How Grady Memorial Hospital skirted death

In 2007, Georgia’s largest hospital was $60 million in debt and facing closure. This is the story of its resurrection.

This is part one of a three part series on the past, present, and future of Grady Memorial Hospital.

In 2011, more than 600,000 patients visited the Grady Health System. Across the Atlanta superstructure’s 16 floors and the institution’s six neighborhood health centers, 5,300 doctors, nurses, and staff members do everything from refill prescriptions to resuscitate lives. With more than 950 beds, Grady is the state’s largest hospital. For Fulton and DeKalb counties’ uninsured residents, the safety-net facility isn’t simply a mammoth infirmary — it’s a lifeline.

Six years ago, Grady nearly closed its doors. Although the 121-year-old hospital has experienced a recent turnaround, it’s not out of the woods yet. For this three-part series, CL spoke with more than 50 doctors, patients, administrators, politicians, advocates, and others to learn about the fall, rise, and uncertain future of one of Atlanta’s most important institutions.

In 2007, two of Atlanta’s most powerful men sat down over drinks to try to “solve the problems of the world.” Former Georgia-Pacific Corporation chairman A.D. “Pete” Correll remembers his first conversation with Cousins Properties CEO Tom Bell about Grady Memorial Hospital’s plight like it was yesterday. “I said, ‘That place is in serious trouble,’” Correll recalls. “(Bell) said, ‘You don’t know the half of it.’... So we decided, ‘Why don’t we go fix it?’”

Grady was on the verge of shutting down. The downtown Atlanta hospital system had amassed a $60 million deficitand could barely meet payroll or pay vendors. As debt continued to accumulate, questions were raised about the future of the aging, 950-bed facility, which was long overdue for more than $360 million worth of upgrades.

As a public safety-net hospital, Grady provides free health care services to the city’s uninsured. The system’s behemoth size enables its staff to treat more indigent men and women than any other Georgia hospital. It also houses the most advanced level-one trauma center within a 100-mile radius of Atlanta, as well as a top-notch burn unit and stroke center. Grady’s physicians provide patient care in more than 50 specialties and 100 subspecialties.

Closing the hospital’s doors would not only have hurt thousands of employees and patients, it also would have been catastrophic for hospitals throughout metro Atlanta. No longer would suburban medical facilities be able to send indigent men and women to the massive structure alongside the Downtown Connector’s “Grady Curve.” Victims of car crashes and gunshots normally treated at Grady would flood other hospitals’ smaller and less-prepared emergency rooms.

“It couldn’t close,” says Dr. Michael Frankel, the hospital’s chief neurologist. “Shutting it down would’ve had a ripple effect on the health care community. Without Grady, profit margins at other hospitals are gone. It would be like shutting Hartsfield-(Jackson International) Airport and would have ramifications for decades.”

Grady required help. Over the next several years, administrators would overhaul the institution’s operations not only to keep the lights on, but to make sure they stayed on for good. The road to solvency began with the hospital’s privatization. From there, changes brought dramatic power shifts, unpopular cuts, and public backlash against those in charge. Tensions boiled, death threats were made, and jobs were lost. The first year of restructuring resulted in a more than $75 million turnaround. Despite the uproar over how best to move forward, the hospital still stands today.

OPEN FOR BUSINESS: Grady Memorial Hospital has struggled to keep its lights on over the past six years. That includes the eighth floor halls, home to the Marcus Stroke and Neuroscience Center. Photo by JOEFF DAVIS.
OPEN FOR BUSINESS: Grady Memorial Hospital has struggled to keep its lights on over the past six years. That includes the eighth floor halls, home to the Marcus Stroke and Neuroscience Center. Photo by JOEFF DAVIS.


When Grady Memorial Hospital first opened in 1892, 18 employees oversaw 100 beds. The hospital, born out of former Atlanta Constitution managing editor Henry W. Grady’s vision for the New South, served both black and white patients. Its mission was to provide medical care to the poor and emergency care for the entire city, still in the process of rebuilding following the Civil War.

