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James E. Cathey, Jr.
President/CEO North Oaks Health System
PUBLISHED: November/December 2011
James E. Cathey, Jr. can boast over 40 years of
experience in the health care industry. During his 25
years of leadership at North Oaks, he has grown the organization
from a single, acute-care hospital to a major
health system with nearly 3,000 employees, physicians,
and volunteers. During his tenure, the system
has grown to include the 259-bed North Oaks Medical
Center, 27-bed North Oaks Rehabilitation Hospital,
North Oaks Heart Health Services (located within
North Oaks Medical Center), North Oaks Diagnostic
Center, North Oaks-Livingston Parish Medical Complex,
North Oaks Hospice Agency, North Oaks Outpatient
Rehabilitation Services, and nearly 20 clinics.
Cathey is currently overseeing a major
expansion of the North Oaks campus
to include a 200,000-square-foot,
five-story hospital addition with 14
new operating room suites, 12 additional Same Day
Surgery beds, and 67 new private inpatient rooms.
An additional 50,000 square feet is being shelled
in to allow for Phase Two expansion. Also soon to
open is a new 4-story office building, which will host
North Oaks Clinics.
Cathey’s professional career includes administrative
positions with several healthcare organizations
throughout Louisiana and Mississippi. He has been a
member of the Hammond Rotary Club and Hammond
Chamber of Commerce since 1987. Cathey has belonged
to the Louisiana Hospital Association for over
24 years and is a past president of the Southeast District
of the organization. Additionally, he has served
on the steering committee for the annual “Sweet 16/
Ladies Top 28” state tournament for girl’s high school
basketball since it was awarded to Hammond.
Cathey holds a Bachelor of Science degree in Accounting
and a Master of Business Administration from
Louisiana Tech University in Ruston.
Smith W. Hartley: What are some of the issues
facing hospitals these days?
James Cathey: Today, I asked that question to someone
this way, “What keeps you awake at night?” The number
one thing is the same it’s always been—reimbursement.
I think it’s more profound than ever. Now there are
all different types of payers—from Medicare to Medicaid
to managed care—and all three components are an issue
today and will continue to be moving forward. That’s always
been the number one issue, but it is significantly
more than it was in the past. The government programs
have, almost from the beginning, underpaid for the services
that the physicians and the hospitals provide.
I think the other thing that’s an issue today is also something
that’s been there, but now is massive, and that’s
change. There’s so much change that’s taking place. We’re
talking about healthcare, but we could be talking about
any industry. There’s always been change, but what’s different
today is the pace of the change. Literally, we may
be doing something today, but we may change in six
months. In the past, you would look at something strategically
that you were going to implement and it would
hang around for a few years. Not today. And also, as part
of that change, there’s so much that’s unknown in healthcare
today. I’ve been in healthcare a while, and never
have I seen this much unknown, and a lot of that comes
from the health reform act that was passed last year in
Washington. And part of the problem is that it is being
legally challenged. Is it going to be or is it not going to be?
What’s the real effect? If it stays as it is, it’s going to have
a very dramatic impact on North Oaks. One, the cuts to
North Oaks in Medicare reimbursement over a 10-year
period will be about $61 million. Two, and this is the one
that affects every state in the United States, the one you
hear Governor Jindal and Health Secretary Bruce Greenstein really
concerned about, and that is the large change in the number
of people who will become qualified for Medicaid and the cost to
the state. In every state, when this was debated last year, it was
unanimous; every governor was concerned about that part of the
deal. The numbers you generally hear, give or take a few percentage
points, are that our state will go from around 25% to 27% of the
population qualified for Medicaid to 45+%. That’s dramatic. That’s
probably almost not sustainable. So that’s a massive impact on our
industry nationally, statewide, and then rolling down to us.
