It was announced on Wednesday, March 22, 1989, that Dave McRae had been appointed president and chief executive officer of PCMH—only the third time since the original hospital opened that the presidency had changed hands. Jack W. Richardson, former president and CEO, who had decided to step down, was named president emeritus. Richardson had been a vigorous and tireless architect of the medical center’s growth since he assumed the top administrator’s role in 1971. His sensitivity in balancing the often divergent interests of the hospital, medical school, private physicians, county commissioners and regional hospitals would be long remembered.

McRae had been on PCMH’s administrative staff for 13 years, and had been chief operating officer since July 1986. He was very active in state and national healthcare organizations. Besides his professional organizations, McRae was involved in many local public service organizations.

The new president would demonstrate that he was a vigorous and insightful leader, profiting from the teachings and example of his predecessor, Richardson. He brought to his new responsibilities a penchant for long-range planning and a sense of what was required in the way of corporate restructuring to improve management. His vice presidents often joked that it was a good thing that computers had come along, because McRae needed one to carry out all the tinkering he did with the hospital’s organizational chart.

Richardson would continue to head the hospital’s subsidiary corporation, East Carolina Health Services, and to represent the hospital in healthcare organizations. He would also continue to serve on the boards of Blue Cross of North Carolina and the N.C. Hospital Association, and on the advisory board of the American Hospital Association.

Health and the Tobacco Economy

One of the thorny issues McRae faced in his early years as president was the need for regulating and eventually prohibiting cigarette smoking. The task was made more difficult by the fact that tobacco continued to be a major contributor to the local economy.

In May, in one of their more controversial moves, the hospital trustees approved 17-4 a plan restricting smoking in public areas of PCMH to designated locations. The plan was the first phase of a two-phase program to make the entire hospital smoke-free within a year. Trustee Wilton R. Duke, who was also a county commissioner, Betty Lewis of Farmville and Lawrence Davenport of Pactolus said they would oppose going beyond the first phase, while several other trustees who voted to approve the plan said they would do so only if they were assured that it would not obligate them to vote later to move to the next phase. It troubled them that the trustees were restricting tobacco smoking in the public hospital of “the flue-cured tobacco capital of the world.”

The smoking control plan had been requested by the medical staff as a first step toward completely eliminating tobacco smoking by patients, visitors, or staff. There would be signs in areas where smoking would be forbidden, and those where it would be permitted, such as a limited portion of the Emergency Department waiting area, the visitors’ lobby, and limited areas of the hospital cafeteria and the lobby of the rehabilitation center. Smoking would be acceptable in private offices if the occupant agreed, and in patients’ rooms if their doctor allowed it.

Endowments and Gifts

On May 23, Dr. Jack W. Wilkerson, division chairman of a PCMH campaign to raise money for purchasing hospital equipment, presented pledges for $320,000 from private physicians. The general chairman of the Hospital Foundation’s campaign, G. Henry “Harry” Leslie, accepted the pledges, saying, “The privately practicing physicians had, by their exemplary support of this campaign, demonstrated that those closest to the need understand the importance of building an endowment fund to keep medical equipment state-of-the-art at Pitt Memorial.”

Dr. Earl Trevathan, foundation chairman, said that the campaign to raise $1.75 million had been started in January to set up an endowment fund on which only the interest would be spent for equipment. Already-announced gifts to the fund included $300,000 from the Greenville Service League, $300,000 from Burroughs-Wellcome Company, and nearly $300,000 from hospital employees.

Mamie Latham Richardson Perkins, resident of Pitt County for more than 30 years, died in November 1988, leaving the Pitt Memorial Hospital Foundation a bequest of 10 percent of the income from a trust. Mrs. Perkins’s husband, a Greenville native and owner of J. J. Perkins Real Estate and Perkins Lumber Co., had died in 1982, when he was 86. The couple had no children.

The trust was named “The James J. and Mamie Richardson Perkins Memorial Fund.” Attorney Louis Gaylord, one of the trustees, called the trust “one of the finest things ever to happen in Pitt County,” and gave a preliminary estimate of Mrs. Perkins’s estate as $6.83 million.

From November 1981 on, the Pitt Memorial Hospital Foundation held annual Awards Benefit dinners that were occasions for recognizing services to the community, especially the hospital, and at the same time served as fund-raising events. Dr. Sarah Morrow, secretary of the N.C. Department of Human Resources, was the guest speaker at the first dinner, at which Dr. Ray D. Minges and Edward Waldrop, supporters of the hospital’s development, were recognized. Over the years the foundation award was given to Dr. Fred Haar, Charles Gaskins, Josephine Twilley, Dr. Frank Longino, the members of the EastCare flight crew, Dr. William E. Laupus, Eli Bloom, Kenneth Dews, the Greenville Service League, Wilton R. Duke, Jack W. Richardson, the Monk Family and Mary Raab, M.D.

At the hospital foundation’s benefit banquet on April 6, 1990, the ninth Annual Award was given to Leslie, who had been for 12 years, from 1970 to 1982, the plant manager at Burroughs-Wellcome Company in Greenville, and who had devoted much of his time since his retirement to community service, primarily the hospital. During his time as manager, he had persuaded the company to become a major financial supporter of PCMH.

