Interview with Frank Butler, May 8, 1986

SMOOT: To begin Mr. Butler, tell me a little bit about yourself, your family background, where you were born, your educational background, et cetera.

BUTLER: I was born in Waymouth, Massachusetts on October sixth, 1942, grew up in Washington, D.C. I went to undergraduate school at Virginia Polytechnic Institute, degree in industrial mechanical engineering. Worked several years in the Virginia Hospital Association as a consulting engineer and then went back to graduate school at the medical college of Virginia in Richmond, Virginia, obtaining my master's degree in hospital administration. Spent my residency at Roanoke Memorial Hospital in Roanoke, Virginia. Went from there to the Medical University of South Carolina, served one year as an 00:01:00assistant director, two years as an associate director and then moved to Lexington in 1975, as associate director under Judge Calton, who I believe was the third administrator of the University Hospital. Was associate here until 1980, and became the director in the 1980-81.

SMOOT: It seems that-- industrial mechanical engineering was your-- was your major, that seems like--

BUTLER: It was my undergraduate major.

SMOOT: -- a rather strange that you would end up in hospital administration from industrial mechanical engineering. Am I wrong or is this--

BUTLER: I think probably about half the engineers in the country have taken a career course change. I basically got changed because while working as an engineer in a hospital, I became-- I became aware quite soon that-- that there were a lot of people working in a hospital and 00:02:00there was one individual running it, who was the administrator, and I started inquiring about how you become an administrator and at that time the-- the key was a master's degree in hospital administration and I happened to be working in an office three blocks from a-- from a master's program in hospital administration, so-- and I worked at the hospital that was affiliated with the university. So when I decided that it was-- that was the-- a key to fur--- to advancement in my career, I resigned from my position with the Virginia Hospital Association, took a part-time job with the Medical College of Virginia Hospital and-- and then spent a year at school in the academic portion, and then had a year residency to follow it in-- at Roanoke. But, um, I was interested in hospitals early on because there were a number of people in Virginia with a sim-- with a background similar to mine in engineering, who had moved into hospitals in the late sixties and who 00:03:00actually came and recruited a number of us directly out of-- out of our undergraduate programs to go into work in hospitals. And I'm-- I am-- I've never been--I shouldn't say never--I am mostly never sorry that took that career change.

SMOOT: Um-hm. Um, you studied in Virginia and did your residencies in Virginia, et cetera. How did you get to Kentucky all of a sudden?

BUTLER: Well, actually, as you're probably aware, hospital administration is a field similar to others, and that is that those of us who run hospitals gather periodically to-- to talk about what we're doing compared to what some-- what the others in our field are doing. And I met Judge Calton at a meeting, and I'm not sure I can even remember where at this point, and I was impressed with him. And we talked and he said-- asked me at that time, you know, was I interested 00:04:00in looking at anything else and I said, well, I really didn't know. And he-- he described what was going on at the University of Kentucky and it sounded like something that I would want to be a part of. And I was like everybody else, looking for a-- a chance to move up, and so I came to Lexington and interview in early 1975. I fell in love with Lexington. Saw the opportunities at the medical center and thought they were considerable, recognized the intellectual capacity of Judge and-- and was very impressed by what he was able to accomplish, and thought it would be a team which would not only provide me with some good experience, but would also give me, you know, I needed exposure to other than one medical center and it looked to me at the time that Kentucky was on the move and it would be a-- and it'd be a good time 00:05:00to be a part of the management team here. As it turns out, it was, you know, it was a fortunate decision.

SMOOT: Um-hm. Did they take you around to introduce you to various, uh, deans and so forth?

BUTLER: Oh, I-- I got--

SMOOT: Tell me a little bit about that process.

BUTLER: I got the full-- full course of interviews.

SMOOT: Um-hm.

BUTLER: Um, including the requisite interview with the chairman of psychiatry. I always found that to be an (Smoot laughs) interesting diversion. I-- I was-- I-- I presumed that the chairman of psychiatry interviewed you for-- for a specific reason (Smoot laughs), but I'll-- I won't forget my interview with Arnold Ludwig. But um, yeah, I-- I think it-- it really was a sense of what the people here were about, that it was a well managed institution, that their orientation to patient care was unmistakable. And that was really what I was looking for, that and an opportunity to do some different things.

SMOOT: Um-hm.

BUTLER: I've had different levels of responsibility. The Uni--- the hospital had just finished expanding at that point in time. What we refer to as the 1975 edition, the front-- front of the hospital was just completed. And-- and it was an opportunity for me to-- to come here-- I had a number of reasons for coming here, one was I thought at the time that I wanted to pursue a doctorate degree. It didn't take me long to figure out that-- I-- and I started in the graduate program here in-- in business administration and-- in the D.V.A. program and-- and discovered very quickly that trying to that and be responsible for a family and have a full time job in, you know, a hospital that was-- as dynamic as this was, was basically impossible, so I decided that devotion to this full time was-- was about all I could handle. But I 00:07:00really did want to get back into a-- a university environment that-- that was a full university. The Medical University of South Carolina was-- was basically only a medical university; there was no other activity on campus and-- and I-- the idea of going--coming to a campus that had a full range of-- of university activities appealed to me. So, you know, in retrospect, if you ask me would I make the decision again, the answer is unquestionably yes.

SMOOT: How does this facility compare with-- with you experiences in Virginia as well? You-- you've already compared it somewhat to what you were seeing in South Carolina.

BUTLER: Um, when-- as-- as you probably are aware, when this institution was, was conceived and it was being built, there was a great deal of innovation and new thought and-- and uh, that still-- that-- that presence and that aura was still here in 1975 when I interviewed. 00:08:00There was still a high level of enthusiasm for what was going on. The dean, Dr. Clausen, had been here just about a year and a half or two years when I arrived. He was obviously a very enthusiastic, hard driving person. He and Judge seemed to work well together, which is obviously a key in any many medical center to the functioning of a teaching hospital and that is that the hospital director and the dean have got to have a good working relationship. You know, the respect in which Judge was held by his peers as well as the people in this -- in this institution had a great deal to do with my-- with my coming, as well as the fact that-- that historically, the people who had come here, not just in-- in the University, but in the hospital particular, had-- careers had blossomed as a result of their association with this medical center and I think that it was a reflection of-- of the quality 00:09:00that was expected of people here. And I think-- I sensed a little bit more of a-- of a devotion or a-- a togetherness when I first came, than I sensed in other institutions. Some of the ones that-- one of the ones that I worked at--the Medical College of Virginia Hospital--was an eleven hundred bed facility, that at-- at the time I worked there, seemed to be so huge to me, to have no coordination at all; everybody sort of was doing their own thing. And um, there was a great deal of-- of understanding here of what-- of what everybody else was doing. And while not everybody was marching to the beat of the same drummer, there was enough continuity in thought that uh, the institution was really moving ahead as one and not as a series of individual parts. And I think that was the thing that I-- I remembered when I interviewed and 00:10:00the thing that was the most impressive when I first got here, that there was a sense of unity in terms of what the medical center was all about, where the hosptial's role was in that plan and-- and how it interdictated with the rest of the medical center.

SMOOT: Um-hm. Obviously you were impressed, as you have mentioned already, with the facilities and with the town, the fact that you had a whole university setting right here. Um, let me ask you to-- to back up and talk about the-- the foundation of hospital administration here, because I-- you've heard-- undoubtedly you've heard--and are aware of different opinions as to how well some of the foundation stones were laid in relation to--

BUTLER: Um-hm.

