By CARL CORRY
Friday, March 23, 2001
It's not going to be easy for John S.T. Gallagher to retire. As the leader of what has become the North Shore Long Island Jewish Health System, he has taken a 169-bed teaching hospital formed to keep the local Gold Coast elite from heading into the city and made it the core of a mammoth, $3-billion health network that spans from Staten Island to Southampton. He has lasted through 13 board chairmen.
Easily the most influential man in Long Island health care, Gallagher shaped the structure of how most hospitals operate in the region.
Many in the industry call him a visionary and say his efforts to cut costs, improve patient care and fight pressure from managed care organizations surely saved some local hospitals from going out of business.
He also forced other hospitals that have not joined the system to form networks of their own. Those include the Diocese of Rockville Centre's Catholic Health Services of Long Island and the Winthrop South Nassau Health System, which have joined forces to form the Long Island Health Network.
"He was the single biggest force in transforming health care on Long Island," said Michael Maffetone, former director of the University Hospital and Medical Center at SUNY Stony Brook who now serves as the vice president of health care affairs.
Gallagher's name is synonymous with the system that he built.
But after 38 years with North Shore - 20 years at the helm - Gallagher, 69, known as Jack by friends, says the time is right to pass the torch to his second-in-command, Chief Operating Officer Michael Dowling.
"It's time for him to take over," he said in a rare interview. "It would be wrong not to give him that shot."
Gallagher plans to step down at the end of the year.
Officially, the 120-member board of trustees has only just begun the search for a new leader.
"The board is committed to conducting a search," said Chairman Roy Zuckerberg, a former vice chairman of Goldman Sachs who had chaired the Long Island Jewish Health System before it merged with the North Shore Health System in 1997.
Zuckerberg called Dowling "a strong man," but said it was the board's responsbility to find Gallagher's successor.
North Shore-LIJ's success comes as other large networks around the country flounder, such as the University of California at San Francisco-Stanford Health Care merger, and Optima Healthcare in New Hampshire.
At last count, North Shore was the sixth largest non-profit health system in the nation, with 18 hospitals, some 5,200 beds and 29,000 employees.
The merger with LIJ - Gallagher's proudest accomplishment - went through after a bitter court showdown with the U.S. Department of Justice and despite complaints from critics that the combination would lessen the ability for patients to be treated by the facility of their choice.
Rivals have called Gallagher a ferocious competiter who cares little for how other people are treated so long as he gets his way.
On the other hand, his employees are utterly loyal and point to his refusal to accept a pay raise for years as an example of his compassion.
For years, Gallagher's salary - less than $400,000 into the late 1990s - was only a fraction of the pay taken by other executives in his league. "This is a not-for-profit, charitable institution," he said. "I was making enough money."
He said some of his peers were angry with him for not taking the pay raise "because it kept some of their salaries down."
Now, with the integration of the two systems substantially complete, Gallagher feels comfortable with handing over the reins, but he's not leaving the picture completely. He'll be assuming the new post as co-chairman, or head fundraiser, of the system's foundation.
A Jackson Heights, Queens native, Gallagher went to St. Francis Xavier High School, an all-male Jesuit military school in Manhattan before entering Holy Cross College in Worchester, Mass., another Jesuit institution that required students to attend mass three times a week.
After graduating with a business degree in 1953, he went into the family tire business. But it wasn't what he wanted.
"I didn't think it was big enough, or could grow enough," he said. "I didn't like the double standards in the business and I didn't feel like I was accomplishing much by selling tires."
He and his brother Tom sold the business following their father's death. Gallagher, already married with two kids at the time, took a year off to consider his options.
Encouraged by a former college classmate who was serving as an assistant administrator at Huntington Hospital, Gallagher latched onto the idea of hospital administration. He felt he could honor his Jesuit upbringing by helping people and grow a business at the same time.
So in 1961, at 30, Jack Gallagher went back to school.
"There were two ways to get in," he said. "You could start from the bottom up, or you could get a masters degree." He chose the latter, and managed to convince Yale University to accept him in its public health program, taking up one of the two slots usually left for military personnel.
Gallagher again used his power of persuasion on North Shore University Hospital top guns, who established an administrative residency program around him in 1963 that fit Yale's internship requirements.
And North Shore is where he stayed.
In an age when some people switch jobs as often as they change their car's oil, Gallagher's peers stand back in admiration, if not jealousy, for what he has accomplished.
"It's easy to be a flash in the pan and move to new locations," said Ron Aldrich, CEO of Catholic Health Services, the administrative center of four hospitals owned by the Diocese of Rockville Centre that was formed as a defensive measure on the day North Shore sealed its deal with LIJ.
Aldrich says the worries that patient choices would suffer from hospital consolidation have not materialized.
"Having two large networks competing with each other as we do I think has served the community well," Aldrich said. "We are more efficient and effective. I don't see any evidence that it has been harmful to consumers. An alternative like Stony Brook keeps everyone in focus.
Gallagher quickly charged up the ranks, serving as hospital administrator from 1971 until 1982, when he was named executive vice president. In 1992, with the establishment of the North Shore Health System, Gallagher was named president and CEO.
As managed care organizations began instructing their members to go to hospitals that offered steep discounts, Gallagher moved to form a network that would "be strong enough so that we could negotiate on a level playing field."
The first incarnation -- a group of eight hospitals called Classic Care -- went belly up in 1994 after the Justice Department accused it of violating antitrust laws by attempting to fix prices.
But Gallagher didn't give up. Having already acquired the financially-troubled Glen Cove Hospital in 1990, Gallagher set out to build a network with a single corporate identity. He added eight others to the network, some through outright acquisitions and others through sponsorship agreements that gave North Shore control of their boards. Gallagher credits former North Shore Chairman Saul Katz with the idea of merging with the Long Island Jewish Health System.
While Gallagher is satisfied with the end result of the health system, there were a couple of deals that got away. One controversial plan would have brought the SUNY Stony Brook Medical Center into the fold. Another involved a merger with Columbia Health System.
In the deal with LIJ, North Shore agreed to share power on the board equally, and Gallagher agreed to serve as co-CEO along with LIJ's David Dantzker.
Though fiercely competive, Gallagher said he "didn't want to be the one not to make the merger work. I honestly wanted it to work."
The two worked closely, but had different ideas for the system. Dantzker soon agreed to leave the shared leadership and took over in a new slot as president. Last year, Dantzker abruptly resigned. His office, across from Gallagher's in North Shore's headquarters, remains empty.
"I haven't seen or heard from him since the day he left," Gallagher said.