Governance and Finance

McRae had not been in the presidency long before he began to seek changes in the hospital’s structure and in its relations with the county. At his request, the county commissioners by a 6 to 1 vote passed a resolution in November 1989 to give PCMH trustees limited freedom to lend and borrow money, lease and sell property, and enter into partnerships with private healthcare providers, without waiting for county approval. Bob Harrington, hospital board chairman, said that PCMH needed the additional authority so that it could compete effectively in the healthcare marketplace. The first action the hospital took was to seek favorable interest rates on a 30-year, $34 million bond issue to fund its new bed tower.

McRae told the commissioners the county could not take for granted that the hospital’s ability to remain profitable would not be threatened by competition from the private sector. Private enterprises, with their flexibility and ability to make rapid decisions, could threaten the hospital’s financial viability. There would be much more risk in not becoming involved in joint business agreements with private healthcare providers than in entering into such ventures.

State law in effect at the time forbade public agencies, including those owned and controlled by counties, from entering into joint ventures with private businesses. If the county had to approve an agreement to form a connection with a private enterprise, that would make the new entity into a county agency.

The agreement between Pitt County and the hospital defined excess cash that could be invested without consulting with the county as money left over after operating costs and debt service had been paid. It required that investments be directly or indirectly related to healthcare and that they support the hospital’s best interests. No more than 5 percent of the hospital’s total assets could be invested or borrowed in any one year, and there was a requirement to notify the county of investments or borrowing. The agreement was the keystone of the 30-year renewal of the hospital’s lease, and essential to the hospital’s plans for a $34 million bond issue to fund its projected 143-bed expansion.

Commission chairman Eugene James voted against the agreement out of concern about the county’s losing control of how taxpayers’ money was spent. He said he was afraid joint ventures would take money from the hospital that would not come back, so that healthcare costs to county residents would have to be increased.

McRae said that unless the hospital could be competitive and deal freely with the shifting healthcare market, it would lose to private businesses the income from such services as X-rays, minor surgery, and laboratory tests. If the hospital should become unprofitable, it would be forced to rely on government subsidies. He added that he believed healthcare costs locally would go up much faster if hospitals did not have the freedom to make profitable agreements.

Commissioner Kenneth K. Dews, Sr., a member of the hospital board, said the agreement would protect county taxpayers’ interests while providing the necessary freedom for the hospital to meet competition. Hospital administrators had practically no freedom to deal with threats from private businesses. The agreement was very similar to those defining how most public hospitals in the state related to their county governments, he said.

Early in his tenure, McRae led the move to purchase strategic properties to ensure the hospital would have ample room to grow. In 1990, PCMH Management, Inc., a corporation established by the trustees for the sole purpose of managing the property, bought the four-story BB&T Center office building at 2000 Venture Tower Drive and a vacant six-acre lot adjacent to it. The hospital also bought a 2.37-acre plot across from the Gaskins-Leslie Center on Emergency Road for $400,000 from Dr. Alfred Ferguson of Greenville, as well as the Mental Health Center property next to the hospital.

At the time, one vice president joked, “Up until now we haven’t bought so much as a blade of grass. All of a sudden, it looks like we’re buying everything in sight except the Fuel Doc,”—a nearby convenience store.

Perhaps one of McRae’s most far-reaching moves was to recommend in 1990 purchasing the Eastern Carolina Surgical Center for $5 million. The center was an outpatient facility on Bethesda Drive that had been owned by a group of 30 local doctors. Eighty-four doctors performed surgery there, to be joined by numerous others. The center became Surgicenter Services of Pitt, Inc., a nonprofit corporation that would be an agency of the hospital. All income from the center would be used to offset losses in other services of the hospital. The ensuing years would bear out the wisdom of the purchase, as demand for outpatient surgery grew and reimbursement continued to increase.

Ralph Hall, vice president for facilities services, commented about the acquisitions that the hospital had made, “All these purchases are critical to the overall development of the hospital facility. Over the past six years, the hospital has been working to fulfill its overall facility master plan, which was completed in 1984. A part of this plan is the development of the medical center on the East Side of Moye Boulevard.”

                                                                           A New COO

In late 1990 James H. Ross, former senior vice president at St. Luke’s Episcopal Hospital in Houston, a 951-bed medical center affiliated with Baylor University and the University of Texas at Houston, was named chief operating officer for PCMH. He would be in charge of day-to-day operations at the medical center.

Ross’s experience during his five years at St. Luke’s Hospital had prepared him well for his responsibilities at PCMH. The departments he oversaw at the Houston hospital had more than $125 million in annual operating revenues. Before going to Houston, Ross had been administrator of Southeastern Medical Hospital, a 172-bed community hospital in Dallas, from 1980-1985. He had also been vice president of Methodist Hospital of Dallas, a three-hospital corporation. He had been involved in medical residency programs and outpatient services.

His experience in both large and small hospitals, in free-standing facilities as well as multi-hospital systems, in academic as well as community settings, placed him in a unique position to guide Pitt Memorial’s continuing evolution into a full-service health system.