The Corban Group
Executive Insider Interview Series

Rod Laughlin
President & CEO
Regency Hospital Company
11175 Cicero Drive, Suite 200 Alpharetta, GA 30022
Tel: (770) 772-4345

Mr. Laughlin founded Regency Hospital Company in April 2001. His goal was to provide a place for patients to get their lives back by providing intensive critical care for medically complex patients.

Regency Hospital has been named as a finalist, for three years in a row as an A+ Employer by the Atlanta Business Chronicle. Laughlin has been named a Top 50 Entrepreneur by Catalyst and Business to Business magazines for the amazing growth Regency has shown in its short history. Regency has also been recognized by Emory University and the Atlanta Business Chronicle in their fastest growing company categories. Laughlin has most recently named Entrepreneur of the Year 2006 by Ernst & Young in the Southeast healthcare category.

Prior to founding Regency in 2001, Rod Laughlin founded Transitional Hospitals Corporation (THC) in 1992. THC was one of the first long term acute care (LTAC) hospital companies in the country. The company grew to 19 hospitals with five more in development, and was sold to Vencor, Inc. (now Kindred) in 1997. The THC hospital chain was highly regarded for its outstanding quality care and excellent patient outcomes. THC quickly became the model for the LTAC industry under the direction of Mr. Laughlin and an excellent team of senior executives.

As a recognized expert in the LTAC industry, Mr. Laughlin has substantial expertise lobbying members of Congress on healthcare issues, has testified before the Ways and Means Committee on LTAC Medicare reform and has met extensively with senior policy makers at CMS to lobby for LTAC issues.

Mr. Laughlin received his MBA degree, as well as his BBA degree, from Georgia State University. He has served on a number of boards including the Acute Long Term Hospital Association of America (ALTHA), which he founded in 1996. He served again as President of the Association in 2004. Mr. Laughlin is currently an active member of the board of ALTHA and spends a great deal of time lobbying for the LTAC industry.

Regency Healthcare – Rod Laughlin, President and CEO

1. When did you first realize you wanted to be a corporate healthcare leader?

I think it was probably early in high school when I realized that I wanted to manage a business. I have always worked since I was a young kid. I had my first paper route when I was 10 and I built that up and then moved to Jackson, Mississippi and started another route from scratch in a new neighborhood—to the point where I had to split that up and give half of it to a friend. I just enjoyed business, and knew that I wanted to be a senior level corporate leader. 

2. Who is or was your biggest professional influence?

I really didn’t have what I would call an influence. My dad worked for the government as a lawyer and as an accountant where he would audit hospitals. He did that his entire life and growing up I thought, the one thing I do NOT want to do is to be an accountant or to be in the hospital business. It’s funny how life brings you full circle. My goals early on were just to work with a corporation, although I was not trying to be entrepreneurial. I wish I’d had an influence like that so that I could have started being entrepreneurial much earlier in my career.

3. How do you define a good leader in today’s business environment?

I think the aspect of leadership that’s most important probably never changes, it doesn’t matter what decade you’re living in or what is going on around you—people are people. In any enterprise, the thing that is important to people is having a leader that has a mission and vision and is committed to doing what it takes to carry out that mission and vision with integrity. I once asked Jack Welch, in all of his years at GE, what quality he looked for in someone to decide to invest time and effort in them to see if they could become a senior manager at GE. Without hesitation he said, “I look for someone who can get other people excited about what they’re doing.” And I think that’s exactly right. No matter what you’re going to do, if you have a vision for something that’s going to be of value, and you can get other people excited about helping make that vision happen—you’re a leader and you’re going to be successful. 

People want to have significance, to feel like they’re doing something important—part of having vision is painting a picture of what that vision looks like. Running hospitals is not anything new, hospitals have been around for a long time. A nurse can walk across the street and get a job any day of the week—they’re in great demand, most healthcare professionals are. 

