Employment Empire: The keys to 5 top local employers' success

Outside our boundaries, there are a number of misconceptions about our community, which is why we get nicknames like “The People’s Republic of Madison.” Contrary to popular opinion, this republic happens to be engagingly entrepreneurial, and some of its business success stories have been written by people who grew their companies into Dane County’s largest employers.

Several of them are also among the state’s largest employers, offering ample evidence that the free market is alive and well in a progressive bastion that happens to have the state’s lowest unemployment rate (4.2%). So, in our annual presentation of the Dane County businesses that employ the most workers, we also profile five local organizations that are perennial members of our largest employers list, leading off with the county’s largest employer, Epic. (Our full list of top employers is available in the IB print edition. Click here to subscribe.)

Epic: Nonstop Growth

Verona’s Epic Systems develops just about every product in-house. It doesn’t acquire other companies. It is employee-owned and independent, and even though it would draw considerable interest from investors, it will probably never issue an IPO.

Yet Epic has grown into the largest private employer in Dane County and one of the nation’s highest-grossing health information technology companies, with $1.75 billion in annual revenue. At the rate it’s adding employees — another 600 were hired during the past year — the maker of medical records software is likely to hold this distinction for many years to come.

“Our software can run fast, even for very large, consolidated systems. This is essential for productivity, especially at a time of margin squeeze. Not many systems can do this.” — Judith Faulkner, CEO, Epic Systems

Like most iconic companies, the anchor of Dane County’s technology cluster began small, but 35 years later it can boast that more than 50% of the U.S. population has, or will have when rollouts are complete, a current Epic record. A fair number of those patients see their providers in an ambulatory-care setting, but it’s still a remarkable percentage considering the competition Epic faces from industry stalwarts like Cerner, McKesson, and GE Healthcare.

CEO Judith Faulkner attributes this market share to the fact that Epic’s software was designed from the start to keep track of patient clinical information, and to the company’s privately held focus. “It is all developed in-house around one patient database, for both inpatient and ambulatory care, and for many needs — clinical, billing, analytics, patient engagement, etc.,” Faulkner noted. “We are employee-owned and do not have the distraction of being a publicly traded company.”

Epic software offers the added advantage of speed, especially in an era when industry consolidation — the merging of health systems — has been incentivized by provisions of the Affordable Care Act. One of the reasons health systems are merging and trying to build scale is the requirement to better manage population health — an area where the many varieties of electronic medical software, for both clinical and business uses, come into play.

“Our software can run fast, even for very large, consolidated systems,” Faulkner stated. “This is essential for productivity, especially at a time of margin squeeze. Not many systems can do this.”

Margin squeeze is partly the result of the health care industry moving to a business model where hospitals and health systems are compensated for quality health outcomes, rather than the volume of services provided. In this victory of value over volume, government payers like Medicare are setting the pace and private insurers are following suit, forcing providers to improve processes and efficiency.

All of this is helping to fuel Epic’s growth, as health systems leverage medical software to improve administrative performance and care delivery, and to reduce preventable events (falls, bedsores, infections) that add cost. Some believe the health care industry formally entered the process-improvement era in the early 2000s, following the Institute of Medicine’s startling 1999 report on hospital errors.

But if Faulkner could pinpoint one thing that spurred Epic’s growth, it would be a different national event, one involving a former Wisconsin governor. “If I have to zero in on a single event, it would be the presidential election debates when George W. Bush, advised by Tommy Thompson, spoke about the need for EHRs [electronic health records],” she stated.

As for how large her workforce could get, and what that means for Epic’s ever-expanding Verona campus, Faulkner declined to speculate. “Our staff says I never get this right, and I’ve always estimated too small,” she noted, “so this time I won’t hazard a guess.”



UW Hospitals and Clinics: a Healthy Diagnosis

Ask Donna Katen-Bahensky, recently retired president and CEO of University of Wisconsin Hospitals and Clinics, about the organization, and she’ll tell you it has been very busy, but the delivery of care doesn’t always translate into high revenues. There is an upside to that, however, because in the health care reform era, hospitals have to be more cognizant of gaining efficiency and cutting costs.

Before the Affordable Care Act, hospitals were compensated based on the volume of services they provided; now they are compensated for quality outcomes. For this and other reasons, the ACA is both a blessing (more people will be insured and have access to care) and a challenge that puts Katen-Bahensky’s master’s degree in public administration to the test.

“It’s forced us to reduce our costs because we’re going to see more patients, and we are going to be paid based on performance and value-based purchasing,” she noted. “The combination of all those has forced us to look very seriously at cost, and if you look at the national data, [health care] costs really are going down.”

UW Hospitals & Clinics is an academic medical center that includes a 592-bed, tertiary-care center, plus the American Family Children’s Hospital, the UW Carbone Cancer Center, and Level 1 trauma and burn centers — with more to come. A new UW health campus is now under construction in the American Center; when it opens in 2015, the facility will provide a combination of inpatient and outpatient services, wellness and prevention, alternative medicine, orthopedics, and rehabilitation.

