Published on April 26, 2012

Simon Scholtz Key to LMH Financial Success

After 13 years as LMH CFO, Simon Scholtz is retiring Friday with 43 years in hospital finance. 

Read Karrey Britt, LJW reporter's story

For the past 13 years, Simon Scholtz has worked quietly in the administrative offices at Lawrence Memorial Hospital where he has played an integral part in improving its financial status.

“He’s not a table pounder. He just goes about his business. He doesn’t make waves, but the results speak so loud,” said Chuck Heath, LMH finance committee chairman.

Scholtz was hired in March 1999 as chief financial officer. In 1998, LMH had an operating income loss of $2 million. The following year, LMH has profits of $1.3 million and then consistently improved its operating margin despite a worsening economy.

In 2011, it had $9.5 million in operating income — a 600 percent increase from when Scholtz started. During Scholtz’s tenure, the hospital also has received three credit rating upgrades from Moody’s Investors Service, with the last one coming right before his retirement, which is Friday.

“The bond upgrade we got last week was clear out of left field. We didn’t ask for it. We didn’t beg for it,” Heath said. “Moody’s said the results are so good that we just can’t ignore you guys, as small as you may be, and to me that’s the epitome of Simon.”

During a recent hour-long interview in his office, Scholtz, 66, talked about his career, family and even offered some financial advice.

“You’ve got to save and you’ve got to live within your means,” he said.

Simon was born and raised in San Antonio and he earned a bachelor’s degree in accounting from the University of Houston.

“When I needed an A in college to make sure I kept a good grade-point average, I took a math class,” he said. “I loved math. The way I look at it, the numbers tell a story. They are like reading a book. All you have to do is try to understand what they mean and what they are saying and they can be very interesting.”

His first job was working as a junior auditor at a 500-bed charity hospital in Houston. His office was located next to the clinic and he said a woman gave birth right outside his door during his first week on the job.

“I didn’t know anything, but that matured me real fast,” he said, with laughter.

Then, the chief accountant quit about a month later, and the administration asked if Scholtz wanted the job.

“I hadn’t done anything except put checks in order, so I proceeded to spend days and nights having to track everything,” he said. “Now, this was before computers, so everything was manual. The books were kept in a big safe and I was the only one with the combination to the safe, and so I had to learn all of that.”

He soon moved on to become controller for the Memorial Hermann Healthcare System in Houston and then later became CFO of Baylor Medical Center in Irving, Texas. He worked there for 12 years before he landed the job at LMH.

“I started looking around and this job came open, and we had never been north of the red river, so never been out of Texas,” he said. “We came for a visit and it seemed like a wonderful place to bring a family.”

Scholtz said the financial turnaround that LMH has experienced has been a team effort from the CEO to the food service department to nurses. He said there have been several factors that have led to its success.

First, the hospital got out from under its Health Maintenance Organization insurance plan, which was losing money. They worked out a deal with Blue Cross Blue Shield to assume coverage for the plan’s participants.

Next, he said they hired consultants to help with computer problems they had with accounts receivable software so they could start getting payments for patient services that they were providing.

Then, they expanded outpatient services and opened LMH South and primary care offices in communities surrounding Lawrence. Scholtz said this helped grow the hospital’s revenues.

In 2006, Moody’s upgraded LMH’s credit rating so it was able to issue bonds that allowed it to do a $40 million expansion at the hospital which included the surgery department, emergency room and intensive care unit. They also remodeled the maternity suite and added a nursing unit.

“The main thing we did was go to mostly private rooms for patients,” he said.

During the past few years, Scholtz said the hospital has added more physician practices, such as a cardiology group and internal medicine group.

The hospital went from 135,124 patient visits in 1999 to 222,750 in 2011, a 64-percent increase.

During the growth, Scholtz said Moody’s Investors Service warned them that most hospitals struggle financially after such construction and staff expansions. But, they proved them wrong.

“Our CEO is a very strong administrator and the organization has done a great job of controlling its costs and that’s probably one of the bigger reasons as to why we’ve been successful,” he said.

The other reason: community support. He said the hospital has had great donors and volunteers.

He said when he first started, he would hear grumblings about the quality of care at LMH, but he doesn’t hear that anymore. Instead, he said people approach him and share their positive personal stories.

“Nothing makes you prouder than having your company talked about like that,” he said. “You can’t buy that. It’s priceless.”

While Scholtz is humble about his involvement in the turnaround, his colleagues say otherwise. As CFO, he’s in charge of budgeting, the billing and collection process, purchasing, materials management and investing.

“I think the leadership at LMH, and particularly Simon, was able to define the challenges that we had and then put into place systems to very aggressively correct that,” President and CEO Gene Meyer said.

He described Scholtz as “the nicest person in the world” and someone with a lot of integrity.

“It’s been a really good run,” Meyer said. “He will be greatly missed.”

Joe Pedley, left, is pictured with Simon Scholtz during a Lawrence Memorial Hospital Board of Trustees meeting Wednesday, April 18, 2012. Scholtz, who is retiring, was recognized for his 13 years of service as chief financial officer during the meeting. Pedley will take over the position in May. by
Karrey Britt

Scholtz said his colleagues have joked with him about bailing out before the full effects of federal health reform are in place.

“I’ve assured them the timing is just right,” he said, with a big smile.

He said it’s not the first time that hospitals have feared closure due to government regulations. Many thought they would go broke when the Medicare program was created in 1965.

Scholtz also recalled sitting around a table in the 1970s at the Texas Hospital Association trying to figure out how many years it would be before Social Security went broke. They were estimating it would be seven years.

“It was never going to last this long and now we are saying that it will last into the 2020s,” he said. “The point is the government can fix that stuff or at least change the rules a little to keep extending and that’s what always happens.”

He expects the rules will be bent again when it comes to health reform.

“The problem is surviving through those years until they adjust it and that’s why the improvement in our position now is so important for the community,” he said.

Scholtz and his wife, Pam, are moving to Denton, Texas, to be closer to their children and grandchildren. When he talks about his family, his face lights up.

He believes his retirement days will be filled with family, golf, long walks, travel and volunteering. He even plans to catch the Jayhawks whenever they are playing in the area. “We will probably get to see more games there than we did here to tell you the truth,” he said.

He said leaving Lawrence is bittersweet.

“This place has been great for us and I couldn’t have asked for any better way to spend the last part of my career than to be here,” he said.

Simon Scholtz Key to LMH Financial Success

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