An Interview with Tim Carmack, CFO, Lucile Packard Children's Hospital

Steve Player interviews Tim Carmack, CFO, Lucile Packard Children's Hospital at Stanford.

Steve Player: Could you give us some quick background on Lucile Packard Children's Hospital?
Tim Carmack: We're wholly owned by Stanford University and located on the Stanford University campus in Palo Alto. Lucile Salter Packard was the wife of David Packard, who cofounded Hewlett-Packard. The Packard family made a large gift to break ground and build the hospital, which opened in 1991.

SP: I know that Stanford also has a teaching hospital. What is the relationship between the two hospitals?
Carmack: Both of the university's hospitals are teaching and research facilities: Stanford Hospital & Clinics is the hospital for adults, while Lucile Packard Children's Hospital is for children but also provides all obstetric care for expectant mothers. Essentially, we care for children almost from conception, as well as mothers during pregnancy. Of the 5,000 to 6,000 hospitals in the United States, only about 250 are children's hospitals.

Stanford's two hospitals are separate corporate entities from one another and the University, and each has its own physical plant, although they are joined by several tunnels and bridges. We share a lot of basic infrastructure in order to save costs.

Packard Children's Hospital has about 2,500 employees and staffs 300 beds. We generate $700 million in net revenue on $1.3 billion of assets. If there is a procedure or treatment that can be done to improve the health of a mother or child, we do it. We are somewhat smaller than some of the older children's hospitals, particularly those on the East Coast, but we do almost no primary care like many of them; almost everything we touch is complex. Therefore, we are among the top children's hospitals in the United States with respect to the number and difficulty of cases that we treat.

SP: I know that there are a lot of changes in healthcare. Tell me about how you are getting requests from distant communities to partner with them.
Carmack: Sure. This is a national phenomenon that we are seeing. One of the larger structural issues in U.S. healthcare is that there are not that many pediatric physicians, particularly specialists. There are even fewer subspecialists, which is pretty much the work that we do. These physicians tend to want to work with other subspecialists due to the narrowness of their fields and the complexity of the cases that they see. This in turn leads them to aggregate around academic medical centers like Packard. Taken together, complex care for children therefore tends to be treated on a regional basis; there are simply not enough specialized doctors to be in every community, nor the case load to support them. The larger regional children's centers like Packard Children's are being asked more and more often to staff a small satellite unit at adult facilities a distance from our campus in an attempt to keep care closer to the patients' own communities. The general idea is that the simpler cases will be treated locally, and the complex cases will be sent into us. But all of this care will be led and coordinated by our medical staff simply due to the paucity of available physicians. To that end, we also train a lot of community pediatricians to care for patients after a major procedure here, such as a heart transplant.

SP: Tell us about when and how you got to be CFO.
Carmack: I joined Packard as CFO about two and a half years, ago. I've been a CFO of hospitals my entire career except my first three years out of school, when I worked on the audit staff at Coopers and Lybrand.

SP: Had you audited any healthcare institutions?
Carmack: Only once for about two weeks. But as an auditor, I found myself getting tired of always looking backward, verifying that a company made X dollars versus Y. I wanted to use numbers to think on a forward basis and ask strategic questions like, Why are we doing this and not something else? Or: How is the market responding to us? As well, right after graduating from college, I began doing quite a bit of volunteering. I initially worked with mentally disabled adults and then went from there. Combining these things, I decided that I wanted to work for an entity that was helping to change lives somehow, and I wanted to help lead it, not do the accounting for it. I did a lot of informational interviewing in the helping fields, and finally a door opened at a local hospital to work as the senior financial analyst for the CFO. My boss involved me in everything that you could think of, and it quickly felt like I was part of the success and progress of the organization. Then, to cut a long story short, I caught my boss embezzling.