SMOOT: -- the administration of this facility.

BUTLER: Yes-- well, when I got here, you know, this -- this ho--- institution was in its, I guess, thirteenth year. There had been only three administrators. In re--- in effect probably really only two because Dick Wittrup was here for a number of years. He was replaced- 00:11:00-and I'm going to block on his name--John Laberty, but John was here I think less that eighteen months. And-- and then Judge took over in 1972, I believe, sev--- somewhere been '70 and '72, and was here until 1978. So in effect, in the first sixteen years of its existence the hospital had two, you know, two administrative people. Um, and I'm fifth, you know, in the series of this-- of this institution. And I guess our career-- or the careers of hospital administrators have been compared in terms of their tenure to deans of medical schools and that is they turn over about every two and a half years. And that hasn't occurred here and I think it's added to the stability of the institution. I think Dick Wittrup, as little as I know about him, having only met him a couple of times, was probably one of-- 00:12:00one of the real thinkers in the health care field. I'm sure he was recruited because of his background and credentials originally. He's gone on from here to do some-- some substantial-- made substantial contributions to the health care field. He's currently managing a number of health care facilities in the Far East and went from here to Boston and did very well there. So, I think a great deal of thought was given to the original administration of this-- of this institution. It's interesting to me that there has been a lot of internal growth in terms of the development of administrative people. The current administration consists of myself and Bill Massey, who-- Bill ca--- who ca--- Bill came as a resident the-- about three weeks after I arrived here as associate director. And Bill is now the associate director 00:13:00here. The administrative staff here has either come from within the University or has come from within the hospital; people who came into the hospital at a lower level have-- then have worked themselves up. The only person we've recruited outside the University in the last five years, other than the key financial officer, was-- who came here in 1980 and has since moved on, Peter Franklin, has been Diana Weaver as the director of nursing. So we've got basically an ingrown admin-- an ingrown -- inside the-- the University administration here, which I think speaks well for the institution. If you-- if you hire good people and you allow them to grow, then you've go-- you-- you ought to be giving them the opportunity to move up in the organization. And-- and that's basically what we've done here in the last ten years. And obviously that's what happened to me, since I came here as the associate and then ultimately was-- was allowed to become the director. Judge came as an assistant, moved his way up to associate and then was 00:14:00made administrator, so, you know, that-- that's been a history of-- of administrative staffs here. Bill Corley, who was the associate before me, left here, became the director at the Hersey Medical Center in Pennsylvania, moved from there to Youngstown to be the administrator of a large hosp--- I said--did I say Youngstown? I'm sorry; um, Akron, Ohio--and became administrator there and is now the head of one of the premier facilities in Indianapolis. So as-- as you look back at the careers of the people that have-- have been in the administrative ranks of this hospital, you will find significant achievements. And of course Judge Calton, who was two before me, is now the president of Methodist Hospitals in Memphis, Tennessee, which is one of the largest community hospital systems in the country. So I guess the careers of these individuals have demonstrated that-- that the University Hospital 00:15:00at the University of Kentucky has been a very fertile ground in which to grow. And I'm anticipating that we will continue that tradition in the future.

SMOOT: Were you made aware, when you came here, of the -- of the basic philosophy that had been written by the founders of this institution concerning not only the development of medical education, but even in terms of the development of the physical plant of the hospital and-- and the medical school and the relationship of departments in how they had been situated on certain floors and et cetera?

BUTLER: I-- that probably wasn't a piece of knowledge that was up-- that was provided up front.

SMOOT: Um-hm.

BUTLER: You learned very quickly after you got here the way things worked. I guess I assumed that because I stepped into an organization that was working very smoothly, you know, that that was done easily. I -- I-- I-- as I talk to people I become aware of the fact that nothing 00:16:00was-- was accomplished in-- easily, that it was all accomplished through hard work, but it certainly was in good shape, uh, when I arrived here in '75. But you -- it didn't take long-- as a matter of fact, I recall having been here I guess no longer than four or five months and Judge asked me to give the hospital report at a clinical board meeting and it was my first time and I was quite nervous and I gave the statistical report and then somebody asked me a couple of questions about how the hospital was doing and I-- I made a few comments and I wasn't sure I really remembered what I said because I was so nervous, I sort of blurted it out and I was so glad when my portion of the report was over and Dr. Clausen took it -- took the meeting over again. And I was feeling very-- very smug that I had made it through the meeting. As I walked to the door of his 00:17:00conference room after the-- the clinical board was over, kindly Dr. Clark, our emeritus professor of neurology and then chairman of neurology, grabbed me by the elbow and said, "Young man, there's some things you ought to understand about this institution," and he marched me from Dr. Clausen's conference room to my office, (Smoot laughs) closed the door, and I got an hour and a half lecture from Dr. Clark. (Smoot laughs) Very-- it ended up being one of my better educational experiences. I had made the mistake--I didn't know why Dr. Clark had picked me out--but I had made the mistake earlier in the week of-- of making a reference to Dr. Clark in one of my comments. We were trying to install a new process in the admitting office for bringing patients into the hospital and I'd had a couple of previous encounters with Dr. Clark and came to realize that he was very knowledgeable on what was going on and he was also a very tough guy to deal with if 00:18:00you didn't know what you were doing. And I made the mistake of saying to the people in the admitting office, "If we can get this one by Dr. Clark we can get it by anybody." (Smoot laughs) And unfortunately, he (laughing) found out about that. (Smoot laughs) So I-- I did get a-- a very good lecture on the relationships between the college of medicine, the chairmen and the hospital administration from Dr. Clark and I have never forgotten it. He gave it in a-- in his usual, gentlemanly, introspective manner and it was actually-- it was quite kind of him to do it, although I wasn't sure at that the time, that-- when he grabbed me by the elbow that he had kindness in mind, but (Smoot laughs)-- but it -- I-- I won't forget my first encounter with Dr. Clark.

SMOOT: This institution has been changing in many ways. I asked this philosophy question in terms of the physical plant here and when you came here for that -- for the reason I wanted you to take, since you've been here and bring us up to the present and perhaps tell me how well 00:19:00that philosophy that was originally espoused here has held.

BUTLER: I would sus--- I would probably observe that a number of things have changed since--

SMOOT: Um-hm.

BUTLER: -- since the institution was originally set up. Best-- to the best of my knowledge, there were some thoughts that originally when the hospital was built, there were a lot of spaces, for example, on the patient care floors that were designated as-- quote unquote, "Teaching and conference spaces." Everybody knows what happens to a hospital that has lots of teaching and conference spaces over time. As programs change and as technology changes, the first thing that you look at when you need new space is conference spaces and teaching spaces, 'cause they are probably the least utilized in terms of an acute patient care 00:20:00facility. Um, as you change programs, you can't expand the building unless you go into a major program, so you're always looking around for opportunities to-- to attack what appears to be the weakest link in the chain and so the face of education has changed in the hospital over time. Where it's carried out, um, how it's done, the method of education has also changed for the most part. Even though there are rounds now--

SMOOT: Um-hm.

