Lacing Up for Another Run

Lacing Up for Another Run

Herbert took his money and invested in bringing minor league baseball, the Bluefish to Bridgeport. After nearly a decade, he sold the team to take the helm at ConnectiCare and guided that health Plan to greater success.  Many would say about Herbert that he doesn’t think outside the box, “he brings his own cardboard.” He needed that cardboard to help break another HMO into the market, the non-profit Harvard  Pilgrim, which he helped launch and after only two years has become an important contender among the state’s health plans

Herbert’s latest challenge is a real one; he takes over the regional Business Council after a decades-long run by Paul Timpanelli, a chamber and Bridgeport business stalwart. New Haven magazine publisher Mitchell Young and Facebook “friend” Herbert, talked to see how he keeps it going.

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 How old are you?

Seventy One

No f—way – [everyone including photographer Christmann laughing].   

You can put my age in, but don’t put your comment.

I’m putting that comment in, I can tell you that.  I’ll just leave out the [expletive] part.

You’re known for running your own course, but weren’t you taking a personal risk being an early supporter of Mayor Joe Ganim’s controversial new run for mayor of Bridgeport?

Finch didn’t expect to lose, but yes, I supported Ganim full bore because he was so good [at Mayor] the first time around, that’s when we were building the Ballpark, the Arena, he made things happen.  Rowland became an inner city guy and in tandem with Ganim, they worked together, that’s how things got done.herbert2

 Herbert: I figured I would become a minor league mogul, and probably never go back into healthcare.

We first met when we interviewed you for Business New Haven in 1993 as the first business person we featured “On the Record” and parts of this interview will run in Business New Haven twenty-three years later. But you were Connecticut’s first healthcare Entrepreneur, running the first break-out HMO, Physicians Health Services. How did you get there?

I grew up outside of Washington, D.C. in Maryland in Prince George’s County. Eventually went to Harvard Business School and joined a consulting firm after, Crescent McCormick. They had some financial difficulties and then laid off all the MBAs. 

Suddenly I was unemployed and I went to Minneapolis to work for Dr. Paul Elwood, a Pediatric Neurologist who had coined the term Health Maintenance Organization.

He was a really charismatic guy, it was in the 1970s, Nixon was in office and his big health initiative was going to be to promote private health plans all over America.  

That was Elwood’s vision, so all of a sudden he was thrust into the national scene going down to Washington working with [Bob Finch] who was the secretary of HEW.  I was working for him as his assistant, right with him. 

He [Elwood] was running a health policy research firm and the Sister Kinney Institute,  which was a post Polio Hospital, it had treated Polio patients and was a leader in the country. Along comes the Salk Vaccine and it became a quadriplegia recovery institute. He was running the hospital and running this research organization, doing health policy.

That’s an odd combination of effort?

Patients used to be in for six months. He got so efficient in treating them, they were getting out in a month and he was bankrupting the hospital. He became a huge advocate of pre-paid healthcare and that’s how he developed this health maintenance organization concept. 

He was remarkably successful in convincing the Nixon Administration to make it part of Federal health policy. The Health Maintenance Organization Act was passed the last day of 1973, providing $375 million to start new health plans all over America. Nixon’s vision was to start 2000 new health plans.  

As non-profits?

Virtually all were non-profits, the funding could only go to non-profits. There was some loan money that could go to for–profits, but it had to be paid back. We got nowhere near 2000 health plans, we did get six or seven hundred started up using that money.

Is that really any different than what Obama did, helping start Healthy CT and a bunch of other health plans around the country as part of the Affordable Care Act?

Different era, and the money was much bigger this time, but against much greater odds. Some of my colleagues that were at the {Elwood] firm went off to start their own health plans. I had hired Rich Burke to come to work for the research firm, he went off and founded what is now United Healthcare. 

He did okay.

I stayed through most of 1976 and decided I wanted to do one of these too. I had three job opportunities, one was in L.A., one was in Boston, and one was in Bridgeport. So why would you choose Bridgeport?

They had the defending national champion softball team, that was the real avocation of my life— was to play fast pitch softball.  I traveled around the Midwest doing that, I decided to come here and play with this defending national championship team, it was the Raybestos Cardinals. 