Actually, if you had asked me that question three or four years
ago, my number one or number two concern might have been
workforce. That’s not true today. That’s not to say it won’t come
back around because we’ve seen this cycle before, but never to
this extent. The first year after Hurricane Katrina, our board
and leadership made the decision that we were going to keep every
service open. There was a drastic shortage of nurses. By doing
that though, there were not enough nurses, and we had to
go to contract nurses. We were paying an additional $1 million
a month for nurses through contracts. Today, we have no problem
whatsoever hiring a nurse. It’s just a dramatic change that
has happened, but that’s going to evolve. I’ve never seen anything
as dramatic as the “Katrina effect,” but the economy has had a
significant impact on hospitals for the first time in my career. It
used to be healthcare was almost immune, but maybe it’s because
in the last 50 years, we’ve never had a downturn in the economy
quite like this one. So workforce I think probably for most
hospitals, if not all—certainly here on the Northshore—is not
one of the top one or two concerns that we have. Now what we
have to be prepared for with workforce is the baby boomers aging
out. That’s still real. I know everybody’s heard economist Loren
Scott’s presentation, and when you look at the timeline, it’s
like a watermelon. There’s a big bubble there that’s going to age
out. Now, I do believe, because of the economy and other reasons,
baby boomers are working longer, so it’s maybe not going to happen
on exactly the timeframe that he was predicting, but they
will at some point age out. They’re not going to be wage earners
any more, and that’s going to affect tax bases. The second thing
is there’s going to be a huge opening for jobs. And that’s probably
the next challenge—unless there’s something catastrophic that
we can’t predict. Workforce may be a greater issue then than it’s
ever been because there’s such a large group of people moving
down that timeline. I’m just concerned that it’s such a different
industry today than it was 10 years ago. Will the “young brights”
still choose to be a doctor or decide to be a nurse or consider the
other careers in healthcare? That’s something we’ll see.
So I think one and two are reimbursement and the massive
amount of change that is taking place, the speed of that change,
and the fact that so much of that change has an unknown.
SWH: With all that change, do you then take a wait and
see approach?
James Cathey: You can look on either side of us (gesturing to
ongoing construction at North Oaks) and see what we’ve decided.
But our situation is probably different than a lot of others. We believe
we have a lot of opportunities others don’t have. The Northshore
is still growing; it’s probably the hottest property in Louisiana
and probably one of the fastest growing parts of the United
States. So we have opportunities that other segments of Louisiana
and other segments of the United States do not have. And in
our case, in the middle of all of this upheaval two or three years
ago, we were faced with a situation. With our present buildings,
we could not meet the needs of the existing population. We did
not have enough capacity. There are many days in our Emergency
Department where we’ll have 20 to 30 people on stretchers or
housed in our ED that we have admitted, but have no inpatient
rooms available. So that’s a challenge, but it’s a good challenge, and
it’s an opportunity. And then, the number of ORs that we had was
not adequate to meet the needs of our patients and medical staff.
Third is our present buildings—some of which were built in the
‘60s with two or three expansions since then. During that period
of time, what was built in the United States was semi-private
rooms. That’s just what the industry built. In today’s world,
nobody wants a semi-private room. Today we are about a 50/50
mix. That’s terrible. It’s not efficient, and it does not meet the
needs and expectations of our customers. So with all that being
real and factual for us, then the world ended as we knew it,
whether you are talking about Katrina or the financial meltdown
that took place a few years ago. This board and this leadership
made the decision that it was our responsibility to take care of
the population that we’re here to serve. So, to use a gambling
term, we sort of went “all in” not only with this building, but also,
with a growing population, we needed doctors. We have a very,
very good medical staff, but by numbers, we do not have enough
physicians to take care of the population we serve in this region.
And there’s just not available office space. We’ve got doctors that
are running their clinics in spaces almost as small as closets. We
just didn’t have anywhere, they were not being built in our area,
and there were not even old clinics they could use. So we made
the decision to build an office building. Both of them happened
at the same time. It’s almost the chicken or the egg. Which do
we need first? A place to put the doctors or a place to put the patients?
We had a shortage in both areas, so being very blessed,
we had the financial opportunity and ability in times when some
might question why we are building. We have a responsibility to
take care of this population, and we were not able to do that to
our level of satisfaction. And I’ll tell you, when we move into this
office building in October and November of this year, we will be
in the same position we were on the day we started the building.
It will be full, and we will not have any office space.
SWH: Where do your patients come from? What are their
demographics? Are you looking to attract new patients
or do you not have the capacity to do that?
James Cathey: In the world we live in today…and our industry
was changing even before the economic meltdown…our belief is
we’re designing the new way that healthcare is going to be provided
for this region in the future. Others are doing this too—not
just North Oaks. What worked in the past is not going to work in
the future. We’ve got to design a new way to deliver healthcare.
We have got to do it more efficiently. No question, because the
one sure thing is hospitals and doctors in this country are going
to get paid less in the future. That’s the sure thing. So we have
to be more efficient, we have to have a better design. We have
to have a better model of the way we deliver care in this country.