BUTLER: the-- the time when-- when a attending physician would walk into a room with a group of students and stand in front of the patient and explain to them what was wrong with the patient have passed us by. What we now do is--in terms of education--is we discuss a patient both before and after visitation, but we don't discuss a patient's care in front of the patient. You know, I think that's-- that's 00:21:00progress obviously. But that means that we do teaching now in remote conference spaces or we, you know, the way our hospital's currently designed, there are spaces on each of the wings where if you need to duck in to have a word about somebody so that it, you know, so that you're not talking about them in front of their relatives, et cetera, there's conference spaces at each of the nursing stations. So if an attending wants to take three or four medical students into a little room and sit them down--or residents-- and talk to them about the condition of a patient, that can be done in an area that doesn't expose them to the patient or-- or to-- or to relatives or visitors. The-- the-- the change in attitude in a teaching facility towards the-- the necessary confidentiality of patient information-- the need to treat all patients as though they were private-- unquo--- quote unquote, "patients" has become very apparent in the last ten to fifteen years. 00:22:00To say that it didn't happen before would probably be an error, but it didn't happen to everybody. And I think there is a new awareness and a new sensitivity to the fact that-- that what may have been done under the-- under the guises of teaching in the past is not acceptable behavior--or practice anymore. The discussion of a patient's condition on an elevator, which used to go on routinely in most teaching institutions, without knowing who was on the elevator with you, is an unacceptable practice. It never was-- quote, unquote, "acceptable," but there-- I think there was less sensitivity to the issue. People are much more concerned about their privacy these days, and have a right to confidentiality of information related to their care. The other-- I think probably another very important element as a teaching institution, we see a lot of patients, including our own faculty and 00:23:00staff, one of the things that we have tried to emphasize here with our own people is the nec-- necessity of treating all information very confidentially because obviously if you as a staff member were in here and you happened, as a faculty member, to know other faculty members who are here, you would not want your care and your-- your condition casually discussed as you might discuss a history paper among your peer group faculty, so-- and obviously there are a lot of people in the university who know people who work here. And so what we do is emphasize to th--- to our own staff that when a patient comes into the hospital, whether they know them or not, makes no difference. We treat all patients the same with regard to the confidentiality of the information and none of it is to be shared outside the context of caring for the patient. So those things have changed, you know, I-- I 00:24:00guess you could say, "Gee, shouldn't there always have been that kind of a sensitivity to this issue?" And the answer to that is probably yes, but there-- but there wasn't in the past and there certainly is now. So I think the-- the-- the approach to teaching has changed, the approach to patients has certainly changed. To refer to a patient, ten years ago, in anything other than, you know, I guess what you would call historical hospital terms, would have been unthinkable. To talk about the patient as a client or as a customer would have been an almost total insult ten years ago. The reality is that hospitals are businesses and without patients there is no business. We obviously are not-- we have not reached the stage yet--and will never--where we-- we look at patients like McDonald's looks at hamburgers. But 00:25:00we have changed our orientation and we have been much more sensitive, like a business has to be, to the interests of the people that they, uh, serve. Um, that can be reflected in the changes in the hospital. If you were to look at where it was in 1980 and that wasn't that the physical-- facility was quite adequate in terms of its-- of-- of the resources it could provide. We had the four walls, we had heating and air conditioning, we had electricity, we had everything you need to provide care, but we also had cinderblock walls, ugly tile floors, you know, rooms that were functional, but bas--- but basically grossly unattractive. And what we've been involved in in the last five years is a change in that environment, so, you know, not only is the care good, but the environment is perceived to be equally as good.

SMOOT: Um-hm.

BUTLER: The psychology of taking care of patients hasn't changed a 00:26:00whole lot, except that I think the level of expectations in patients has changed. It used to be that people perceived that they could go into any kind of a "hit" (Smoot laughs) and receive good care and -- and obviously as people become more sophisticated about there choice of health care, as they come to expect not only good health care, but a reasonable environment into which-- in-- in which they-- to receive that care, the-- the days of fifteen bed wards where everybody's lined up shoulder to shoulder and you watch the next guy--the guy in the next bed--get an enema, are-- are-- that is not realistic. And, uh, so there's a new level of expectation and-- and institutions have to respond to that. I think-- I think, especially in Lexington, where we have a very aware community, very sophisticated, understands health care issues, are very willing to ask questions about what's being done 00:27:00to them and for them, uh, expects a certain level of-- of institutional environment, which is viewed as conducive to-- to recovering from an illness or being treated for an illness, um, and those individuals have choices, are making those choices and so we're-- we have tried to restructure our institution, both from a physical plant standpoint as well as a-- an employee standpoint to respond to those. We have tried to emphasize to our employees how important it is that the patient and their vi--- and their visito--- relatives and visitors from the very beginning receive nothing but-- but the best of care, whether that be a helpful hint from the parking attendant on where to park their car, courteous treatment from the admitting office employees, uh, a 00:28:00timely processing of paper work, a good morning from the housekeeping employee when they come in to empty the trash can, all those things, um, are important to-- to patients and how they perceive how well the institution is functioning. We have never had to apologize for the level of-- the quality of care that we have given here. It's always been, in my opinion, the best. But we have had to apologize in the past for our environment and within the next two years, we will no longer have to apologize for that either, so-- we've made a concerted effort to change the hospital in a way that enhances the-- the patient care that we give.

SMOOT: For a long time this institution was perceived as almost-- I-- I really shouldn't use the word clearinghouse, but this was the place where all of the people from eastern Kentucky were coming in.

BUTLER: This was-- this was perceived to be the indigent care facility 00:29:00for the central and eastern part of the state.

SMOOT: Okay.

BUTLER: That's correct.

SMOOT: Okay. First of all I would like to ask you whether or not this is still the major institution that eastern Kentuckians turn to when they have major health problems? And secondly, tell me a little bit about the process and the reasons for change in the original ideas on treatment of-- of indigents in this institution, why those changes had to take place --

BUTLER: Sure.

SMOOT: -- the rationale, et cetera.

BUTLER: The answer to your first question is that, yes, this is-- I-- in-- from my perception, still the-- the-- the premier--the primary-- institution for tertiary care for central and eastern Kentucky.

SMOOT: Um-hm.

