When I arrived at Centuria, the prevailing emotions among mid-level managers and senior VPs alike ranged from fear to panic. In an organization unused to major change, people feared that I would come in and begin “swinging the ax.” Moreover, Centuria was very protective of its fledgling new culture. The organization had worked hard to change, and people were concerned that I would not understand or embrace the new culture and the values.

The speaker was David Josephson, recently-appointed CEO of Centuria Health System. He continued:

Over a period of three months, I interviewed 100 people—physicians, board members, community leaders, managers—asking them for their opinions of Centuria’s strengths, weaknesses, and future direction. The interview process gave me an opportunity not only to establish a personal connection with representative members of all constituencies of the hospital community, but to begin to plant the seeds of a vision and a direction for the hospital.

Now, in 1996, some two years later, Mr. Josephson was assessing the changes he had made at Centuria, and wondering if he had prepared the organization adequately for the challenges it was facing in a managed care environment.

BACKGROUND

Centuria Health System, located in Northern California, was founded as Centuria Hospital during California’s gold-rush days, by the wife of a successful prospector. The hospital grew steadily over the years to its current size of 500+ beds, and was a regional teaching hospital. In addition, during the past two years, Centuria had expanded its activities in response to the intense competition and high penetration of managed care in the Northern California region. This expansion included the development of an IPA-type HMO (called “Physician’s Health Plan, or PHP), a regional cancer center, a regional pediatric center, an ambulatory services center, and an outpatient rehabilitation center. In 1995, in recognition of its increasingly diverse activities, it changed its name to Centuria Health System.

Centuria had a staff of 570 physicians and 2,800 employees, and treated some 120,000 people each year, serving an eight-county population of nearly one million. Prior to the major changes of the past couple of years, it had been thought of, by members of the staff, Board, and town alike, as “a sleeping giant.” Located in a mid-sized city, it had always been the major hospital, more than twice the size of the next largest hospital in town, and had never known significant competition. The cost-plus reimbursement environment that prevailed from 1965 to 1984 contributed to the sleeping-giant image; there was no external pressure to contain costs or to streamline operations.

Centuria’s employees were loyal—when you took a job at Centuria, you became part of “the Centuria family,” and had every intention of staying on for the rest of your working days. The prime example of Centuria longevity was Mr. Josephson’s predecessor, Christopher Roberts, . . .

Assignment

1. Why do you think the board chose Mr. Josephson over Mr. Larson for the CEO position?
2. What challenges did Mr. Josephson face when he arrived at Centuria? How did he deal with them?
3. Contrast the changes Mr. Josephson made at Centuria with those made by Mr. Roberts. Please be as specific as you can. What aspects of the organization did the TUL Program affect, for example? How? What other aspects, if any, did Mr. Josephson address, and how?
4. How, if at all, have the cultural changes at Centuria prepared the organization for success in an environment with a high concentration of managed care? What obstacles remain? What challenges does Mr. Josephson face in overcoming them?