Taking these services out of the hospital setting will save money. “When you’ve got a teaching hospital, you can take a lot of cost out, but you can’t take away all the cost,” Katen-Bahensky noted. “You’re teaching and you’re doing research, and so we want to move those patients so they can be taken care of in a community setting and [so we can] get the cost down to the level of a community setting.”

UW has established partnerships with companies like Aurora Health Care in Milwaukee (as part of a new six-system network) and entities like Swedish American Health System in Rockford and Watertown Regional Medical Center. The partnerships increase UW’s scale for population health management and ensure its staff of specialists have enough patients to make a living.

The smaller partners gain access to UW’s electronic medical records capabilities. According to Katen-Bahensky, one of the things that is sorely lacking in health care is coordination across providers, whether that’s outpatient to inpatient, inpatient to skilled nursing facility, or skilled nursing facility to home. Electronic medical records make it easier to take the handoff with knowledge of the care already provided.

As for UW Health’s merger with UW Medical Foundation, Katen-Bahensky offered some advice for the eventual CEO of the merged entity, now run by interim CEO Ronald Silwinski. “Be optimistic even as health care is going through unprecedented change. It’s all about the patients and their families.”



American Family Insurance Group: Venturing Out

With its development of angel investment networks and its new venture capital programs, Wisconsin appears to be embarking on a new and more promising era in capital deployment. But long before state government took action to boost needed capital, companies like American Family Insurance Group were pointing the way with corporate support of entrepreneurs.

American Family Insurance Group’s branding and business outreach efforts include Dream Drive, a training camp bike event for Packers players and fans.

From the mid-1970s, American Family did this with its support of capital funds, but more recently, through American Family Ventures, it has directly committed $50 million to startups like Shoutlet, the social media marketing platform, as well as young companies involved with telematics, data mining, and data analytics.

CEO and Chairman Jack Salzwedel noted that “Am Fam” wants an equity stake and a good return on investment, but it also wants to drive any information it acquires back into its mainstream business. “It doesn’t work if it is just money going to a startup and you can’t somehow make it flow into your operations,” he says.

Similar multiplier effects are being sought in relationships with Gener8tor, a startup accelerator in Milwaukee, and the stimulation of intellectual capital near the Capitol.

American Family’s data science and analytics lab, located on Fairchild Street across from the Overture Center, will also be the site of a startup called Life Insurance Direct. Salzwedel noted the insurance industry has long used analytics, which are the basis of actuarial science, but the ever-higher volume of data produced by today’s technology has implications for product, pricing, and distribution.

“The unstructured nature of data has been an inhibitor to making sense of the data,” he explained. “With some of the new tools and new thinking around data and unstructured data, it’s opened up a whole realm of actually being able to understand it, apply it, and make tremendous business decisions with it.”
Even with $19.4 billion in assets under management, American Family continues to build an agency network that can provide multiple-line product and give trusted advice.

But it’s also mindful of the different ways consumers want to engage with the business, which explains the acquisition of companies like The General in Nashville, a direct auto insurer, and the Boston-based Homesite Group, a direct property insurer.

“We believe very strongly that our agent model is very vibrant and growing and will be strong for a long time, but we also recognize that there are customers that want us to do business in a different way,” Salzwedel explained. “We’re positioning ourselves to be able to be successful on the mainstream of agency business as well as the new stream of direct business.”

While American Family Ventures was launched with the long view in mind, American Family’s new partnership with Microsoft on an accelerator designed for startups that are focused on home automation is more of a sprint. “We’re partnering with a world-class organization that is known for its innovation, and we’re going to have a lot of companies over the next six months that will be submitting their applications for that program,” Salzwedel explained. “We will invest seed money in those that are selected, so we will be in on the ground floor with those companies, and they will all be in our wheelhouse.”

Combine all this with facilities like DreamBank, which was really the start of Am Fam’s Dreams Protected Campaign; branding efforts featuring prominent athletes like Russell Wilson; and continuing sponsorship of the Green Bay Packers through the American Family Insurance Gate at Lambeau Field, and it’s clear that this insurer has no intention of standing still.

“We see the Packers as a really good fit for our brand,” Salzwedel said. “They are kind of the dream franchise — small-market, lots of success. For us to be connected with that is a great partnership for our brand.”



WEA Trust: Still Standing

Having once found himself in the political crosshairs, Mark Moody can probably relate to what Trek Bicycle Corp. executives are going through.

Moody, president and CEO of WEA Trust, was once caught in the political maelstrom surrounding Act 10, the 2011 law that ended collective bargaining for public employees and sparked weeks of demonstrations outside the Capitol. Given the organization’s close ties with the Wisconsin Education Association, the state’s largest teachers union, the law’s supporters, including Gov. Scott Walker, singled out WEA Trust as a reason for the state’s fiscal woes.