BUTLER: Um, there are a lot of other hospitals that-- that are in the tertiary care business--in selected areas. A lot of the community hospitals in central and eastern Kentucky that didn't perform 00:30:00sophisticated procedures ten or fifteen years ago now do. Many of the things that we do here can be replicated at the local level. But on the other hand, there's a lot of things we do here that are not replicated on the lower-- on the local level, examples being bone marrow transplantation, neonatal intensive care unit, level three type care, burn unit care for the seriously burned patient, concentrated continuity cancer care which we provide here. There are really a number of sophisticated medical procedures that probably will never be replicated in the community hospital because it's not just a case of providing the necessary physical plant resources or even physician resources, you have to have an academic enterprise to back up a lot of what we do here. And I think bone marrow transplantation is 00:31:00probably one of the best examples of that. Many of the techniques that are currently being used now in bone marrow transplantation at this institution did not exist when we started the program. T-cell depletion was basically developed here by our faculty and-- and that wasn't even in existence when we started this-- this-- this enterprise, approximately 1979, 1980. And that's developed out of the academic process. That would never happen in a community hospital because that's not their-- they're care deliverers, not care researchers. So we will always do s--- a number of things which won't be replicated. So for a lot of care, yes, we will continue to be the institution of choice for-- in central and eastern Kentucky. In terms of changing the-- the focus of the institution, if-- I became very aware of, I 00:32:00guess what you would consider a message, that I saw coming from the state [coughs]--excuse me--in terms of-- of financial support for this hospital over time. With one or two very minor exceptions, the University Hospital since 1967 has received only one major increase in its state appropriation and that was for support of the neonatal program in 1978. We've gotten a few small increases, we've also gotten some cuts as the vagaries of the state budget process have-- have occurred. And so as-- as I looked and-- and as I was asked by the chancellor--or the vice- president at that time--to assume the role of director of this hospital, one of the first things I did was look at the financial status of this institution, which in 1980 was quite poor. We were basically a hand to mouth operation. It was 00:33:00quite clear to me that there was going to be no major infusion of state funds into this hospital. At that point in time about-- between 10 and 12 percent of our patients were-- were totally without funding, we had a very large Medicaid load, and so I proposed that we look at ways to reduce what I saw was going to be an increasingly large financial deficit at this institution. The other thing that I became, I think, probably aware of at a very early, uh, point is that the University as an academic institution was not structured nor financed to underwrite large operating deficits of a teaching hospital, that there were already demands on the University's funds which exceeded its capability to respond. The University at that time, as I remember 00:34:00a presentation by Dr. Singletary, was having to fight its own battle in terms of a-- of a shrinking portion of the state dollar. So they were not in a position to-- to step in and underwrite a-- a university hospital which could-- which could have probably run up deficits at a rate much faster than even the University would have been able to-- to address if it-- if it had the resources, with no prospect for -- for any help from the outside. So we had basically a committee of people inside the institution, including faculty, pe--- members of the chancellor's staff, who looked at what kind of changes in the way we were doing business needed to be implemented, recognizing that we were always going to have a larger proportion than any one else of indigent patients because of the types of programs we have here, that-- that 00:35:00our teaching programs were going-- were going to be the elements that-- that drove what the hospital did. We looked at a-- I guess a changing philosophy in terms of what you would call the open door policy, and that was we took all patients without regard for their ability to pay. My recollection of some of our musings and computations at that point involved an examination of what kinds of patients we were taking, where they were coming from, why they were coming to this institution? And one of the conclusions we came to, that many patients were coming to University Hospital not because they required tertiary care and not because care wasn't available in their community, they were coming here simply because they had no money. And so the council of supervisors, which is the body charged with governance of the University Hospital, 00:36:00under the auspices of the Board of Trustees, looked at the policies that were in effect and looked at our original mission statement. We went all the way back to looking at the mission statement that was developed and while the mission statement made references, you know, to the fact that there would be indigent care at this institution, it was determined that there-- that, you know, we had no specific role in providing indigent care. You know, we were not a county or city hospital. We were not a hospital that was established by the state for the purposes of providing care to people who couldn't pay. We were established as a teaching institution and that our state appropriation, which comes through the Council on Higher Education and not through the Cabinet for Human Resources or some other mechanism, was for support of educational programs here and not for support of patients who couldn't pay. And we continue to retain that position. The only allocation we currently have is-- is a million seventeen thousand dollars, which 00:37:00is earmarked specifically for support of the neonatal program. The rest of the money comes-- does not come directly to the hospital, but comes into the colleges and passed through to the hospital for support of the educational programs that take place in the hospital. So the-- the philosophy change that occurred in 1980 was that we would review admis--- all admissions of patients to University Hospital, that we would reject no patient who was-- who was an emergency patient. If the patient needed to be admitted here and it was determined that the-- that their-- that delay of their care would be life or health threatening, we would take those patients without question. We did however, reexamine the issue of whether patients should be accepted solely on their ina--- on the basis of their inability to pay and decided that that was not a criteria for admission to this institution. 00:38:00For example, a patient who requires their gallbladder to come out-- can be done by any competent general surgeon. There were a number of instances where patients who had a procedure as simple as that to be done were referred here when there was a community hospital in their town with competent surgeons in that community who could very well do that procedure, but when it was determined that they had no money, then they immediately became a University Hospital patient. And what we basically have done is cut off the flow of those individuals to this institution through the referral mechanisms.

SMOOT: Um-hm.

BUTLER: That has obviously enhanced our financial position here, um, because we no longer have 10 percent, 12 percent indigent patients. We now have a number-- that numbers in the neighborhood of 3 to 4 percent. The other thing that we did, I think which is probably a-- 00:39:00I guess one of the smarter moves, I-- I wish I could take credit for, I didn't think it up though (Smoot laughs) and that was, we had a number of patients who came here from-- from outside our immediate county and contiguous counties. Uh, approximately two-thirds of our patients come outside of Fayette County and our contiguous counties. And many of them were-- were patients who would qualify for the Medicaid program, but the system that was in-- in effect at that time required these patients to go back to their home county and register and they-- and they had to do that after the fact. Well, what we found out was that after a patient was cared for there was very little motivation for him to go back and go through the process of filing for Medicaid coverage. He'd already received his care. And so what was happening is we were-- a lot of patients who we could have received money for, from the state UKMCohimately, who should have been covered by the Medicaid program were not because we would treat them first, 00:40:00worry about the insurance later and what we found out is that-- that the insurance in fact never-- never materialized, so a lot of that care was being written off with no-- no source of, of revenue available to offset it, except to increase charges to insured patients. So what we worked out was an agreement with the state, whereby we now have a B.S.I., that's Bureau of Social Insurance, worker here on-site in the University Hospital so that any patient that comes in who we determine may be eligible for Medicaid, we immediately refer that patient to our on-site individual and they work with that family or with that patient to determine if in fact they're eligible for Medicaid. That has been a significant boon to us. We pay the state for those services, but it was one of the best investments we ever made. There has been a change in the mix of patients over time. We continue to have a-- we are still 00:41:00the largest provider of Medicaid care in the state. Thirty-- thirty- one to thirty-two percent of our patients are Medicaid, which is going to continue to be a financial problem for us as the state cuts back on Medicaid program. We received in fiscal year 1986-- '85-86--cuts which on an annualized basis will amount to about two point two million dollars from the Medicaid program alone. Um, our write-offs at this point, to charity and to bad debt, do not approach the write- offs that we currently have under the Medicaid program. Our charity and bad debt together probably amount to about eight million dollars. Our write- offs due to the Medicaid program amount to sixteen million dollars. Um, 00:42:00and you might ask then, you know, "How do you pay for those costs?" and the answer is we pay for them by transferring that cost to patients who pay. In the past that was viewed as a very acceptable way of doing business, however, in the changing health care environment, with PPOs, HMOs, alternative delivery systems, the unwillingness of other third parties such as Blue Cross to allow you to shift that cost to their subscribers, which if you're-- if I was one of them I would probably take the same position, has caused institutions to re-look at their ability to carry large numbers of patients who can't pay because either you don't get paid anything for it at all or you turn around and shift that cost to someone who does pay and then your costs become out of 00:43:00line with the community or with people with whom you are competing for patients. So those options are really not available to institutions anymore and that's why you're seeing this institution and other institutions restructured.

[Pause in recording.]

SMOOT: We just finished discussing indigent care, let me ask you now about something you just kind of ended up with, on talking about the shifting of costs in health care, taking these-- these patients, indigent patients, bad debts and all these kinds of things and making up for it with patients who can afford to pay. A lot of people are saying they can't afford to pay--

BUTLER: Right.

SMOOT: -- today. You see the rise of the for-profit hospitals.

BUTLER: Yes.

SMOOT: All these kinds of changes that are taking place--

BUTLER: Who aren't taking an overwhelming share of the non-- of the nonpaying patients.

SMOOT: Right.

BUTLER: [Coughs] Excuse me.

SMOOT: What do you see as being the situation and this is always difficult to prognosticate something like this, the economy is as unpredictable as anything, um, but how do you see this hospital and health care generally--health care administration in-- in terms of the 00:45:00hospital specifically--ten years down the road? You know, some people are-- are really painting some dark pictures.