They have this great women’s team too?

Yes forever, still do. The men’s team had won six national championships and the women about thirty [at the time]. I ended up playing eight seasons and won one more national championship. 

What position did you play?

Came as an infielder, they made me an outfielder, and [eventually] I was playing designated hitter.

So at 32 you weren’t much of a fielder?

I was a terrific hitter and that’s why I was always going to be in the lineup. 

So the job was to start a new health plan [Physicians Health Plan] from scratch to compete against Blue Cross and Blue Shield. They were insuring more than half the people in the state, there wasn’t much competition.  There were others that started taking the federal dollars.

We didn’t take Federal money initially, we didn’t have a lot of money. We got licensed and were off in 1977. Well, when I arrived it was called Greater Bridgeport Medical Foundation, a crazy name.

One f the first things I did was change it to a marketable name, Physicians Health Services and it became known as PHS. We went back in ‘78 and got some of the Federal HMO Act money, about $1.6 million, and that helped capitalize us a little better and we started growing.  

By 1984, we were the largest health maintenance organization in Connecticut [not counting Blue Cross, an indemnity insurer at the time]. We didn’t really have many HMOs in the east yet. The closet thing was Community Health Care Plans CHCP [operated on Long Wharf], a bricks and mortar staff model HMO.

I’ve always seen the Clintons as the proponents of HMOs. They weren’t really accepted until they were talked up in the healthcare hearings at the time. 

They didn’t slow the momentum down. Nixon gave that initial infusion of capital working with Senator Kennedy. It was bi-partisan.  In 1981 when Reagan came in, one of the first things he said was we’re not going to fund health plans anymore. We’re not going to give grants anymore, that’s not part of my Republican philosophy.

A bunch of us were in this incipient state. He said convert to for-profit and go get your capital the way the rest of American industry does on Wall Street. It set off this wave of for-profit conversions. US Healthcare became the first to go public in 1983. 

By 1996, we [PHS] had converted to for-profit, had gone public, and were operating in three states [Connecticut, New Jersey and New York]. We were ‘rocking and rolling’, we went public the day after Bill Clinton came into office.

I recall there was some controversy about converting for PHS?

We began a process in 1986, a whole bunch of doctors [owners] didn’t believe in for-profit medicine, even though everyone was practicing for-profit medicine in their own practice. 

There was, until the Clinton years, a concern that HMOs would be too restrictive in choice, and that was the rub for a long time?

There was always that choice that you would be locked in to a closed panel, but actually the type of health plan that PHS was involved with was most of the physicians in the community. You had to stay within the panel, but the panel was very wide. That gave us a huge marketing advantage over CHCP where you had to go to the facility.

I recall at the Advocate, back then we had Aetna and in those days our staff could go to any doctor in the U.S. practically, and I think our employees kicked in about $50 a month. But the New Haven staff were demanding that they could go to CHCP. 

We were like, “any doctor in the U.S. or a small group in a single facility on Long Wharf and that’s what you want?” It was a political statement of some kind.

That was the critical flaw, but in other parts of the country, where I came from, we had the Mayo Clinic. Clinic medicine in the Midwest was considered high quality medicine, it wasn’t seen as a big constraint if you had to go to the Mayo Clinic and get your health care. In the east, people thought of clinics, hard benches, long waits, foreign medical doctors, people want to be able to go to their own doctor.

The concept was working HMOs were getting an enormous amount of capital from Wall Street and they were exploding in growth. By the mid-nineties healthcare costs were coming down. In 1996, healthcare costs went up 1.1 percent. 

We were accused of paying for “drive through mastectomies,” stuff that was not true, but we were doing things like asking whether the doctor needed to hospitalize a patient or if the patient was in the hospital “why are you keeping them in for so long.”

Or we’re going to look at your practice and make sure your utilization was appropriate. The public didn’t like it, the doctors didn’t like it, so health plans backed off in the later 1990s and as a consequence, healthcare premiums started exploding.

So you’re saying the HMOs were not able to intervene and that drove costs, but there was technology and drug discovery and mergers, and a lot of unhealthy people weren’t there?