In its early years, Grady comprised four wings and separated patients by gender and race. It was one of the only infirmaries available to blacks, at times housing three-quarters of the city’s hospital beds available to African-Americans. As desegregation occurred in 1965, Grady’s finances were transformed. That year, President Lyndon B. Johnson created Medicaid and Medicare, which offered hospitals some compensation for previously uncovered patients — a huge boon for Grady.

Yet Grady has consistently remained underfunded, despite receiving money from federal, state, and county governments, as well as private donors. In a state where 1.9 million people are currently without health insurance, patients are constantly seeking affordable health care options. From the beginning, the hospital has received little to no money for the uninsured it treats.

“A young physician who trained at Grady came up to me and asked, ‘What were the most troubled years of Grady hospital?,’” recalls Martin Moran, a retired doctor and author of Atlanta’s Living Legacy, a detailed account of the hospital’s history through 2008.
Moran replied, “The first 120.”When the institution’s financial crisis came to a head in 2007, the Fulton-DeKalb Hospital Authority, a politically appointed board tasked with overseeing Grady, looked outside the hospital for solutions. The FDHA, along with the Metro Atlanta Chamber of Commerce, formed the Greater Grady Task Force in March 2007. Its objective: resurrect Grady.

SEA CHANGE: Grady Hospital chairman A.D. '€œPete'€ Correll (from left), dialysis patient Baani, and state Sen. Vincent Fort, D-Atlanta, were firsthand witnesses to the safety-net hospital'€™s contentious transformation. Photo by DUSTIN CHAMBERS.
SEA CHANGE: Grady Hospital chairman A.D. ‘€œPete’€ Correll (from left), dialysis patient Baani, and state Sen. Vincent Fort, D-Atlanta, were firsthand witnesses to the safety-net hospital’€™s contentious transformation. Photo by DUSTIN CHAMBERS.

Seventeen of the city’s preeminent movers and shakers, including Correll, Bell, H.J. Russell & Company CEO Michael B. Russell, Georgia State University President Carl Patton, and Atlanta Housing Authority President Renee Glover, joined the group. Correll and Russell were made co-chairmen.

The task force quickly concluded that Grady was being mismanaged by “unqualified” board members who “had lost track of the bright line between managing and governing,” Correll says. Among the alleged offenders was state Sen. Charles Walker, D-Augusta. In 1994, he attempted to strong-arm Grady into exclusively hiring temp workers from his employment agency. As the House majority leader, he later used his clout to stop a committee from looking into Grady’s financial operations. Walker was ultimately convicted of 127 counts of tax evasion, mail fraud, and conspiracy in 2005.

It was obvious that Grady lacked fiscal responsibility, even to its employees.

“When I first got there, Fulton and DeKalb used to have a pretty big subsidy for Emergency Medical Services that was just free money,” says Mike Lunney, a former paramedic who worked at Grady from 2007 to 2012. “People worked lots of overtime. There were paramedics clearing six figures working 100 hours a week. (There) was no oversight.”

Low morale also plagued the ranks. Chief Nursing Officer Rhonda Scott recalls a revolving door among senior leadership and a dearth of nurses committed to the hospital’s mission. Dr. Andrew Agwunobi, Grady’s CEO from 2003 to 2006, remembers a “very dire” mood among his physicians regarding the hospital’s future. “People were concerned about whether or not Grady was going to be able to manage itself out of the situation it was in,” he says.

Grady had few options remaining. The safety-net hospital was on life support, facing both an overwhelming financial burden and a treacherous decrease in its quality of care. Correll says the hospital’s performance ranked so low — in the bottom quartile after inspectors reported broken equipment, sanitation issues, and poor patient recordkeeping — that it risked losing the accreditation needed to participate in Medicare and Medicaid. Moreover, the hospital faced an estimated $60 million budget gap and owed $71 million to Emory and Morehouse, whose medical schools provide the hospital with doctors.

“It was floundering,” says State Rep. Lynne Riley, R-Johns Creek, who was a Fulton County commissioner at the time. “It was very unnerving to see an institution of that size and critical function teetering on the verge of shutdown.”