BUTLER: Yeah. I think it's probably going to get worse before it gets better. Um, I think the general view here at this institution is that you cannot shift the responsibility of this care to a single group of providers or a single institution.

SMOOT: Um-hm.

BUTLER: Um, it's going to have to be shared, that the care of the nonpaying patient is a public policy issue, not an issue that can be dealt with uh, individually by any institution or by any group of providers, whether they be insurers, hospitals, physicians, clinics, whatever. The-- the -----? of the United States and-- and ultimately through what they -- they indicate to the government they want done is going to determine the future of health care in this country. We have moved from a regulated environment in health care to a competitive 00:46:00environment. The competitive environment is fine as long as everybody understands that in a competitive environment no one-- not everybody's equal and those with will benefit and those without will suffer because the competitive environment encourages sleeker operations, tougher management, operations at a lower cost, fewer employees, you know, all the things that in the past have been an anathema to what is perceived as good health care, so-- and our own institution is caught into the-- in that very vise. As I mentioned before, there are a number of hospitals who can provide many of the services that we provide here. The hypothesis that patients will come here as opposed to other hospitals where the cost may be a hundred and fifty dollars a day less in the past could be supported, where the indemnity insurers 00:47:00simply pay for their health care. Now that businesses who are paying a substantial portion of the health care cost have gotten into the act, what they're telling their employer--employees--is, we're spending too much of our money on health care and so what we want you to do is go to the institution that charges the least. There's a perc-- at least from my per--- position, there is a perceived level of quality that exists at all institutions in this point. You know, nobody's-- you know, the days where a hospital was viewed as, gee, you know, that's really not a place you'd want to go, you know, if you look at Lexington, you know, Lexington has excellent hospitals; every one of them provides excellent care. Well, how do you decide then which one you go to? Well, if you're an employer you're going to want your employee to go to the one where the cost is least 'cause it's going to cost him the least. And if you paint the picture that they're all equal in terms of quality, then you in fact are shopping price. And 00:48:00that's what's happened, that's what's changed since 1965. Institutions are no longer-- or individuals are no longer shopping quality because, for what I would call routine health care, that is, you know, health care that's below the level of transplant or have the-- the exotic variety. There is a perception, it's probably not undeserved, that the level of health care, in terms of quality, is fairly equal among most institutions. I certainly would feel personally comfortable with going to any hospital in this community. Obviously, my first choice, without question, would be here because I know how-- how well the care here is given, but I also know that every hospital in town has the capability of providing good care. So it's a tougher decision, it's not nearly as clear to people as it was before. The other thing that's changed, very 00:49:00honestly, is that-- that most of used to simply say to our physician, "Well, where do you want me to go?" And the physician would say, "Well, I'm going to admit you to Cen--- Saint Jo's Hospital, University Hospital, Baptist Hospital, next week." And what has happened of course is that, you know, as employers have formed relationships with individual institutions, the-- the day of the physician simply determining where the patient was going--is going--has changed too. Physici--- and patients are now asking to go into specific institutions because of what they perceive as, you know, either better quality, less cost, whatev--- for whatever reason, patients are taking a much more active role in determining not only where their care is given, but, you know, how their care is given. That has all been very difficult for the health care industry, you know, to digest. It's-- 00:50:00it's a significant change in behavior and the institutions that-- that are responding to it are doing well. The institutions that continue to try to resist those changes are going to find themselves in very difficult times, at-- from my perspective. I-- I think that, you know, that health care is going to change in the next ten years more than it's changed in the past fifty. Um, it's chan--- it basically changes almost on a daily basis now. Three years ago there was one H.M.O. in Lexington, there are now six and probably will be another three by the end of this calendar year. We had, in 1975, um, four hospitals in town plus the two hos-- two-- four community hospitals including 00:51:00the University and the V.A. We have since added a fifth hospital in the form of the Humana Hospital as well as major expansion programs at each of the other three community hospitals. So health care has grown dramatically here in the last five years. Um, you know, and there are going to be continued changes, there are more-- more alternate delivery systems that are going to come into being. Three years ago we had no Urgent Treatment Centers, we now have at least two and we'll probably have more in the near future. So the way health care is delivered, the places that people go to get health care delivery have changed significantly in the last three to five years here in Lexington and it's going to change even more significantly in the next ten years. There's going to be much more care provided at home, there's going to be much more care provided in-- in um, situations other than-- than 00:52:00acute care hospitalization. Many of the procedures that-- that five years ago we would have hospitalized you for, we now--excuse me--we would now do on an outpatient basis. We've got an outpatient surgery unit sitting here on Harrodsburg Road that didn't exist-- I guess it's been up about five years. You know, these are all new health enterprises, just in-- in a city of two hundred and fifty thousand people and you can imagine what's going in-- going on in some of the larger communities where it's even more competitive than it is here. But the face of -- the face of health care is going to change. And the other thing that I think is-- that's probably going to cause us the most agony-- and that is the whole process of educating people, that's going-- that are going to enter into this new enterprise, is going to be the biggest challenge that we face in the next five years. The idea-- I think that the education of physicians is probably going to be 00:53:00the most radical because in the past a physician went through, got his- - got his degree, served his residency and went out and set up private practice. I think those days aren't over yet, but, you know, they're coming to an end. There's a projected excess of physicians in 1990 by a hundred and fifty thousand or some ungodly number. Um, and what's going to happen to the-- to-- what's going to happen to the expectation of the guy that goes through, receives a very good education at the University Hospital, becomes very skilled at taking care of in-hospitalized--ho--- patients in-- in a hospital and then goes out and finds that the only thing available to him is a job working in a health maintenance organization seeing patients on an outpatient basis, five days a week, and may hospitalize three patients a month. You know, how we train them for what they're going to face--or how 00:54:00we change that training--is going to be a significant challenge to the medical center. There's going to be much more emphasis, I think, in the future in training medical manpower in the outpatient setting as opposed to the inpatient setting. The problem with that is that we have gotten used to the educational setting in the inpatient side and it-- from my perspective it functions well. It has not been designed well in the outpatient setting. The-- the key to making outpatient settings fiscally viable and running right is to keep patients moving through them in an effective way so that patients are seen in a timely basis, that they see the phys-- physician who's taking care of them, that there are no undue delays as they go through the system, that our expectations for health care are probably not unlike our expectations for hamburgers these days, nobody wants to go in and sit and wait twenty minutes for a hamburger, you can walk up to a window, (Smoot 00:55:00laughs) slap your money down and move on. You know, we are all-- you know, people are busy these days and they don't intend to go into a physicians' office, wait an hour and a half to be seen, spend twenty minutes sitting in the exam room waiting for the physician to show up, then come in, you know, spend thirty seconds with them and then leave. The education process and how that gets integrated is going to be very important because the education process in fact, in terms of-- of the timely turnover of patients is not an asset. You know, give students the appropriate exposure to a patient, it takes time. That's an anathema to the efficient quote, unquote, "operating" of the outpatient setting, you know, that's how HMOs make money, is to turn patients over as quickly as possible through their system. And that objective and the objective of providing a medical student or a resident with appropriate exposure to a patient for the lear--- the purposes of the learning process are-- are on diametric ends of the pole. And how 00:56:00we do that here, will depend a great deal on how successful we are on recruiting patients for the future and also will determine to a great degree the quality level of education that we give the health-- the health manpower students that come through this medical center. That's probably going to be one of our-- the most difficult task we have in how to design that and how to make it work, maintaining a level of patient satisfaction, at the same time trying to balance the needs of students--and not just medical students. I mean, let's face it, everybody is going to be exposed to these alternative delivery systems, whether they be physical therapists, nurses, pharmacists, whatever. So we're going to all have to give them an experience in that setting and-- and how we do that is going to be an interesting process.