We have to paint a vision that, at Regency, what we are doing is different and more important. We need to differentiate ourselves from other hospitals that do a lot of the same things we do. We do that by talking about being dedicated to the very sickest of the sick patient population who are not responding in other settings, delivering world-class care, giving people their lives back and talking to people in terms of the different paradigms. We talk to nurses and other clinical professionals about how this is more than just a job, this is more than just helping humanity and feeling good. We’re literally dealing with patients who put their lives in our hands, and the difference we make could give that patient their life back.

That is how we define ourselves and it is truly our vision. I overheard someone say the other day to one of our board members that “the reason we are all here is because of Rod’s vision. We’ve bought into that and we don’t want to ever see that change.” Communicating the vision is important for every leader to do, but then you must walk the walk of that vision. If you deviate from or violate that vision, you have lost your contract with your people.

4. What do you think prevents a good leader from becoming a great leader?

Their own willingness to live it. I was exposed to a fellow years ago that I learned a great deal from named Mike Sinclair. Mike used to run a hotel chain. I remember hearing him talk to a group of us at Charter Medical. He said, “You’ve got to dream big, don’t be limited in any way in your dreams. Don’t talk yourself out of your dreams.” This was before I decided to be an entrepreneur. When I was in my 20s and early 30s I had this calling and longing to do something entrepreneurial but because I was “so smart,” having an MBA, I could think of 10 ways something might fail, and would talk myself out of taking the steps to make it happen. I realized later that entrepreneurs are people who do not care about the reasons a venture might fail, they are thinking about one driven goal and that is what they’re going for. Mike Sinclair said, “Don’t limit your dreams, think outside of the box and just imagine something that is so great that you’re not sure how it can be accomplished. Then break down the steps and see what would need to happen in order for you to get there.” It was 1987 and at that time, Charter was having 20 percent growth every year, everything we touched turned to gold. Mike told us that in September, when we do our budget for the following year, we needed to plan for 20 percent growth and plan for the same thing moving forward each subsequent year. Then he asked, “What would it take to get the results you’re going to get in 1990 now, rather than waiting three years of going up 20 percent a year? See what you have to do to get the results in 1990, but let’s get them now.” He said that it was all about breaking it down and seeing what the census has to be in the hospitals and what the margin has to be and that it would be amazing how much of that we could go ahead and do if we let our imaginations run wild.

Even prior to that conversation, I was in charge of growth in the company. We were growing like crazy and the chairman and I were at dinner one night when he said, “Rod, if you had five more people developing hospitals, how many more do you think you could get?” I replied that I thought we could get at least seven or eight more a year. He said, “Well, why don’t you get those five people? We’ll try it.” So we started a much faster growth pace. People were going crazy over it. That’s the kind of thinking I’ve brought to Regency—I know I drive people crazy here. I was talking to our hospital CEOs yesterday and told them, “We’ve got our census up and about 80 percent consolidating and we’re in the middle of a consulting project that’s fairly extensive. You know, we need another 30 census in the hospitals. We have 23 hospitals, all I need is for each of you to add one or two in census and for you guys to raise enough incremental revenue to pay the consultants on this project and it will not effect us financially. I know our people are already going as fast as they can go, but if we can get one more patient in every hospital or even two more in a few, we would be there, and we would have increased incremental revenue every month, 60 percent of which would go to the bottom line.” That’s the way to think in this company. 

We have budgets, but I tell people all the time that those budgets are simply a floor. The goal at Regency is to have all our beds full every day, our costs under control and have a record month every month. We want great leaders who are not willing to settle at any point, who don’t limit themselves, who continue to push the envelope. This is a company where every leader is fully engaged. You have got to be hands-on. You can’t just be an administrator, watching to make sure everything is status quo. We’re not standing watch on a ship here. We’re pushing forward. This is more like a football team that is going for the Superbowl.