Our responsibility is the delivery of care here in this region.
Where do we get the majority of our patients from? The vast majority
comes from Tangipahoa Parish, the second would be Livingston
Parish, and that was that way even before we went into
Livingston Parish. Then we’ll get a sprinkling of patients from
St. Helena, Washington Parish, and St. Tammany, but very few.
I’m going to guess 80 plus percent come from Tangipahoa and
Livingston Parishes combined.
SWH: Are there some services you don’t provide that patients
would go to Baton Rouge or New Orleans for?
James Cathey: Well, we don’t have a burn unit, and we don’t
do transplants. But beyond that, we do everything here. We’ve
got good physicians on this medical staff. For example, Dr.
David Masel is a neurosurgeon that we recruited recently from
El Paso, and we get many out-of-state patients for him because
he has built up such a national reputation. Dr. Gerard Gianoli,
who is a neuro-otologist, draws patients from all over the world.
His office is in Baton Rouge, but all of his inpatient surgery is
done here. It’s just a change that is taking place in the spectrum
of what we do and the breadth and the width of what we’re doing
that has evolved over time. But again, here on the Northshore,
the population has grown so much over the last 20-25 years. It
has not been boom growth, but it has been a very consistent 2, 3,
4 percent growth in the St. Tammany and Tangipahoa Parishes
area. And, of course, in the last 10-15 years, Livingston Parish
has really, really grown.
SWH: What does your payer mix look like?
James Cathey: We are not good. When I say this, please know
I am not talking about people, I am talking about the reimbursement
model the government has given us. In Tangipahoa Parish,
we have a significantly larger Medicaid population than either
parishes to our east or west. They are also large in St. Helena and
Washington, but their populations are so small, the numbers
aren’t comparable. In our parish, probably 25-27% of our population
is Medicaid. I’m not positive on the numbers, but St. Tammany
is probably 8-10%, and Livingston might be 5-8%. And because
we are so large, our numbers are large numbers. We are one
of the largest Medicaid providers, not only by percent, but also in
absolute numbers in the state of Louisiana.
SWH: Where do you fit in with the Northshore? What
other acute care hospitals are available?
James Cathey: Depending on who you talk to, you’ll get a different
definition of Northshore. Perhaps the St. Tammany people
wouldn’t include us, but we are part of groups like the Northshore
Healthcare Alliance. My definition is basically the I-12 corridor
from Slidell to Baton Rouge. That may be a broad definition of
it, but when I refer to the Northshore I’m talking about St. Tammany
Parish, Tangipahoa Parish, Livingston Parish, Washington
Parish, and St. Helena Parish.
On the Northshore, you have two hospitals in Slidell, Slidell Memorial
and Northshore Regional; moving west into Covington
and Mandeville, you have St. Tammany Parish Hospital and you
have Lakeview. In between those is the Louisiana Medical Center
& Heart Hospital in Lacombe. When you come to Tangipahoa
Parish, you have North Oaks in Hammond, Lallie Kemp in Independence,
and Hood Memorial in Amite, and then you don’t get
another hospital until you get to O’Neal Lane. There’s nothing in
Livingston Parish.
SWH: What’s the timeline for your expansion?
James Cathey: We will begin moving into the North Oaks
Clinic Building in this fall. The last floor should be occupied by
November or December. The other building, the new patient tower,
is scheduled for completion in summer 2012. It will have additional
patient rooms, all private. It will have 14 totally new surgical
suites. In Phase II, there will be an expansion to our ED. We
are the second busiest emergency department in the state of Louisiana.
The only ED that sees more patients than us is the Lake.
There will be an expansion in our nutritional services because
we’ve got more patients, more rooms, so we’ve got to accommodate
that. We will also be adding a surgical ICU. I think that nationally
we have a significantly sicker patient today than we had
10 or 15 years ago. I don’t know that anybody has the answer as
to why that is. They are just sicker. So the beds that we run out of
the quickest are the critical care beds—the ICUs, medical/surgical
and telemetry beds. So that’s what the vast majority of bed types
we are adding are.
Going back to healthcare reform and Medicaid, a concern we
share with every hospital in the nation is how to care for the influx
of additional patients seeking care in the ER that expanded coverage
may cause for conditions more appropriately treated by a primary
care provider. There’s only x number of patients we can take
care of in the emergent setting, especially when they are patients
that don’t require emergency care. They belong in some type of
primary care setting like a walk-in clinic or a physician-based clinic.