The charge was that teachers unions would pressure local school boards to buy more expensive health insurance coverage offered by WEA Trust. By removing health insurance from collective bargaining, school boards would be able to shop the market and gain more competitive pricing, without union interference.

Some predicted WEA Trust’s demise, but three years later, it has regained lost business and emerged as the third-largest group health insurer in the state of Wisconsin’s insurance plan. It now has 93,183 total health-plan members, including 45,260 school employees, 30,536 state employees, and a growing number of local government workers.

Moody believes WEA Trust has surprised critics who wondered why, in the absence of collective bargaining, any Wisconsin school district would still buy group health insurance from the not-for-profit company. For a while, the insurer lost business and had to lay off workers, but by focusing on competitive pricing and problem solving, it has given itself reason to be optimistic.

“We didn’t have quite the [2014] renewal season that we had hoped, but we are encouraged by a number of things that have happened,” Moody says. “We had a number of schools that left us in the aftermath of Act 10 that have come back.”

It was “exceedingly challenging” and without precedent for an individual company to be in the middle of such a political storm, Moody stated, but “we’re still standing with a strong balance sheet. Customers are coming back, and we’ve had to adapt.”

Moody acknowledged WEA Trust, which was known for generous benefits, had to change its insurance plan, but he noted that it has always offered a broad range of plans with various deductible and co-pay options. He said that in the collective bargaining era, educators in particular were successful at negotiating and maintaining high-quality benefits, which became a sore spot. “What we’ve seen is that in 2010, our weighted average deductible was $218 for a single premium,” he noted. “Now, it is $1,044, an increase of 380%.

“That’s not necessarily something we did, but it’s what happened because of the cost of health care and because schools were really compelled to cut back on what they were spending, and were able to do so in the absence of collective bargaining.”

One way WEA Trust has recaptured business is by forming additional insurance-purchasing consortiums with Wisconsin school districts. The consortiums have gained in popularity during the past five years because small school districts believe they provide better bargaining leverage, and the districts can protect themselves from the variability that comes with being a small employer. Sometimes, the consortiums have difficulty sustaining themselves, so participating districts have to be committed to living with the bad cost years as well as the good ones.

WEA Trust’s workforce is now about 60% of what it was in 2010, but getting back to previous staffing levels is not necessarily a business goal. “We’re less focused on the size of our workforce,” Moody said, “than on serving our customers and on the size of our enrollment.”



Catholic Charities: Ready to Serve

Jackson Fonder could tell you 100 stories about how Catholic Charities of Madison has made a profound difference in people’s lives, but one really stands out. It’s the story of Kelly, a 45-year-old Madison man who has been struggling with alcoholism since he was a teenager. At one point in his life, he was homeless for close to 10 years, and his addiction almost killed him.

Catholic Charities of Madison has developed programming that serves the elderly, the developmentally disabled, families, and children in an 11-county region.

Since undergoing treatment at Catholic Charities’ Hope Haven program, he’s been sober, but that’s only one piece to his recovery. He also has a job, transportation, and housing and is now featured on a YouTube video acknowledging that if it weren’t for Hope Haven, he would not be alive today.

Fonder, president and CEO of the local branch of Catholic Charities, not only loves these stories, he appreciates the expertise and devotion of a staff that makes them possible. “When you look at our alcohol and drug clients, that kind of story comes through over and over again,” he says. “We were their last hope.”

That hope is spread to anyone in the organization’s 11-county service area who is dealing with a family crisis, a crisis pregnancy, academic difficulties, or issues associated with a disability or advanced age. Established in 1946 to support the poor and the vulnerable, no matter what their religious faith, Catholic Charities takes a business model approach to its work and applies evidence-based practices to lifting people out of despair.

This requires both staff expertise and resources in the form of private donations, foundation grants, and fundraising events. Every program has to stand on its own; nothing is taken from Peter to pay Paul. “It’s got to be aligned with our mission,” Fonder stated. “We’ve got to have the expertise to pull it off. We’ve got to be able to collect the resources, and it’s got to be sustainable. If we can do all four of those things, then we’re going to venture into that area and try to meet that need.”

One of about 170 Catholic charity agencies in the United States, the Madison agency did not see a drop-off in donations when the recession hit in 2008-09. That was a difficult time for many nonprofits, but Fonder is grateful that Catholic Charities’ donors understood community needs “almost as well as we did.”

“Surprisingly, they maintained their giving despite the financial challenges, so our own fundraising during that period of time was not negatively impacted,” he said. “We did see an increase in the needs in the community, so we expanded our outreach, especially in the rural communities.”

It could soon expand even more. When Fonder sees tens of thousands of Central American children being brought to the United States — children who need humanitarian services — the organization’s first impulse is to reach out. “First and foremost, this is a humanitarian crisis, and there are many Catholic Charities across the United States that are fully engaged in responding to the needs of these families and children in search of a better and safer life,” he said. “We’ve reached out to offer our support here in Dane County. We don’t know if the government is going to seek to use our resources, but if they do, we’re going to be ready to respond.”

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