5.  What motivates and drives you?

I have a passion for the business. I’m not a guy who thrives on all the day-to-day operations; my forte is strategy and relationships with people. I want to see the company grow and financial growth is certainly a part of it, but to me that is a byproduct of good things happening. We need more people coming into the company, leaders being developed. I love to see people taking on more responsibility.

 What I enjoy doing the most is talking to our employees and seeing those people who are super stars in the making and then getting them into a position where they can really shine. We have some CEOs in our hospitals that started out at Regency as nurses, they were so good and had so much potential, we put them in a place where they can shine and it’s incredible. I’m amazed at what some of them have done. I have got big expectations, but people can make you. I’ve always said this is just a business, your capital is your capital, but the magic is in the people. If you can get people to buy into the goal and to put their heart and soul into it, unbelievable things can happen—a team really comes together.

6. What is your greatest fear as a leader?

The business is always changing. The greatest difficulty we have is that 75 percent of our business comes from Medicare, and Medicare is under pressure financially so we are getting periodic adjustments in what they want to pay and it’s putting pressure on the margins. We have to redefine ourselves based on the patients we have been treating and what we can do for them. We don’t want to give up on world-class quality and we don’t want to compromise our reputation with the doctors. It has put pressure on us so we’re redefining our staffing model so that our hospitals come closer together and share resources. It is a painful process, it has fostered some anxiety, but we’re bending over backwards to communicate the process with our people. I can’t totally take away that anxiety but I can involve our people in the process. Great example: today we have a call with our CEOs and we have everyone assigned to one committee or another. So each CEO is aware of the changes, they’re involved in the process and have a voice in it. It’s not just a train that is going to come down the track and roll over them. That’s the difficulty, that’s the fear that I have about this particular business. I have watched this cycle for 30 years, the government and Medicare will build something up for five years and they look at it and they say, “Oh my goodness, it’s growing too fast!” Then Wall Street comes into it and you go down the other side of the mountain until two or three companies file bankruptcy. Then Medicare gives you a little bit back, and you go back up the hill. My fear is that we hit the top of the mountain in 2005 and now we are going down the other side. We meet more and more patients every day who need our care, technology is fantastic, we are getting 60 percent of our people home who thought they were coming to us to die.

7. What is your biggest pet peeve as a leader?

I don’t know that I really have one. Everything I’ve been involved in has been very, very successful. I’ve been in healthcare companies like Charter when managed care started cutting back on what they were willing to pay, and the company was forced to redefine itself and there was a lot of retrenching, people going out of business.

I guess the frustration that I’ve had in the healthcare sector is around reimbursement and national policy. I have spent a lot of time lobbying, talking to senators and congressmen all the time, and it’s frustrating when I think of Medicare reimbursement, that as a country, we just haven’t really made any decisions about what we want for healthcare and what we are willing to pay for it. What we have in Washington is just kind of an annual or certainly semi-annual grab fest, where everybody’s going for a piece of the pie. Right now, for example, what the president and congress are facing is the need to give more money to children. There’s not enough money to go around because the plan for seniors is costing a lot more than anyone thought it would, and what they’re going to do is what they always do because they don’t want to raise taxes. They’re going to take money away from the Medicare Plus Plans. They’re going to take some from the short-term hospitals.

This will go on for a year or two until everybody screams, then they’ll impose budget cuts in another sector to send a little bit more over to the hospitals. It’s just that kind of mentality that continues to plague us in healthcare. You cannot plan for the future. For example, in our business in the last two years we’ve had no inflationary increases, but our costs have gone up. It’s frustrating, but that is what we have in America and if you’re going to be in the healthcare business, you have to live with that.

8. If you could give a business leader just one piece of advice, what would it be?

To recognize that the real value in any business is its people. Obviously, you can take pride in your service or your economic model, but you have to keep your people in mind. For example, you can hire a staff of people and have them go through the motions, you can treat people like a commodity and you can say, “Well, if this bunch doesn’t like it, we’ll just hire somebody else.” On the other hand, I choose to take the attitude of a great football coach, I’m going to make this team better than they were when I got them.

