depending upon the nature of the cancer involved. It makes it easy for folks in the Berkshires to move into clinical trials. I’m really proud of that. Together, we can do something to keep really good cancer care in communities.

ON HIS TEAM AND THE BERKSHIRE COMMUNITY

Is there anything else that you would like to let our readers know about BHS and the Berkshires? I do want to reiterate the point that neither people nor organizations make it on their own. We have benefitted from a great leadership team, a board that has always been supportive even when it wasn’t easy to be, and we have remarkable clinicians and employees. I can’t even begin to thank them enough for all they have contributed. Our patients benefit every day, in ways that are reaffirming by the response that second homeowners have to our organizations when they come for care. They are just so complimentary to the experiences that they’ve had in all of our facilities. It’s heartwarming. Third-party validation also is important. We look at data, we have quality indicators, we monitor, we have organizations whose job it is to provide good information on how well you do relative to the industry as a whole, financially and clinically. But there’s nothing that’s more comforting and reassuring than a patient pointing out the special care they got from one of your employees or one of your doctors. At the end of the day, we are all here to create an environment that allows our clinicians to excel and to give every physician who comes here a good career path, to practice medicine in an environment that makes them feel proud.

—Anastasia Stanmeyer