So it’s going to be a challenge to manage the population that
does not have a physician or chooses not to have a physician. It
will be interesting to see how the Coordinated Care Network that
Louisiana is rolling out will affect that. We hope that it is successful
because it will come before that additional wave of Medicaid
recipients as far as placing them with a physician or placing them
in the proper setting. I hope it’s successful in changing the culture
of the Medicaid population and where they go for physician care.
Another issue that will directly affect us and every hospital in
our state is physician reimbursement. For the last few years, they
have introduced decreasing physician compensation by up to 40
percent. Each year, that can gets kicked down the road for another
year, but if that were to ever happen, if a doctor can leave
our industry, they are going to check out. There’s also that concern
about the brain drain and if the “young brights” don’t choose
to go into healthcare. There could be a massive physician shortage
in our future. I’m not here to predict that, but if this lines up
wrong, it could be a very significant issue in addition to the normal
workforce shortage that is coming with the baby boomers
anyway. Doctors are very frustrated with where healthcare has
evolved to in the last 10 or 15 years.
SWH: Are you optimistic about the Coordinated Care
plan coming through the state?
James Cathey: I hope it works. I agree with the Governor and
Secretary Greenstein, and really it was introduced conceptually
when Secretary Levine was here. Secretary Greenstein has
changed it a good bit. The model we have had for so many years is
just not sustainable. I think we all agree that the current model
has to change. And that’s what I was talking about; the redesign
that we’re in for healthcare. I think we had to try something
different. Is this the right answer? Obviously, the Governor
and Secretary Greenstein believe it is, but I don’t think anyone
knows. I hope that they are successful, but at the foundation of
it is changing the culture and the mindset of the Medicaid recipients
as to how their care is coordinated. And that is a big statement.
I’ve said it in one sentence, but it is massive. That’s what
we will find out with these companies that are coming in; are
they able to change the mindset of a program that’s been here
for 40 or 50 years? None of us does change really well, especially
if something has been around that long. But the model we have
is just not sustainable.
SWH: Is there anything interesting coming up for North
Oaks or you personally?
James Cathey: We have a lot of challenges in healthcare, absolutely
we do, but I am the most energized about my career as
I ever have been, because we get the opportunity to design the
healthcare of the future. And I believe that’s going to be done
community by community. It’s not going to come from Washington,
and it’s not going to come from Baton Rouge. They are
going to make the decisions about our reimbursement. That’s
the golden rule; he who has the gold makes the rules. But we are
going to take that, and we are going to get to design how healthcare
is going to be provided in the future in our area. That’s exciting
to me. We have opportunities here that others do not
have. We are going to do everything we can to take advantage of
these opportunities.
We’re having to change. I had to change. I had to change my
mind set. It could not be the way I thought in the 70s, 80s, and
90s—even the 2000s. That part energizes me. I’m not saying
I’m enjoying this time or that it’s fun, but the opportunity, if
you think about it, is we get to design how healthcare is provided
in this region. The challenge, with all of this efficiency and
cost reduction conversation, is balancing it against protecting
the quality of care. I think that’s what pushes me, and I think
that’s what pushes a lot of leaders in healthcare today because
we really do believe in this quality element, however that’s defined.
But this is going to happen whether we want it or not.
We’re either going to manage the change, or the change is going
to be driven to us. I do believe that 10 or 20 years from now
there will be fewer hospitals open in this country. It was already
happening. The healthcare reform act is not going to be the driver
that does that, but it’s going to speed up the process.
We’re working to manage the change. We take very seriously our
responsibility to the population we serve. We’ve got some really
good leaders in this state. The LHA leadership is outstanding,
the Scott Westers and the Bill Holmans and the Teri Fontenots
in Baton Rouge and the Pat Quinlans and the Dr. Mark Peters in
New Orleans. There are some really outstanding healthcare leaders
in this state that are working very hard in their regions to do
exactly what I’m saying. This is not special to Jimmy Cathey at
North Oaks. We have some really good leaders that feel the same
way about their communities and are doing the same things we
are doing. It may look a little different, it may have a different
shape to it, but basically they are doing the same thing.
Where we are located, we are kind of in the middle of everybody.
But you know what? In the change that’s taking place in healthcare,
we are going to partner with people we never anticipated
working with. It may not be a legal agreement, but hospitals and
providers are going to do things with others that we’ve never
imagined we’d do.
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