Joe Ledesma and his bold, unpopular decisions

Michael Alan Hamlin

Posted on July 14, 2008

The transition from institutional mediocrity to world-class innovator

Almost 28 years ago, a young hospital administrator who had been fired from his first big job turning around a provincial hospital, took over a much bigger one: St. Luke’s Hospital. Considered one of the worst hospitals in Manila at the time, in 1980 St. Luke’s had revenues of just P18 million, which produced a meager profit of P100,000. The new administrator, Jose F.G. Ledesma, knew he faced a sizable challenge.

Hospitals are complex organizations to manage. According to Ledesma, “you have to deal with doctors who do not want to be under non-physician professionals; many of these physicians are gifted, highly competent prima donnas imposing their will on management. You deal with a constant threat of malpractice cases. You face a growing population which can hardly afford the rapidly increasing cost of medical care.

“You are in an industry with a constant, rapid change in expensive technology. You deal with managers, professionals, and rank-and-file employees of widely varied educational levels who are generally paid less than their peers in other industries. And you are faced with politicians, the general public, and media which still think that a hospital should be run as a charity and not as a regular money-making business.”

Ledesma described his job in this way last week at a meeting of the Personnel Management Association of the Philippines (PMAP), where he was the keynote speaker. Despite the challenges, Ledesma and his colleagues transformed St. Luke’s into the Philippines’ “most advanced, most comprehensive, and most financially viable hospital in the Philippines.” From P18 million and P100,000 profit in 1980, today St. Luke’s has annual revenues of close to P5 billion, and cash flow of P1 billion. Construction of a new facility in Ft. Bonifacio is being financed almost entirely through internal cash.

The existing facility is better equipped than 95 percent of hospitals in the United States according to Ledesma, but you don’t have to take his word on that assessment. St. Luke’s was the first hospital in the Philippines – and just the second in Asia – to be accredited by Joint Commission International, considered the premiere healthcare accrediting organization in the world.

Ledesma cited an example in his remarks to PMAP of the standards the hospital employs. “A study in the US showed that a typical hospital makes an average of 10,000 medication errors a month,” he said. At St. Luke’s, “clinical pharmacists prevented 30,000 potential errors” in 2007. For the whole year only 900 errors were actually made with only three serious enough to warrant medical intervention. That’s less than one percent of the errors made in a typical US hospital in just one month.

As a result of its very high standards, the hospital has been repeatedly recognized in other ways, beginning with a financial management award given by the Asian Management Awards in the early 1990s. I was involved in those awards, which presented the opportunity to first meet Ledesma and his chairman at the time, the late William H. Quasha.

For two years in a row, Reader’s Digest subscribers have voted St. Luke’s the “most trusted healthcare brand in the Philippines.” The Memorial Sloan Kettering Cancer Center, considered by many to be the world’s preeminent cancer center, selected St. Luke’s as its only affiliate in the Philippines. New York Presbyterian Hospital, ranked among the top 10 hospitals in the US, along with its affiliated medical schools – Columbia University and Cornell University – named St. Luke’s their only international affiliate in the Philippines as well.

Just how did Ledesma and his colleagues manage to bring about this impressive transformation? Despite the challenge of turning around an ailing institution of any kind, and especially one intended to minister to the healthcare needs of a community, Ledesma says, “we believed then, as we do now, that it does not take a genius to run a hospital successfully. All it takes is a lot of common sense, the guts to make bold and unpopular decisions, the courage to take risks, the wisdom to innovate, and above all, a high degree of professional and business integrity.”

Those early bold decisions included raising prices significantly so the hospital could invest in modern equipment. Supply contracts were renegotiated and a charity program and free employee hospitalization revamped to eliminate glaring abuses. An early retirement program enabled the institution to rid itself of entrenched employees who had no interest in seeing the hospital turned around.

Over the next 30 years Ledesma and his colleagues ran St. Luke’s with military precision, and by his own admission, Ledesma is no touchy-feely manager. He demands adherence to processes and requires staff to meet objectives. But Ledesma is also a superb innovator, looking not just at other hospitals for insights into improving St. Luke’s but service organizations of all kinds.

As Ledesma concluded his talk last week, he referred to an assessment I made several years ago that goes, “While each of St. Luke’s innovations can be emulated, it will take their resolve to do so. More importantly, St. Luke’s will be on its way to its next innovation.” But Ledesma had slightly edited my words. I wasn’t referring to the hospital, I was writing about the bold, and sometimes unpopular, Ledesma.

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