SMOOT: Um-hm. I take it from your comments that the relationship of the University Hospital is-- is very good with the other community 00:57:00hospitals here in Lexington.

BUTLER: Yes, it is. We-- we have had a good relationship for years. It's interesting how it's changed, however. In 1975, when I first got here, uh, I became very active in the Lexington Hospital Council, which is basically a-- it's a-- I guess you could almost call it a journal club for the hospitals where we-- where we used to get together and talk about mutual problems, share with each other what we were doing, discuss our plans for the future, share openly statistics, financial information, et cetera. But I can assure you, that has all changed. The--excuse me, factor of competition has changed the way we relate to each other.

SMOOT: Um-hm.

BUTLER: We no longer share--

[Pause in recording.]

BUTLER: --financial information the way we used to, we're very cagey about what we tell everybody that we're doing. And-- and basically the competitive model has made us that way.

SMOOT: Is that good?

BUTLER: Probably not in the long run, because what is causes 00:58:00institutions to do is to replicate services. Um, you know, I've asked myself, do we need four--five-- hospital emergency rooms in Lexington? I don't know, I guess-- we're all pretty busy, so maybe-- maybe we're all needed, but if you add up urgent treatment centers and emergency rooms, et cetera, what it does, it puts us in intense competition with each other for those patients. Um, I guess if you perceive that competition improves price and outcome then it's good. The duplication of services of course is not good, because it-- it expands the base of fixed cost and then it ultimately drives up the cost of health care, so from that standpoint it's not-- it's not that we don't talk to each other any more, we obviously still do, but we're careful about what we share. I-- that is a byproduct of the competitive environment that we find ourselves in; everybody's a little concerned about letting the 00:59:00other guy get a leg up. You know, you don't want to-- you don't want to play your hand too early.

SMOOT: Um-hm.

BUTLER: And we're all--very honestly, including ourselves--quite sensitive to what our neighbors are doing. There-- there are-- there have been a lot more objections to plans for expanded health care facilities, you know, by other institutions in the last couple of years than ever occurred in-- in -- in-- when I first arrived here in Lexington, where hospitals, you know, opposed in the certificate of need process, the expansion of-- of health care facilities because they view it as competition.

SMOOT: Yeah.

BUTLER: And-- and they don't want competition where they can avoid it, so it-- in all honesty, it's got very tough. The level of occupancy of this hospital has dropped--

SMOOT: Um-hm.

BUTLER: -- over the past five years.

SMOOT: Um-hm.

BUTLER: The numbers of patients that we've seen have actually gone up in numbers, but the length of stay has dropped, partly because we 01:00:00initiated that, partly because, uh, there is an emphasis, specifically through the Medicare program, on getting patients out early. The whole DRG System was set up under the -- on the presumption that some patients were going to stay longer than the Federal government said they were going to stay, some were going to stay shorter and it was all going to average out and the hospitals were going to be fine. And what ha--- what has happened of course is the hospital has gotten very aggressive about getting patients out and--under Medicare--in the shortest possible time because the quicker you get them out, the more op--- the more chance you'll-- there is that you're going to make money on that patient. And of course, carried to its extreme, it becomes not beneficial to the patient because patients are then discharged too early. We-- we have lowered our length of stay, but we have lowered it because we've instituted discharge management on the day of admission. 01:01:00One of the things we did find out we did find out is that patients were staying in a day or two longer because we waited until the day the patient was to be admitted before we started planning for his discharge. Well, that doesn't make much sense, especially if a patient is going to be in five to seven days, he's going to require a nursing home bed when they get out. You know, it takes a couple of days to find one. So what we-- what we do now is when the patient's admitted we estimate the length of stay the patient's going to be in and we start planning for his discharge--his or her discharge--the day they arrive. Whether- - and we determine whether the patient's going to be going home, whether the patient's going to be requir--- and whether the patient's going to require extended care in either a nursing home or will require home health care or will require hospice care or whatever, so that the point in time the physician determines the patient is ready for discharge we also have the next level of care available to the patient.

SMOOT: Um-hm.

BUTLER: There wasn't a lot of motivation to do that, very honestly, under cost reimbursement, which is the way hospitals were paid 01:02:00originally from Medicare, and that is basically that you got paid whatever it cost to deliver the care, but we've swung from that to this competition model where you're reimbursed now if you get the patient out early. So we've really gone a hundred and eighty degrees and that's changed the way a lot of people are doing business. As to whether that's to the benefit of the patient long term, I'm not sure. It certainly has saved money--

SMOOT: Um-hm.

BUTLER: -- saved the Federal government, just a ton of money. And that-- and that was probably appropriate that-- that-- where as in fact too much hospitalization, there were too long-- stays were too long, unnecessarily long.

SMOOT: Um-hm.

BUTLER: So there was a need for change. The-- the question of whether DRG's will survive as a mechanism for payment through Federal programs, I'd say that the jury's still out on that issue. I would -- I'm sure 01:03:00that that will some how get adjusted -- will be adjusted or get changed sometime in the future.

SMOOT: Um-hm.

BUTLER: But it's interesting that the same entity that-- the Federal government--that imposed that method of payment on hospitals is now screaming that hospitals are making a fortune (Smoot laughs) under the DRG program and-- which-- which-- if -- if I read the Federal government right, if they think hospitals are making money on their patients, through their payment mechanism, I'm sure that will result in change, there's no question in my mind, so -- what form that change will take I'm not sure. I wouldn't even care to guess. If I made a guess, I'd put it out so far in the future that I wouldn't be around when it came to fruition, so you couldn't prove me wrong. (Smoot laughs) I-- I could say something in the year 2025, this is what I think's going to happen and then you'd have to ask somebody else at that point whether I was right or not.

SMOOT: Let me make a few little statements here and -- and just get your reaction.

BUTLER: Sure.

SMOOT: I'll make them all together. The current health care system in the United States is terribly inefficient, it is not cost effective, enormous waste of resources, duplication of sources--of resources- -in communities that can ill afford them, so what we need is more government regulation. And I don't mean government regulation in a negative sense, I mean it in an umbrella situation where they are coordinating various communities and coordinating the facilities in various communities so they'll be more efficient and more cost effective, better managed, probably a bit more fair in the distribution 01:05:00of indigents, all of these types of things. Is that what-- is that something that you could see as-- as good? Is that something you see as--

BUTLER: I guess my response to that is they tried that and it didn't work. I am not confident that a government bureaucracy--of any type--

SMOOT: Um-hm.

BUTLER: -- can efficiently run anything, let alone health care.

SMOOT: Um-hm.

BUTLER: Um, for example, if you were to determine that-- that there were three communities in southeastern Kentucky, all who had fifty bed hospitals, would be better served by closing two and having one at a hundred beds. From a cost standpoint that might make sense. From a standpoint of the people that live in those communities, having to drive 01:06:00thirty-five miles to get to a hospital makes them very uncomfortable.

SMOOT: Um-hm.

