William McFaul: Management Maverick

Editor's Note: This profile was reposted with permission from the long-defunct First Moves Magazine, January/February 2003, by its original publisher Medical Distribution Solutions Inc., now known as Share Moving Media Inc.

By Rick Dana Barlow

Quite frankly, Bill McFaul considers the status quo persona non grata. Always has. Always will. It's the common thread he's woven throughout his more than 30-year career in healthcare supply chain management with nary a regret.

McFaul began his illustrious professional journey in the late 1960s as a purchasing agent/internal auditor for the laboratory in New York's Mount Sinai Hospital. By 1971, he had been promoted to assistant director of purchasing for the hospital.

During that time McFaul also acquired a taste for group purchasing by helping the New York- based regional group purchasing organization Joint Purchasing Corp. (now JPC) develop some new concepts for their members, such as a laboratory contracting program.

When a sales and marketing position opened up at a regional manufacturer of disposable medical, laboratory and dietary supplies, McFaul opted to leave Mount Sinai and try it out. But it only lasted for a short period of time. He felt his personality didn't lend itself to sales, and a personal tragedy in his life he politely declined to talk about changed his mind. "It just didn't suit me," McFaul said.

In 1973, he returned to hospital work, joining Hunterdon Medical Center (Flemington, NJ) as director of purchasing. Within six months of his starting at the hospital he learned about a job opening at Central New Jersey Shared Services Corp., a not-for-profit shared purchasing and materials management operation between two unrelated but neighboring hospitals in the Trenton area.

"The CEO at one of the hospitals called me and asked me if I was interested in taking the position as director there," McFaul recalled. "I said, 'No, I really don't want to jump around because I just started this job.'" But he wouldn't take no for an answer, offering to convince McFaul's hospital to join the shared services venture. At that point, the position became too hard to resist, according to McFaul. Very quickly the venture supported three hospitals.

Shared Service Success

McFaul hit the ground running. Within six months he had convinced a fourth hospital to join. Eighteen months later, the shared services venture supported 16 hospitals in central and southern New Jersey. Legally it was part of the New Jersey Hospital Association but it was governed by a management group of CEOs and CFOs from member hospitals.

"We helped them develop expense reduction concepts for their hospitals using a dedicated field staff of materials managers who would support multiple facilities," McFaul said. The venture also operated a print shop and pooled operational data from all 16 facilities and shared results among the group. They helped the hospitals standardize on selected commodity products, negotiated and bid contracts for various products and services, such as collection agencies, and did volume buying but not group purchasing for them, according to McFaul.

To better understand clinical practices within the shared services venture, he hired a clinical nurse named Diana Lyons. It was a decision that would prove fortuitous by the end of the decade.

During much of the 1970s, McFaul had touted his organization's successful operations model to a professional association of GPO executives called Group Purchasing Group (now known as the Professional Society for Healthcare Group Purchasing). By the late 1970s, McFaul began touting the concept of a "supergroup," or a group of GPOs. "Nobody knew what the heck it meant because there were no supergroups back in those days," he said. With Joint Purchasing Corp. CEO Bill Doll, McFaul assembled a handful of northeastern GPOs and hosted a meeting in Atlantic City, NJ. What grew out of that meeting was Mid Atlantic Group Network of Shared Services or MAGNET, which McFaul helped to build.

Founding a Consulting Firm

By 1980, McFaul realized that the concepts he had developed for Central New Jersey Shared Services Corp. could be taught to and replicated in other hospitals so he and Diana Lyons formed a consulting firm — McFaul & Lyons Inc. — to help hospitals control their expenses and streamline their operations. Back in the mid 1970s the healthcare industry supported about 200 separate groups doing shared services and purchasing so it was not really virgin territory. But individual components within the shared services model he helped develop, such as data sharing and product standardization, were something he thought he could expand to other hospitals as the needs arose, according to McFaul.

McFaul brought operations expertise to the table; Lyons brought the clinical expertise to the company. As a result, McFaul resigned from MAGNET's board to concentrate on growing McFaul & Lyons.

Six months later, MAGNET's board contracted with McFaul to create a business plan and a strategic plan for the organization. Two years later, board recruited McFaul to contract manage MAGNET for them as executive director.

But McFaul faced a financial dilemma. MAGNET generated decent revenue for McFaul & Lyons. "But I couldn't grow McFaul & Lyons because too much of my time was devoted to MAGNET business," he recalled. "I either had to quadruple the fee I was charging MAGNET or not be so active with the group. Well, they couldn't justify quadrupling my management fee so we parted ways and I devoted all of my time and energy to growing McFaul & Lyons." It was a bold move because from 1985 forward, the firm typically doubled its sales figures annually for many years, according to McFaul.