In June 2007, the task force suggested that a nonprofit corporation take over operations. All other urban hospitals in Georgia had already transitioned to a nonprofit model — an approach that placed organizational control in the hands of leaders familiar with large corporate enterprises. Others offered alternative strategies. State Sen. David Shafer, R-Duluth, floated an option requiring the FDHA to outsource daily management. Those plans failed to gain momentum.

The task force’s proposal became the front-runner, but it faced intense opposition. The Grady Coalition, a group of civil rights activists, doctors, and patient advocates, reconvened for the first time since it was formed in 1999 to fight for the community’s interests. Its members believed privatizing Grady would eliminate public oversight, cut jobs, and decrease patient services.

Some observers viewed the business community’s potential involvement as more of a private-sector power play than a philanthropic act. Behind every executive-level decision was the question of whether Grady would sacrifice its longstanding mission to serve the city’s indigent population. As far as state Sen. Vincent Fort, D-Atlanta, is concerned, “They didn’t save Grady, they took it over.”

Over the years, the hospital had become increasingly vital to Atlanta’s black population as both a health care provider and an employer. Certain skeptics believed that many of the task force’s conservative white members didn’t understand the African-American community’s vital relationship with the public hospital.

“What these (business leaders) adhere to is: Never let a crisis go untaken advantage of,” says Fort. “They made that point (that) Grady’s going to close and all that. But the fact is, they took advantage of that hysteria and unleashed the dogs. They were enlisted in the fight against the community in a shameful way, as far as I’m concerned.”

Civil rights leaders such as the Rev. Timothy McDonald III, John Evans, and Joe Beasley, all Grady Coalition members, organized protests and sit-ins to ensure that Grady’s new board strongly considered the black community’s vested interest in the hospital’s future. Protestors expressed outrage over the lack of public involvement in privatization discussions, some of which occurred behind closed doors.

“I was caught in a relatively violent protest of folks that were very upset with the privatization process,” says Riley. “I was pressed up against the glass doors by the crowd of protesters as we watched Sen. Fort be handcuffed.”

EARLY DAYS: Since opening in 1892, Grady Memorial Hospital has provided medical care to Atlanta's poor. At the time, it had a mere 100 beds, 18 employees and at least two horses. Photo courtesy of Grady Hospital.
EARLY DAYS: Since opening in 1892, Grady Memorial Hospital has provided medical care to Atlanta’s poor. At the time, it had a mere 100 beds, 18 employees and at least two horses. Photo courtesy of Grady Hospital.

Correll calls the protests “vehement” and says they were “worse than (he) ever anticipated.” Some activists called him an “appalling” hospital chairman candidate. He and his wife received death threats and had to hire extra security guards. State Rep. Sharon Cooper, R-Marietta, remembers being called a racist for her role on a committee aimed at reforming Grady.

The business community’s decision to rally around the hospital was “the best thing to happen to the Grady Health System,” says Agwunobi. “Great hospitals across the country have a mix of high-caliber business-minded individuals as well as clinicians,” he says, a fact that isn’t always clear to those outside the boardroom.

While the state continued to refuse financial aid to the hospital system without a corporate restructuring, DeKalb and Fulton counties remained committed to it throughout the political clamor. They’ve helped fund Grady since the early 1940s, including $126.1 million in 2007. With privatization practically certain, DeKalb County Commissioner Larry Johnson hoped that the state and other metro Atlanta counties would finally contribute their fair shares.

“Everybody was on the counties because you didn’t want Grady to go under, but we were also under the impression that we were all in partnership,” says Johnson. “But when it came back to them contributing because their residents are using it, we never received funding.”

Georgia’s entire health care system benefitted from Grady staying open, but few wanted to bear the financial burden associated with it. Without state support, and with the cash-strapped counties struggling to navigate an unforeseen economic meltdown, Grady’s future looked bleak without the business community’s help.