BUTLER: Probably with-- over time you could see an increase in mortality and morbidity because for acute illness the issue is time. If you have a myocardial infarct at home, your chances of survival are dependent solely on--not solely, that's the wrong term--are dependent to a great deal on the ability to get you to a health care facility in the shortest possible time. Um, in the interest of efficiency, we could probably devastate the health care delivery system. That doesn't mean that we shouldn't, and probably through competition will, weed out the nonproductive institutions. Um, part of the problem with that is 01:07:00that whether you do it through regulation or whether you do it through competition, I think the reality is that some institutions are going to fall by the wayside. My perspective is that regulation would probably prop up more institutions than they would eliminate and that it would probably make the situation worse. It's tough-- it's easy for me to sit here in the middle on an affluent community and say that competition is good because we're doing well in the competition. If you ask me three years from now, maybe I'm not-- I might not be doing so well and I might not be so enthusiastic about it. But if I was the administrator of a thirty bed hospital-- hospital in Estill, Kentucky I would suspect that I would not view competition as all that wonderful. Because what the competition is doing is that it's allowing institutions that are 01:08:00large to have substantial resources to reach out into communities that they've never reached out into before to provide levels of service that's-- when a local hospital can't offer services that a small, local hospital can and basically drain the patient population away from those institutions. Well, that's fine, they can-- you know, we could do that and other institutions can do that, but then what ha--- you know, where is the base under which you build a community health service? We could go into some towns in eastern Kentucky and with our faculty, with our staff in the hospital and provide services in-- in a way that -- that the local physicians and the local institution couldn't do it. But the problem is, we would be there for the short run, as long as we could see it making a contribution to our institution. And at the time that the contribution stopped, the commitment would probably stop too and then you, you know, if you eliminate the local hospital and that 01:09:00process, then what have you left the folks in-- in that community with?

SMOOT: Um-hm.

BUTLER: What you left them is without health care.

SMOOT: Um-hm.

BUTLER: So, you know, the competition model is at-- I think, some of them I would suspect are doing all right, some rural hospitals are surviving the process, but I think you'll see the folks that will suffer in the next five years will be the small community hospital that can't afford, you know, the sophisticated equipment, they can't afford the-- support a large medical staff that-- that-- whose-- where patients are being brought out of their community into the larger, more metropolitan communities and they'll-- they'll probably close. There'll be a number that'll close. And you'll see the inner city hospitals close, the ones that serve a large proportion of indigents, because the um-- the state and city governments are not keeping up with the cost of providing care to those groups and more and more hospitals 01:10:00are backing out of the care for those groups and they're becoming concentrated in a very small number of hospitals and I--

SMOOT: Can you see that as being kind of dangerous?

BUTLER: I would suspect what we will have to have is a crisis before anybody's willing to deal with it. Um, I mean a real crisis. You'll have to see people, literally, who just die because they didn't get health care before anybody is willing to really take a stand on it. It-- it's a difficult issue. We're trying to retreat from the high cost of health care, which is understandable. Health care is now currently 10 percent of the GNP, you know. If you'll recall, we just had a-- our budget that the Federal government just passed--the budget--you know, that's-- the Federal government's budget alone is one trillion dollars, you know. We're looking at 300 billion dollars a year for health care, you know. That's a lot of health care. The question is can-- can-- what-- how much can the country afford us to 01:11:00do for them? We're going to be faced with ethical issues. If you look at Medicare and their expenditure of funds, you find that a substantial portion of the money that Medicare spends for patients that they're covering is for the last year of the life of that patient. And the question that somebody's going to have to answer is, you know, can we s--- can we afford a thousand dollar a day intensive care unit for an eighty-seven year old with-- with a myocardial infarct. You know, if you think about that and that's a year in the hospital, it's $365,000. Can we afford heart transplantation, major heart surgery for eighty, seventy--year old people? Well, that's a tough question. It's a tough question because if I was the seventy-year old person, I might very much want to have that done to extend my life. On the other hand, we 01:12:00always come back to the question of who's going to pay for it? And the Federal government is saying, you know, we can't afford to continue to pay for that kind of sophisticated care at the cost. The problem is, as we look at what's happened to the population of the United States, it's aging, rapidly aging and--

SMOOT: And you also have the largest generation in American history, just turned forty and--

BUTLER: Right.

SMOOT: -- it's going to get even worse.

BUTLER: Yeah, in twenty years-- I've forgotten what they said the proportion-- I-- I've seen some statistics. The proportion-- the proportion of the American public that's going to be over sixty in twenty years is going to move something-- like something from 28 percent to 44 percent-- something-- those are the wrong numbers, but it's, you know--

SMOOT: It's very dramatic.

BUTLER: It's a very dramatic increase.

SMOOT: Yes.

BUTLER: And as the-- as-- as health care continues to develop in sophistication, you know, very honestly ten years ago people that had bone marrow disease died; babies that weighed less than two 01:13:00pounds died, most of them, you know. The survival of a two-pound baby here is so routine that no one takes notice anymore. The level of sophistication of the-- of the neonatologist, the level of sophistication of the nursing staff in taking care of premature infants, the level of-- of technology is so astounding that -- that the mortality rates have just dropped like a rock. So more people are living that previously died and they're living a lot longer. And the question ultimately is going to be, who's going to care for them? You know, I think one of the things that's probably going to be raised and that's the question, at what point Medicare starts in your life, in terms of your age, starts covering? Because I guess when you and I are sixty years old, sixty-five might be viewed as middle age in terms of 01:14:00life expectancy if the health of the-- of the population continues, um in the degree that it has, people change their lifestyle, change their eating habits, et cetera, you know, the av--- the average life span moves from sixty-four to seventy-four to eighty, you know, forty-five, five will no longer be middle age, sixty-five will be middle age and will the Federal government basically be able to pick up health care costs for middle age people who will live another twenty or thirty years. And obviously, the older you get the more health care resources you're going to consume. So it's a difficult issue. Again, it's a public policy issue. What is America willing to spend? Are we ready to go to the British model where after fifty-five no gets dialyzed.

SMOOT: Um-hm.

BUTLER: If your kidneys fail, you die, unless you have private resources 01:15:00to pay for it. I would suspect our country isn't ready to deal with that issue at this point. They probably are for somebody else, but not for themselves. Right now patients with end stage renal disease are covered by the Medicare program. It's not a problem because the Federal government is "paying for it"--quote, unquote. And of course all you have to do is be reminded of what's going on with the tax laws right now to be reminded that we are the government, because we are the ones that pay-- put the money in to make government work. And so as an institution, we're going to be faced with that issue and as-- as a public we're going to be faced with the issue of deciding, you know, that's a tough -- who lives and who dies issue, but, it's going to be revisited numbers of times in the next five years. Some guidelines will be established and issues will have to be discussed and some consensus will have to be reached as to-- to what-- what the expectations of the 01:16:00American public are for health care facilities. We know what they are now and that is quality care at the lowest possible price.

SMOOT: How does this University Hospital rate--and this is an arbitrary question because these kind of rankings are arbitrary, in my view at least, depending on the criteria used to evaluate them.

BUTLER: Um-hm.

SMOOT: But how does this University Hospital at least in-- in rankings and in the view of your colleagues around the country, how does this medical c--- hospital stand up--

BUTLER: Well, I guess--

SMOOT: -- with the competition in terms of its-- its peers, its-- public supported university hospitals around the country?

BUTLER: We probably have low-- one of the lowest levels of state support of any institution in the country of our size.

SMOOT: Um-hm.