There were a number of factors that created a perfect storm [for cost increases]. Certainly technology accelerated. A new technique would come along, cost four times the old technique, and everybody wanted it, patients, doctors. The population was a factor, certain illnesses like AIDS, [Cancer] we would insure them and they would have very substantial healthcare costs. 

You would have the relaxing of the tight controls. 

Another thing is that in fee for service medicine, doctors want to maximize their income.  If health plans are watching utilization, the one thing that had never been controlled is what doctors  charge, so they would raise fees. 

We would turn around and try to negotiate a better fee schedule, but it was always off a higher base. All of these factors combined in the late nineties to raise premiums. During the Bush era, in order to keep premiums so that employers wouldn’t quit or go ballistic, that’s when they started to introduce these high deductible health plans, started increasing deductibles, and co-insurance. 

You were holding premiums in check seemingly, but people didn’t have as good coverage. Which is what has continued and by 2008, health care costs had gotten incredibly high. Obama gets swept into office, controls both houses and passed this huge act.

Most people seem to argue about ObamaCare or Single Payer, or the insurers being too greedy. But isn’t the driver our lifestyles and can any of these systems really change that?

There are two schools of thought. Foreigners smoke, but the U.S. by and large has quit smoking. We’re still 15%, but I guarantee in Asia it’s probably 80%. Smoking [cessation], which began with the Surgeon General, we’ve done a marvelous job. Obesity we get an F.  The country is getting more and more heavy. I read the other day that 37% of the country is considered obese. Not overweight, obese. 

That is a price we all pay, we’re a country of freedoms, you can eat what you want.

Companies have wellness programs, it takes off, it’s great, people sign up, go to the gym, you go back six months later and see where it is. That’s the way it seems to play itself out. 

Just to go backwards for a second, how did you do on the sale of PHS?

I basically got cashed out and became reasonably wealthy for the first time. I took that money and invested a large amount of it in the Bridgeport Bluefish.

That was a good idea!!!

[laughs] I figured I would become a minor league mogul, and probably never go back into healthcare and the Bluefish would make money every year and because I was the owner…

[Interrupts] So you’re really not that smart?

[laughs]  I like to call myself a serial entrepreneur and the Bluefish were the next serial. 

I owned that team for eight seasons and I loved everything about it, except I did lose money every single year. 

I realized that probably after about the third year, but I loved it so much that I deceived myself that next year was going to be better, when I knew the business model was an enormous challenge.

But we still have the Bluefish.

I am an enormous fan of the Bluefish and one of my missions in my new job is to see what I can do to keep the Bluefish in Bridgeport. They just got a one year lease extension so we just have one year to get it thriving again. Even though we lost money in those first three years, we drew record crowds, we had the enthusiasm, we had sell outs. 

At seventy one I see you’re still having fun. I see your Facebook feeds, what made you want to take on this new challenge as President of the Bridgeport Regional Chamber?

I’m under no illusion as to how challenging this new job is. But when I invested in the Bluefish in 1996, I was under the illusion that Bridgeport was about to undergo this great economic renaissance and things would be marvelously better. There were good things happening, the dot com burst, the mayor went to jail, everything came apart. 

Let’s go in another direction for a bit. How many kids do you have and what does your wife do?

Five. My wife is an avid Catholic and works for the  dioceses and is in charge of Catechism teaching 800 kids in the largest Catholic Church in Fairfield, Saint Thomas. Three from a prior marriage and they’re all launched. [laughs].

What do they do?

My oldest works in a facility that deals with brain trauma kids and cares for and counsels them. My son works for CNN and has a senior level strategic planning job down in Atlanta. My other daughter has a Master’s in Italian and is fluent and until a month or so ago worked for Prada, now she works for a competitor, she has a huge job traveling around the country in the fashion business. They’re all doing fine.

If I was talking to them what would they say about their dad and what they learned from you about business and work from their dad?

I never had the question before.

Sorry, I bring my own cardboard too.

My son worked hand and glove with me at the Bluefish. He got out of Middlebury and I hired him as our ticket manager. Then he went to work for Mackenzie, for Bloomberg [media], then for a bankruptcy firm. I was going to sell the Bluefish and he was going to Tuck for graduate school. He quit his job at the bankruptcy firm and came to work for me to help sell the team. I had to sell a company that hadn’t made money. We worked hand and glove, it was fantastic. 