“When the Wall Street debacle happened, DeKalb County lost 50 percent of its home values,” says Johnson, noting that county officials have slashed nearly $130 million from their budget over the last five years. “We’re 60 percent residential.”

As 2007 came to a close, more than $360 million was needed to overhaul the dilapidated 121-year-old institution.

“Ultimately, the financial burden was too hard for anybody to ignore,” says Matt Gove, a former Grady spokesman. “The place needed hundreds of millions of dollars in capital improvements. That doesn’t happen as long as the government-appointed entity operates the hospital.”

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In November 2007, the FDHA voted to restructure the hospital’s leadership and transfer its oversight to the Grady Memorial Hospital Corporation. The new leadership included Correll and other task force members. It also had the backing of the chamber, which encouraged people to see restructuring’s financial advantages. “This is about green — not black or white,” Correll said in 2007. “It’s about money.”

“So because of the alleged threat of the hospital closing, this new board was created,” says Daniel Blumenthal, an associate dean at Morehouse School of Medicine. “The Fulton-DeKalb Hospital Authority was disempowered and a new board was empowered, so that the people running the hospital were now in the hands of the business community rather than the people in whose hands it was before: political appointees.”

Agwunobi, who left the health system one year before the FDHA’s vote, saw privatization as a crucial step for the hospital. The move also made Grady more appealing to Atlanta’s philanthropic community. Correll says benefactors felt the hospital was a tremendous asset worthy of contributions, but had reservations about donating to an institution that many considered poorly managed and always in the red.

Correll says the Woodruff Foundation had wanted to contribute to Grady for years, but it had three requirements before doing so: a nonprofit corporation takeover, a signed 40-year irrevocable lease for the hospital, and assurances of county funding. ‘We’ve been looking for a way to give and we will give this ungodly amount of money,’” Correll recalls. “‘If you’ll deliver those three things, we’ll give you $200 million.’”

In April 2008, the charitable organization made good on its word.

It was at that watershed moment that the institution’s turnaround began. The first improvements were long overdue. Physicians boasted to the New York Times in 2008 about “MacGyvering,” or making due with what was available. Early spending included $8.3 million on more than 600 beds and nearly another $20 million for new medical imaging devices such as X-ray and CT scanners. The most essential upgrade, however, came in the form of a $40 million electronic records system that streamlined health care procedures, minimized health risks, and made it easier to bill patients.

“There had never been a very good or robust patient information IT system or processes around making that work,” says John Haupert, Grady’s current CEO and former COO for Parkland Memorial Hospital, Dallas’ major safety-net facility. “In health care, just like any business, you’ve got to get the bill out the door and you’ve got to get it collected.”

Grady’s fiscal recovery started faster than anyone expected, due in large part to Haupert’s predecessor Michael Young, a Pennsylvania native with more than two decades of experience as a hospital executive. He came from Erie County Medical Center, where he successfully led the 550-bed Buffalo, N.Y., facility to its first-ever operating gain in nearly a century.

BURNING BRIDGES: Rev. Timothy McDonald III (from left), Dr. Neil Schulman, and state Sen. Vincent Fort, D-Atlanta, rallied in defense of patient and community interests, which they thought fell by the wayside as administrators focused on the hospital'€™s finances. Photo courtesy of Crossroadsnews Photo.
BURNING BRIDGES: Rev. Timothy McDonald III (from left), Dr. Neil Schulman, and state Sen. Vincent Fort, D-Atlanta, rallied in defense of patient and community interests, which they thought fell by the wayside as administrators focused on the hospital’€™s finances. Photo courtesy of Crossroadsnews Photo.

During his time at Grady, some viewed Young as an extraordinary fixer largely responsible for stabilizing the hospital’s financial operations. He was also blunt to a fault, and at times condescending. The new CEO frequently had a short fuse and little patience for collaboration, says Correll.

But he got things done. In his first year with Grady, Young oversaw a more than $75 million turnaround, guiding the health care institution toward the black, even if his methods weren’t always the most popular.

