He sees potential for hospital growth

The son of a New York dry cleaner, Alan B. Miller left for college on a basketball scholarship - his high school team had won the city championship - with no clear career goals.

Sidelined from basketball by a serious car accident his senior year, the 6-foot-5 Miller found his way to the Wharton School of the University of Pennsylvania, then tried the advertising industry. He helped the Galloping Gourmet, Graham Kerr, get a TV slot and learned a little about food in the process. He got into the hospital business in the Philadelphia area in 1969 after a Wharton friend asked him to join a new hospital company, American Medicorp.

The day after that company was purchased in a hostile takeover in 1978, Miller started Universal Health Services Inc., with a similar philosophy of operating hospitals in fast-growing areas.

Last year, its revenue was $4.7 billion. Miller calls his company's recent performance "spectacular." UHS has 25 acute-care hospitals and 107 behavior health hospitals. The company has just sold its only acute-care hospital in this area, but it operates five mental-health facilities here.

At 71, Miller recently signed a five-year contract. In a comparison to another older guy, who wants to be the country's chief executive, USA Today last month used Miller as an example of a well-seasoned leader.

"You don't get smarter as you get older," Miller said last week in his spacious office in King of Prussia. "If you're smart, you're smart. But you do have experience, and you put intellect together with experience, you wind up with wisdom."

Question:

Did you know anything about cooking [when you worked with Graham Kerr]?

Answer:

No, absolutely not. . . . I carried around a tape to get . . . on the TV stations. And one of the auditions was chicken polese. . . . I had two dishes that he was cooking. And I was dating my wife, and I made both of those for her, because I could do it blindfolded. Chicken polese. And I forget what the other one was. . . . Chicken polese . . . was her favorite. . . . You put the tomatoes in the pan, and the olives. You have to do a reduction of, I don't know what. Chicken polese. I could do it in my sleep. Because I saw it - you know, 100 times at 100 different stations.

Q:

How would you describe your management philosophy?

A:

Hire good people. Quality of people, number one. You've got to hire talented, capable, hard-working people. . . . It takes three things to succeed in business. You need people. You need money. And you need opportunities.

Q:

Tell me about a mistake you've made and what you learned from it.

A:

I don't dwell on mistakes.

Q:

What do you think about what's going on in Wall Street now?

A:

What's going on in Wall Street is really a result of social engineering, in a way, and greed. . . . At bottom, the problem is the subprime mortgages, where people were given houses that they had no way of affording. Which was a social program, which started under Carter. . . . And they were giving people houses that they couldn't afford. And pressuring the banks and mortgage lenders to do that. . . . But since that was happening, you've got to add the incredible opportunistic greed of a lot of people. . .

Q:

How will that affect your industry?

A:

We like to see people employed. We like to see people insured. . . . The wonderful thing about our industry, and why it's a very solid industry, is that . . . hospital services are demographically in an excellent position. There's none better. That is, the population is growing, and it's aging. And an aging population absorbs, or utilizes, a disproportionate share of health-care services.. . . People have problems as they age. . . . And they must go to the hospital. It's very basic.

Q:

With the bailout, though, how does that affect Medicare funding, and Medicaid?

A:

I don't think that those entitlements, or those programs, would be drastically reduced. I don't see reductions there at all. The good side of this, as far as one narrow area, is that the concept of a socialized medicine - a national program, paid for by the government - is a very bad idea. And it will be difficult, if not impossible, for any administration to want to do such a thing. . . . A fully government-run system is a very bad idea. And let me just point to Freddie Mac and Fannie Mae. I mean, the government moves into the mortgage market, and this is what we've got. The government doesn't do things well. And buying health care and regulating and running health care for 300 million Americans, is a disaster.

Q:

What is the biggest issue in health care?

A:

I guess the biggest issue is people that don't have insurance, because it impacts us tremendously. We spend 12 percent of our revenue on bad debt, meaning we provide services, and good ones, and we get no compensation for it.

Q:

If you don't believe in expanding government programs, how would you go about insuring those people?

A:

The way to do it is to pass legislation that would enable small employers to band together to buy insurance across state lines. . . . People could buy a policy that would be less expensive . . . A lot could be done in the area of qualifying people for programs we already have.

Q:

Behavioral health has been a tough field to make money in, hasn't it?

A:

Yeah. We do well with it. . . . Another . . . result of what's going to happen, unfortunately, is that our psych business is going to go up. When you have difficulty in the economy - It's a sad thing, and I'm well aware of this, and I feel very badly about this. Once you have unemployment, you wind up with increased incidence of alcoholism, increased incidence of drug abuse, increased incidence of wife-beating, marital problems at home, depression and suicide. Those are the ramifications of a downturn in the economy where people lose jobs and have great difficulty.

Q:

How are [unemployed people] going to have the insurance to pay for the services?

A:

Well, you have COBRA, which extends for 18 months. . . . If you have a suicidal person in your family, the family will find that to be extraordinarily important. All depression. . . . It becomes more of a necessity than a discretionary kind of an item.

Job:

President and chief executive officer, Universal Health Services Inc.

Age:

71

Hometown:

New York City

Education:

Bachelor's in economics, College of William and Mary;

M.B.A. from Wharton.

Personal:

Married, three children. His son Marc

is a senior vice president

at UHS.

In his spare time:

Travels, reads, runs a couple of miles several times a week.