Allina ready to kick off executive transition

Dick Pettingill took the helm of a shipwreck at the Twin Cities' largest health care complex in 2002.

But the CEO of Allina Hospitals & Clinics will leave a seaworthy vessel, if not the health care dreamboat he envisions, when he's succeeded next year by his No. 2, Ken Paulus, the chief operating officer who came aboard in 2006. Paulus will assume the title of president from Pettingill on July 1; the CEO duties will be transferred to Paulus over the next year. Pettingill will be CEO emeritus through the end of 2009.

"The board believes Ken has the qualities to continue to grow and strengthen Allina and deliver on our strategic vision," said Ed Spencer Jr., chairman of the Allina board.

"This is absolutely the right job at the right time because of what Dick has teed up for us," Paulus said in an interview Thursday. "We've come through a lot. Dick and the board made several bet-the-company decisions that positioned us for success."

Pettingill arrived amid an investigation into administrative and entertainment expenses at Allina, parent of flagship Abbott Northwestern Hospital, and Medica, its former insurance arm. He helped engineer a settlement with the Minnesota attorney general and the departure or retirement of senior executives.

Allina also spun off Medica as a separately governed company.

Pettingill has returned Allina to profitability on $2.5 billion in revenue, streamlined governance by dissolving community boards of several affiliated hospitals, installed a paperless, top-to-bottom electronic-record system, raised more money and expanded charitable care to the uninsured. Pettingill embraced labor settlements with nurses and other unions that the parties said would result in greater cooperation, improved and more-efficient medical care.

"It was a step in the right direction, but was not bold enough," said Pettingill in an interview Thursday. "Sen. John Marty, when I testified for the original bill in the Minnesota Senate, said it sounded like we were going to do most of this whether they passed the bill or not. We have enough sense of social accountability to believe that all Minnesotans can do better."

Allina, which operates 65 hospitals and clinics in Minnesota and Wisconsin, is going to spend more on prevention, patient engagement and community health programs in hopes that it will drive down disease-treatment costs. And it's going to try using improved disease-management programs to restrain the cost of treating the 25 percent of folks who drive 80 percent of health costs.

If Allina can do that, Pettingill and Paulus contend, it eventually will be rewarded for lower-cost treatment of more patients than it would get through traditional reimbursement for treating sick people. Pettingill was paid $1.4 million in 2006, according to nonprofit Allina's most-recent tax return. That puts him at midstream among the Star Tribune's best-paid bosses, most of whom run smaller organizations.

Pettingill, 59, a former executive at huge Kaiser Permanente in California, said he and his wife, Karen, will return to their home north of San Francisco after the executive transition is concluded in 15 months. Pettingill, who will be 61 by then, said he would focus his time on family, community and charitable work, and advocacy for health care reform. The trim, bicycle-riding Pettingill was named boss at Allina after he missed on the top job at Kaiser. That post went in 2001 to George Halvorson, the former CEO of Twin Cities-based HealthPartners.

Pettingill's board in 2005 committed to a new, consolidated headquarters in the former Sears Roebuck complex on E. Lake Street, a couple of blocks from Abbott Northwestern. That consolidation of 1,600 Allina headquarters and operations employees drove the $190 million office-retail-housing project known as Allina Commons and Midtown Exchange.

"Under Dick's leadership, Allina has established a solid foundation and the organization is poised to deliver significant breakthroughs in the delivery of integrated, safe and effective care," Paulus said.