Growing McFaul & Lyons during the next decade or so was particularly rewarding for him. "I had the opportunity to literally go on site to pretty close to 2,000 hospitals throughout Canada and the United States," he said. "I would sit down with the executive teams and talk about what their needs were, what problems they were having, how they saw their situations and develop solutions with them."

The educational work enabled him to train tens of thousands of executives, department managers and medical staff members about such concepts as value analysis and non-salary expense reduction. Although value analysis had been around in other industries as a different model since the early 1950s, McFaul applied it to healthcare. He also innovated the idea of consumption analysis, which involved statistical measurements of service and supply utilization.

McFaul sports an impressive list of accomplishments. He conducted more than 150 local, regional and national educational conferences and seminars for administrative executives, financial managers and resource/materials management professionals. He developed strategic plans for seven GPO/shared services organizations and facilitated planning processes for six others. He presented more than 400 in-hospital education programs dealing with expense reduction issues and personally attended or chaired more than 800 in-hospital meetings dealing with product evaluation/standardization, capital equipment selection, value analysis and conflict resolution. Finally, he pioneered contract management services for materials management (on a not-for-profit basis).

Moving On

By 1997, however, the hectic travel pace was wearing McFaul down. "I was doing 225 flights a year on average, and 150 hotel stays," he said. "I was rarely at one client more than one day. That got to the point where it affected my [health], and I had a problem walking for a while. So I got my health in good shape, but I just couldn't push myself at that pace for a protracted period anymore."

A year later, McFaul decided to retire, and he and Lyons sold the company to Johnson & Johnson Health Care Systems Inc., which would spin off the division to the employees four years later as The McFaul & Lyons Group — just without the two principals.

Since his retirement, McFaul has been able to spend more time with his family and his passion for wine collecting. But two years ago, the itch returned. In fact, he began writing periodic management columns for First Moves Magazine.

So what's next for McFaul? "I don't know yet," he admitted. "I'm really contemplating getting back involved in some way in healthcare consulting but I don't want to go and create my own company again. I'm thinking between now and July 1 of feeling out the market and if something comes along that's going to meet with my work schedule I'd be willing to jump back in for a while.

"If I'm going to do it for the money, I'll start my own company again," he added. "But if I'm going to do it to just make a decent amount of money, it's also going to be for altruistic reasons."

Deep down, McFaul said he'd love to develop a "truly comprehensive database" for consumption and utilization. "It could save hundreds of millions of dollars in healthcare," he said. All it would take is a reasonable amount of funding and a large enough base of cooperation from facilities.

Looking Back

Overall, McFaul said he was satisfied with his career choices and professional life, which spanned hospital materials management, shared services, group purchasing and consulting. "One thing helped me grow into something else and then into something else," he said. "If you go back and try to futz with some of the things you've done in the past you're just going to screw it up anyway."

The Health Industry Group Purchasing Association honored McFaul for his contributions to the industry by presenting him with HIGPA's Lifetime Achievement Award in 1999.

Derwood Dunbar Jr., HIGPA chairman at the time and president and CEO of MAGNET, recognized McFaul's 30-plus years of materials management and shared services expertise. "Bill has been a pioneer in implementing the concept of shared services among unrelated hospitals," Dunbar said. "He initiated contract materials management services on a not-for- profit basis, adapted the industrial concept of value analysis into a model for healthcare, and developed the concept of consumption analysis -- a statistical measurement for the consumption of products and services." If he could change one public perception of himself it would involve his relationship with suppliers. "A lot of people view me as being anti-supplier," he said. "I guess one of the reasons is because a lot of the suppliers were positioning me that way. But I always tried to be impartial and unbiased. In over 20 years in consulting no one could ever say that I was wined and dined and entertained by any organization — any supplier, any GPO. I was squeaky and totally clean. I tried to offer what my best opinion was to clients or the industry. It bothered me sometimes when I saw the providers were trying to sell smoke and mirrors so I'd speak out on it. I guess I got the reputation for whatever reason as being anti-supplier. But it's not true."

When McFaul first entered the healthcare purchasing field, the actual practice of materials management didn't really exist, he said. Sure, it was a term used for veteran purchasing directors who earned a promotion and required a salary raise and a new title, but it didn't really come to fruition until the early 1980s. "Most people didn't really understand what it really meant or what it should be," he said. "Over the years from the early 1980s to the mid- 1990s it gained in popularity as cost pressures intensified and HMOs and capitation came around. It became a big deal to reduce expenses." Unfortunately, the push beyond just managing and moving stuff and into real resource management "hasn't taken off like it could or should have.

"There's been a lot of lip service about saving money but not a lot of success," he added. "Hospitals need to reduce budgets, control them and maintain them. That's just not happening as much as it should."

McFaul attributed the root of the problem to fundamental misunderstandings. "There are so many misunderstandings going on because of what each person within the executive team thinks a resource and materials manager should do," he said. "And they're all varying. They've never all sat down and collectively agreed on it."