“He was absolutely the right guy at the right time,” says Correll. “Nothing changed upon his arrival, except we had capital dollars. We still couldn’t make payroll. So Mike made some aggressive moves and saved the hospital.”

With his eye on the bottom line, Young made major cuts while also developing select areas of the hospital. Major investments into new state-of-the-art centers and refurbished departments followed the initial wave of needed capital expenditures. Home Depot co-founder Bernie Marcus donated $20 million to build a Stroke and Neuroscience Center and overhaul the Trauma Center.

“We thought it was a good thing for the hospital because it would differentiate Grady from its past,” says Frankel, who leads the Emory University-backed Stroke Center. “This was a golden opportunity built on the background of a lot of research that we had been doing since the early ’90s.” The center has become a top-of-the-line facility and a bastion of the region’s stroke care. Because of such specialties, more patients with private insurance began coming to Grady.

Administrators also worked tirelessly to rebrand Grady as a hospital that does more than serve the poor or the critically wounded. Look no further than the institution’s 2008 annual report, which used a “Really” theme to, well, describe what really happens in the hospital in an attempt to debunk some myths. In it, Young wrote: “Outside of Atlanta, Grady is a legendary hospital. We need to make that true inside.” To do that, Correll says the hospital had to persuade citizens — including “rich people in Buckhead” who failed to see the importance of a hospital they didn’t visit — to “give a damn.”

Grady’s initial overhaul between 2008 and 2011 also came with negative consequences. The hospital cut more than 300 jobs and raised patient fees. Fort says administrators balanced the books by slashing services instead of finding new cash. Dorothy Leone-Glasser, a health advocate for some patients affected by the reductions, thinks the cost-saving moves sometimes ignored Grady’s longstanding mission.

“Their goal was to cut waste, what they considered waste, and get Grady into the black and make a profit,” Leone-Glasser says. “That was their goal, with all disregard for the patients and that’s the part that, to me, was most upsetting.”

The number of neighborhood health clinics was reduced from nine to six without much input from the community. While Leone-Glasser recognizes that the Young administration was attempting to reduce its short-term expenses, she and other critics say that the move hurt patients and could cost the hospital more in the long run.

“You’re not doing any preventative work if you’re closing the neighborhood clinics,” says Leone-Glasser. “These people are going to wind up in your ER only when they’re so sick. It’s going to cost you so much money to treat them. It makes no economic sense.”

Correll admits that the hospital administration “should’ve had a lot more conversation” with community members. Young made strides in balancing the hospital’s books, but he failed to build lasting relationships with local stakeholders. His autonomous management style led to its fair share of tense moments. “Young could pick a fight in a church,” Correll says.

Among Young’s most reviled moves was his decision to close Grady’s dialysis clinic in September 2009. Patients with kidney failure must undergo the grueling procedure of cleansing the body’s blood and fluids multiple times a week. Without dialysis, which at the time could cost individuals upward of $77,000 per year, those patients can die.

At first glance, these service cuts might seem like a drop in the bucket of the hospital system’s 800,000 overall visits that year. But some of Grady’s most marginalized individuals were affected by the clinic’s closure. Frequently, dialysis patients were uninsured and often illegal immigrants with no other access to treatment. Fort says the decision countered the hospital’s overarching mission and served as a prime example of how Grady’s leadership “cared more about the profit than they cared about people.”

Baani, a 29-year-old Fulton County resident, first received dialysis treatment at Grady in early 2009. After other metro Atlanta hospitals turned her away because she was uninsured and undocumented, she made numerous visits to the public hospital’s emergency room before being “selected” by Grady officials to receive biweekly outpatient treatment. “Coming through the ER, it was really stressful,” she says. “Regular dialysis ... was a blessing for me.”
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In September, a Grady social worker informed Baani that the clinic was shutting down. “They were going to close the dialysis clinic without giving us a place to go after that,” she says. “My heart just broke.”

Protests were organized by patient advocates such as Dr. Neil Shulman, an Emory University professor and health care activist whose story was adapted for the 1991 Michael J. Fox film Doc Hollywood. At one board meeting focused on the dialysis clinic, Shulman interrupted to ask angrily, “Can you all go to bed tonight knowing that these people will die?”