These are the people I’ve got and through motivating them, honoring them, valuing them and recognizing them, I’m going to make them better at the game than they were when they got here. The illustration I’ve believed all my life is that a team of mediocre players that comes together and truly works together toward a common goal, can whip a team that’s got a couple of All Stars who are not playing as a team. People working together with common goals and backing each other up always come out on top. It’s not enough to just say that our employees are our most important assets, we must really believe it and act on it, continually trying to motivate and push people to be better than they were yesterday. If you have people that know, understand and are committed to the vision, they will hang with you through the tough times. They will work to make things better. I remember another thing Jack Welch told me, he said once when he was touring one of their plants and shaking hands with people, a man walked up to him and Jack asked him how long he had been with GE. The man replied, “Well, you’ve had my body for 25 years, and you could have had my mind, but nobody ever asked for it.” Jack said he would never forget that. 

That’s why I started getting people involved. I encourage them to internalize our goals. We do a lot of asking for suggestions, and I do a lot of communicating. I’ve got a button on my computer so that I can send all Regency employees motivational messages. When I go to hospitals, I get as many people together and talk to as many of them as I can. I say to them, “If you want to know who Regency Hospital is, look in the mirror when you walk in a patient’s room. As a nurse or a therapist, you’re the only person the patient or family is going to see. Regency is not a corporate office in Alpharetta, Georgia. Regency is you, walking in the room and talking to a patient in a way that makes a difference.” When we empower people like that and say to them, if something needs to be done, do it; or if there is a problem, own it, we give them the power to BE Regency.

Leaders need to have their people buy in to their vision and run with it. So, what I would encourage any leader to do is really think about their people—they are the greatest resource a company has. One of the things I’ve done to empower our people is to tell them, “I want you to think of every patient as a relative—what would you do if it was your mom or dad in that hospital bed? You would be willing to do whatever it took, and that is what I want you to strive for, because every patient is that important.” I also say to them, “I want you to be able to honestly say as a nurse or a therapist, that if you had a relative in need, you would not hesitate to place them in this hospital because you feel so confident in it. We’ve got a great hospital, not to say we don’t have an occasional problem somewhere, but our people do a great job.

When I get our employee comments and read them all, people will say, “I’m on the night shift and I don’t see the administrator enough” or “I don’t know what’s going on” or things like that, but at the same time they say, I love Regency and I would never quit. So, you know you’re grabbing them somewhere, they know everything’s not perfect or in their mind everything’s not perfect but you’ve grabbed them.

9. Where do you see healthcare in five years?

Actually I see healthcare pretty much where it is today. In Washington, we get lip service and preaching, people trying to paint a better vision. Healthcare can be better integrated, we can move to electronic medical records. That’s a huge financial burden that is difficult for hospitals today, and unless the government is willing to take some of the risk, we’re going to just stay right where we are now. Even though we have national companies like FDA that own hospitals all over the country, healthcare is still a very local product, delivered right in the local market with the local politics, local doctors and local issues. It’s just not going to change and that’s why it’s so frustrating to people. They think, “Why can’t we do this like Wal-Mart does merchandising?” It is too local for that, and it will take a ton of money to go from where it is today to where they might like it to be. So, I think we’re still going to be sitting here arguing about things, and I don’t see a lot of changes actually materializing.

On the other hand, technology will only improve and that drives our prices a little bit. I think our healthcare will continue to improve as well. The healthcare industry is making some progress with improving errors in hospitals, but they seem like small steps. Grady Hospital here in Atlanta is a great example, you simply can’t ask a hospital to care for people who can’t pay the bill, and survive economically. We’re going to have to make decisions in America about what we’re willing to pay for. More and more people are going to be on Medicare and fewer and fewer people are going to be paying for it. Something’s got to give at some point.