BUTLER: They certainly-- we don't certainly get the same kind of 01:17:00rankings that the basketball team does. (Smoot laughs) I guess from my perspective, and -- and it's partially a self-serving comment, but as I review what other institutions are doing in terms of their performance, in terms of, you know, how patients perceive the care at your institution, I think we're doing as good a job as any institution in the country. We've recruited good people, we have a superior nursing staff. We have excellent support staff in the hospital; we've worked at that for a long time. We've got a good management team, we've got outstanding faculty. You know, those are the elements that go together to make a- (coughs) a class act. The-- that is not to say we do not have problems. Every institution like ours has problems, but we try to take them one at a time, resolve them and move on to the next 01:18:00problem. Um, the level of activity that's occurred here in the last three or four years has been-- has to a great deal been dependent upon the support of the faculty, the support of the citizens of Kentucky who have chosen to come here for their care, the response of the employees of the hospital to, you know, a change in behavior with regard to how they interact with patients and visitors and-- and each other. You know, all that has been positive and that's why we're talking right now about establishing a trauma service here, enhancing our transplantation program, establishing a helicopter service to enhance the care of patients in central and eastern Kentucky. Without the other-- without the things previously mentioned, none of what we're talking about now would have been possible. I would not be so brash as to rank us, you 01:19:00know, the number one institution in the country, but I certainly think in terms of the quality of care here, we're one of the tops, just-- you know, but again, that's a-- you know, that is not a-- a very objective observation, but I have been in a lot of other institutions and-- and I've seen what they do and I can tell you we're at least as good and in some cases a lot better. Some places, you know, have a different emphasis than we do, um, have different programs, but to a great degree most of the teaching institutions do a lot of things similarly, a lot have the same kinds of programs, neonatal care, burn care, transport, transplant. You name it and you'll see-- you'll probably find a 90 percent correlation with the other teaching hospitals, so-- so we're -- most of us are in much the same business. The quality of the program really depends on the quality of the people and we're stronger in some 01:20:00areas and not -- I think we're probably as well known for bone marrow transplant as any program in the county, and we're one of the youngest. So, you know, you do some things outstandingly well and the rest of the things you just do great. (Smoot laughs)

SMOOT: The University of Louisville has a-- rather a different set-up with their hospital, don't they? Uh-

BUTLER: Yes, it's contract managed by a for-profit corporation. The only-- at this point I believe with the possible exception of the University of Mississippi and, uh, New Jersey are the only-- they're the only three--quote, unquote--"managed," teaching hospitals in the country, that are managed by for- profits.

SMOOT: Are we going to see a lot more of that?

BUTLER: I don't really think so. There was sort of a rash about two years ago of the buying and selling of university hospitals. Creighton 01:21:00Hospital in Omaha was purchased by-- by A.M.I. They've been negotiating for three years with George Washington University for the purchase of that hospital and it hasn't happened and I would suspect it won't. Um, there's been a few hospitals that were not university owned, but had large teaching programs in them that have been purchased by for- profits, but I think if you take a look at the financial reports of the for-profit industry this day--these days--I don't think you'll see much more of the two hundred fifty million dollar purchase of a hospital by a for-profit team unless they view it to be, you know, a particular advantage. I think when Louisville was acquired by Humana there were a lot of problems, but you must remember that -- that Humana was not the only suitor for the U of L hospital. There were other people who were 01:22:00not for-profits who were also interested in that enterprise, so it cou- -- it could have gone a number of ways. It could have been managed by one of the not-for-profit facilities in town as well as-- as the Humana Corporation. At that time I gather that those who made the decision felt that that was the best option for them. That is not-- obviously not an option that we are considering here, nor would we in the future.

SMOOT: What are your goals for the immediate future and what do you think makes a good hospital administrator?

BUTLER: My two most immediate goals for this institution are to examine what appropriate corporate structure, that is responsive to the changes in health care, needs to be implemented for this hospital. And basically to meet the commitments that we've made for program 01:23:00development here in the next five years. We have made some significant commitments to the development of trauma service and enhanced transplant service. We need to meet those commitments in an orderly fashion. Um, we need to have an orderly transition from the current physical facility to the-- the physical facility that we're proposing, basically a forty million dollar addition to this hospital which is scheduled to start next spring. That needs to take place. That's in the long term interest of this facility, to have that happen. With the exception of the addition in 1975-- and I can't tell you how many square feet that was, but it wasn't much of an addition in terms of-- of size-- this hospital is basically the same facility as it was when it was completed in 1962. And we share space in this building with the 01:24:00college of medicine and the college of dentistry. We all have needs for more space and as the programs change and the programs grow, they also generate needs for a different space, so we-- we need to do that and I want to see that come to fruition, I want to see the bulldozers in the south parking lot digging up the ground, um, by next June. So that I feel comfortable that we-- that we have basically positioned the hospital for the next ten to fifteen years in terms of-- of the physical facility needs of the institution. Once we-- once I'm comfortable in light of that, then we've got to go about providing the human resource to make it all happen. And that occurs both on the college of medicine side, with the recruitment of talented and interested faculty and it's 01:25:00dependent on the hospital side with us recruiting and retaining the appropriate skilled nursing, technical personnel to support the-- the clin--- the clinical activity of the faculty. Those things will happen here and I am convinced of it. We have some-- some people that I think are-- are dedicated to accomplishing that and I am-- I'm enthusiastic and confident that it will occur.

SMOOT: What do you think makes a good hospital administrator?

BUTLER: What makes a good hospital administrator?

SMOOT: Yeah.

BUTLER: Well, I guess I'm more-- I-- I'm an outcome person, not a process person. That's probably a failing in-- in some sense because sometimes the process takes a beating at the expense of the outcome, but I think the way you measure whether you've accomplished anything 01:26:00is, from my perspective, has the quality of care improved in your institution? You know, and did you have a part in improving that? And how do you measure whether it's improved? Well, you measure it in terms of whether patients feel they received good medical care. Was it done in a timely fashion? Was it done in a courteous fashion? Were they supported emotionally during their-- their stay, as well as physically? Did we make it easy for them to enter the facility? Did [coughs]--excuse me-- did they interpret, um, from our employees a feeling of friendliness, willingness to-- to be of service? Did they feel good about their care while they were here and did they feel good about it after they left? Um, you know, was the outcome for the patient 01:27:00good? You know, did we bring the patient in here, perform surgery on him and was the outcome, you know, what was expected? Did we keep the patient informed during the entire process? Did we keep the family informed during the entire process? So from my perspective, there's a whole series of things that I guess you would call quality assurance that-- that if those things happened, then I would say that the hospital had good administration. If those things aren't happening, regardless of whether the building is beautiful or whether there's a thirty-five million dollar addition going up, is really a moot point. If the patients are not happy with the care, if we're not getting good results, basically none of that counts. Um, so, you know, if that-- you know, and I've perceived in the last five years that there has been an increase, at least based on the correspondence I get from patients 01:28:00and-- and families up here, it's, you know, been very positive. When I first got here, we-- most of the letters I got were not telling us how good we were doing. That doesn't mean that we're not getting any now that-- that, you know, that are saying, you know, everything went wonderfully because, you know, in an institution that has two thousand employees, and sees sixteen thousand patients a year, there's going to be a glitch once in awhile. But our goals are to have, you know, we're sort of the zero defects folks, we're the zero glitches folks. We want it to go well for everybody.

SMOOT: Mr. Butler, thank you very much on behalf of the medical center, the University Library and myself for taking time out of your busy schedule to tell me a little bit about the University Hospital. I appreciate it very much.

BUTLER: I appreciate the opportunity.

SMOOT: Thank you.

[End of interview]

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