In anticipation of the clinic’s closure, Grady gave dialysis patients three options: the emergency room, treatment in other states, or a trip back to their native countries. “A company hired by Grady known as MexCare was offering plane ticket, money, and three months of dialysis care for people to go back to their country of origin,” Leone-Glasser says.

Correll says that although the hospital “didn’t do a good job” responding to the community’s concerns, the institution simply couldn’t sustain its attempts “to be all things to everyone.” After a fierce battle that led to subsequent rallies and tenuous legal proceedings, including a court injunction blocking the clinic’s closure, Grady eventually struck an agreement with three local dialysis providers to extend treatment for the remaining patients. According to Leone-Glasser, the hospital still foots the bill for 14 men and women today at nearby clinics.

Young’s brunt approach eventually caught up with him. At an October 2010 breakfast event with Buckhead business leaders, he boasted that Fulton County residents “should want to shine his shoes” after saving taxpayers $26 million. One source who worked closely with the former CEO thought the racially insensitive remark highlighted his lack of political acumen and “crystallized why Mike wasn’t going to last long-term.” Young later apologized for his comments, but it was the beginning of the end. He called it quits the following spring. (Young declined several requests for comment for this story.)

Despite his character flaws, Young’s financial stewardship placed the hospital on solid financial ground. Haupert, who took the reins from Young in August 2011, has continued along that path. More importantly, he appears to possess the social skills his predecessor lacked.

“That’s what I like doing — if you’re going to work in public health care, you have to be able to interact politically,” says Haupert. “You have to be able to interact with foundations and donors and community groups.”

Andy Miller, a longtime health care reporter and Georgia Health News CEO, thinks Haupert has done well on a personal level, a sentiment shared by other industry professionals. Many other Grady employees and stakeholders told CL that he’s the right leader for the foreseeable future. According to Johnson, Haupert understands a lot of the nuances that impact urban counties like Fulton and DeKalb.

While Haupert has made progress in mending relationships, he also remains focused on making Grady the “leading public academic health system” in the country. Now that the hospital has made deep cuts to improve its finances, the CEO wants to turn his attention to some other goals.

“If the infrastructure is right around financial stewardship, then the front-line employee doesn’t have to be concerned about whether the payroll is going to be made,” says Haupert, who wants his staff entirely focused on clinical quality and patient satisfaction. That mission should be easier looking ahead, as he projects the hospital’s 2012 net income to be around $20 million. Haupert estimates that he’s added 200 to 300 full-time jobs since he started at Grady. “The organization is financially stable,” says Dr. Leon Haley, Grady’s chief of emergency medicine. “Five years ago, you never knew.”

“Ten years ago, nobody would have believed that Grady could have the level of infrastructure and the caliber of management that it has today,” says Agwunobi. “Nobody could have looked forward 10 years and said that would have happened.”

Nadine Kaslow, the hospital’s chief psychologist, observes how administrators have tightened things up since the takeover. “We don’t worry,” she says. “But we lost important services in that process, and I think we need better planning going forward for how we can get back some of those valuable services.”

Perhaps just as important as the fancy IT systems, focus on attracting patients with private insurance, and new state-of-the-art centers is the work Grady’s done to change its image. For years, people saw Grady as the place to go to only if someone was shot or involved in a car accident. The hospital actually propagated that kind of thinking with bumper stickers that read: “If I’m in a car crash, TAKE ME TO GRADY.”

When he first started working as a paramedic, Lunney remembers the stigma certain Atlantans attached to the hospital. He recalls instances in which affluent people such as a “soccer mom from Alpharetta” involved in a car crash on I-75/85 would “flip” at the suggestion of going to Grady, despite the fact that the level-one trauma center offered the best possible care.

That negative perception has slowly started to fade.

“I’m not surprised that Atlanta has come to the conclusion that Atlanta needs Grady as much as Grady needs Atlanta,” says Agwunobi. “If not more.”