Except for my youngest son, all four of my other kids worked at the Bluefish, it was really great. My wife never worked there, but we dragged her to a lot of games. They certainly respect me for my business knowledge. I think they have a respect for the culture I’ve been able to inculcate at every company I’ve worked for. 

What kind of culture?

At PHS, we trademarked the phrase “intensive caring.” On my first day at ConnectiCare, I said I don’t want anyone calling me Mr. Herbert, that was my father, call me Mickey. We’re a team, it’s a collegial effort, we’re going to work together. Another big principle I’ve had throughout my career—someone makes a mistake, I’m not going to jump down their throat. Mistakes don’t matter, it’s the response to error that counts. I don’t care that you made a mistake, I just want you to learn from it and not do it again.

It’s a little tougher with your teenager, isn’t it?

[Laughs] we’ve been through that for sure. The School for Ethical Education [Milford] gave this award three years ago, Ethics and Action Award, they knew about [my approach], I think the kids respect me for that more than anything else. 

So are your kids into sports the way you were into Baseball?

My son at Yale [Divinity School] never really played sports, but he is a sports addict. He was just hired by Sam Rubin, who runs Yale’s sports department, he’s a rabid sports fan. My oldest son is a rabid hockey fan and he plays hockey [at 38]  down in Atlanta. My second daughter runs a lot, my youngest son works out, but doesn’t play organized sports. 

None of them have taken the path I took.

It’s kind of easy to identify what New Haven or Stamford looks like a decade or two from now. If it’s a few years from now and you’re successful and Mayor Ganim is successful, what is Bridgeport going to look like?

I don’t know if we’ve found the particular niche yet. The way I would have answered that question a few years ago is if you can look at how Stamford gentrified and brought in the big companies. You look at what happened to its downtown, all those vibrant restaurants and the same thing happened in South Norwalk. I thought the natural evolution is it would continue up the road and it would happen in Bridgeport, and Main Street would become many great restaurants. 

I think Steel Point [new development on the Harbor] still has enormous promise now that we’ve cleared some of the road blocks, and we’ll get some housing there. The [Long island, Port Jefferson] Ferry is going to move across to that side and they’ve begun the work for that. 

Is it going to be Arts and Culture? Is it going to be manufacturing? I don’t think so. There are things that are happening in different parts of Bridgeport. There is an area we call the “smile,” which is a little strip as you leave Bridgeport heading to Fairfield.  It’s been burnt out factories for decades, now it’s being converted to housing. There is a shopping center going in there. My challenge is to make sure that happens, developers are in there, they’re ready to go.

I guess what I’m saying is that I see Bridgeport on the verge of a comeback and I can be a catalyst to help make that happen like it didn’t happen twenty years ago. What character will it take? I could argue it should be the Arts, but the Bijou Theater, the people that ran that gave up, now they’re trying to get another group in there. Maybe it won’t be arts, I don’t know yet.

You’re Seventy One - your kids are grown up, your wife is busy, what makes you nervous about this challenge?

For one thing, I’m stepping out of the healthcare industry where I’m considered an expert with a national profile, and going into a business where I don’t really know as much. That makes me a little nervous. I just had a lunch with the metro [Chamber] execs, and they’re all saying great, we welcome you aboard. Those guys have been toiling in the fields for a long time and I’m trying to act like a sponge.

Well, membership is one of the things you did excel at with PHS and ConnectiCare?

Yes and I have to go out and convince those members that their membership is valuable and go out and recruit new members. We need them to help us promote the economic well-being of the region, new economic development and promoting the vibrancy of the existing companies. 

Well isn’t there some push back in places like Trumbull not wanting more economic development?

When I was on the Trumbull board, our concentration was trying to push any economic development to the absolute outside borders. And not to let anything come into that nice residential center. 

I remember making fun of your shoes on Facebook, straight CEO and red patent leather shoes and colorful sneakers. How did that become a trademark for you?

Back in the early 80s we started sponsoring walks [PHS], March of Dimes, etc. We were the first company we would sponsor the whole walk. Now at a run, you look at the back of the shirt and there are thirty sponsors. We were like the only sponsor. I started going on the walks and I had these bright red sneakers. I don’t remember how I got the first pair, but people began to identify me by the red sneaks. There was a guy [down there], he had to go to Hong Kong and he got as a birthday present a pair of red patent leather shoes made for me there. I started wearing them to every high society even that I went to in Bridgeport and people totally associated me with the red patent leather shoes and the red sneakers.

Every year at the Ringmaster’s Ball, the annual formal dance that they have each year to celebrate the Barnum Festival’s Ringmaster of that year—I was Ringmaster in 1993 and have been going ever since.

I’m still seeing you in that get-up?

[Laughs] the Barnum Festival Great Street Parade near the Fourth of July puts all the old Ringmasters, we call them the “Crotchety Old Ringmasters,” I go every year and sit on the back of the convertible with the red shoes and the top hat. [for many years] I would show up at a BRBC board meeting in a different set of wacky sneakers, it is sort of a brand.

I tell people all the time that in New Haven, the demographics of four growing colleges, including Yale University, means that New Haven will progress pretty much. Government and leaders can make it worse or better, but the trend line is going to be there. But I don’t know what the driver for some other Connecticut cities are, Bridgeport, Hartford where is the wind at your back there?

Things are happening, there is a substantial amount of capital directed to projects both public and private. The big power company that has the great smokestack next to the ball park, they’re involved in a [hundreds of million of dollars] building of a new power plant right there. 

There is a lot of housing being built in the downtown area now, I don’t think it is at a sufficient mass to start creating things all by itself. It’s a necessary step, we certainly didn’t have that in the nineties.  My challenge is to help get more and keep it going.

What was the pull for you personally by seeking the role of Bridgeport Regional Council President?

When I was CEO of PHS in 1981, I was on the board and have been on the executive committee for years and years. The search committee failed to produce a candidate that they could bring to the board. They said “we had a candidate but they said we weren’t able to reach an agreement, we’re going to have to start all over again, people were groaning in the room.”  I went home that labor weekend and said, I’m healthy, I still have a lot of energy, I’m familiar with the organization, I’ll make a commitment for [at least two years]. 

They put me through the process, it just happened a week ago. 

Sometimes when you’ve been around something for a long time, you’re just steeped in the problems. How do you break that? I always tell people the folks that are most negative about New Haven have lived here the longest, they love it, but they only see the things that have not gone right.

Where are the fresh eyes?

The Mayor’s been in office just a year now, he’s now really eager to concentrate full bore on economic development. I intend to make this organization really transformative and take all the years I have as an entrepreneur to figure out how to really boost economic development.

A friend of mine the other day, after I told him about this interview said, “well what do chambers of commerce do, anyway?

[Laughs] For us it can be a real catalyst for projects, many already on the drawing board, that need a further boost to bring to fruition and some handholding to keep them developing. We have an eco-technology park, there is a bunch of businesses in there, they almost all are small businesses.

There’s a mattress recycling company, it has finally gotten to where it is breaking even. There are a whole bunch of towns, including in Fairfield County, that do not send their mattresses into that facility. They put them in the chute at the dump. Fairfield’s on the list, and I live in Fairfield, and the Fairfield dump is about three miles from the mattress recycling center. There is an example where I can be helpful in getting these other towns to help out in some fashion so that can become a really thriving company. It’s good for the environment and most of their employees are formerly incarcerated.

[laughing] Sorry I can’t help myself, but I think Mayor Ganim should be very supportive, hopefully he has a sense of humor.

Absolutely. 

Anyone else going to wear “Red Shoes” other than at the golf course? can you make that happen, maybe that’s what you need to do to make things happen?

Get people to loosen up some. I live on a posh street in Fairfield.  Jack Welch lived there, Bob Wright of NBC. I tell people when they ask to use me as a contact for other wealthy people, I don’t have hardly any rich friends. I grew up poor in Washington, D.C. my wife grew up in New Haven on Irving Street,  she’s a street smart New Haven girl. The country club of Fairfield is five doors from my house, I’m not part of that. I’m probably more suited to have an office in Bridgeport than I would ever be in Southport.