NJ CEO Print Edition: December 2007 Archives
By Janet Mcdonough
Charles Dickens said it well: “It was the best of times, it was the worst of times.” While he was writing about the era of the French Revolution, his words apply to New Jersey’s business climate today. A number of organizations have evaluated New Jersey and other states from a business perspective, and together their reports create an illuminating picture. New Jersey consistently ranks high by certain key measures and low by others. The Garden State, it seems, could also be dubbed the Bipolar State.
The weaknesses are well-known to New Jersey’s business leaders. They include sky-high taxes, a punishing cost of doing business, a bloated cost of living and a frequent inability to compete effectively. While those shortcomings are enough to make one’s heart hurt, there’s a bright side as well.
Poles apart, there are these blissful findings: New Jersey ranks quite high for growth prospects, quality of life, access to capital and leadership in technology and innovation.
Following is a look at the findings regarding New Jersey as a place to do business.
Overall, Forbes magazine ranks New Jersey 19th in its annual survey of “The Best States for Business.” That’s down from last year’s number 16. High expenses caused the state to weigh in at a lowly 46th when it comes to economical business costs. Among the sweeter findings: New Jersey garnered third place in the nation for quality of life and seventh for growth prospects.
The state was rated similarly by CNBC.com, placing 15th on “America’s Top States for Business.” But New Jersey then sank to 45th for cost of doing business and 48th for cost of living. The latter poor scores were offset by the state’s stellar standings for quality of life (first) and technology and innovation (second), as well as access to capital (fifth).
Taxes in New Jersey continue to be a tough row to hoe. The Tax Foundation’s 2007 State Business Tax Climate Index ranked New Jersey among the 10 worst states—a wilting 48th ranking overall, with a corporate tax index rank of 41st. The state’s personal income tax rank hit dirt—not pay dirt—at number 50.
John Galandak, president of the Paramus-based Commerce and Industry Association of New Jersey, said in the July 18 Bergen Record, “New Jersey should see people and businesses flocking to our state. And they would be if our business and personal costs were in line with the rest of the country.”
Competitiveness Needs Tending
The Rutgers Economic Advisory Service study showed slow economic growth in New Jersey in 2006, with only 34,600 jobs added. It forecast a dip in new jobs for 2007 and a continuation of 2006 numbers through 2016. Of the three-quarters of new jobs in the private sector in 2006, most were in administrative support and food service industries, while high-wage sectors such as manufacturing and information continued to decline.
NJ Employment Watch indicated that New Jersey added 12,900 jobs in the private sector in the first seven months, putting the state on track to add just 26,000 jobs in 2007. New Jersey’s job growth rate is currently about half that of the nation.
Also, New Jersey is winning no blue ribbons for competitiveness. The Beacon Hill Institute for Public Policy Research in its State Competitiveness 2006 study listed New Jersey in 43rd place for economic competitiveness—down from 26th in 2003.
The New Jersey Chamber of Commerce, concerned that the state has become less competitive in recent years in attracting and retaining business, commissioned its own study in 2005 to determine where improvements were needed. Chamber leaders presented their study, New Jersey in Transition: Growing the Economy in a Corzine Administration, to Jon Corzine prior to his taking office as governor in hopes that the study’s recommendations would be addressed.
That report, for which Kate McEnroe of Atlanta-based Kate McEnroe Consulting interviewed company decision makers and third-party consultants who did not choose New Jersey, showed that the state is often not even considered by companies looking to relocate or expand, due to both its high costs and the attitudes of state and local organizations. Recommendations from that study included:
• Reduce or stabilize costs such as taxes and permit fees imposed on employers.
• Enhance the level of site selection information, such as online demographic data, available from the state and counties.
• Encourage the formation of regional development organizations and more public/private funding mechanisms to highlight and market each diverse region.
• Streamline state economic development and financing organization structures to provide a single point of contact and responsibility for project management.
• Respond to projects on the company’s timeline.
Sunny Spots in the Garden State
“We were heartened that the administration did take virtually that entire report and make it a basis for its Economic Growth Strategy,” says Chamber President Joan Verplanck, referring to a document that was released last September. “We’re expecting some modifications and refinements in version 2.0 of that economic development plan, which will probably include a new marketing plan for the state.”
In addition, the final pieces are nearly in place for the restructuring of the Department of Commerce to provide a better line of communication with New Jersey businesses.
“There has certainly been a push from us and others to have account executives meet firsthand with business people to get a handle on what’s happening,” Verplanck says. She noted that more hand-holding at state and regional levels with prospective companies is needed. “We can learn from the competition in other states, particularly Pennsylvania, which has been extremely effective and very, very well organized.”
On the N.J. budget front, 2007 marks the first in six years that did not see increases in taxes and fees. The budget provides $275 million in relief by modifying some business-tax policies.
The state’s unemployment rate remained at 4.3 percent in June for the fourth consecutive month, rose to 4.6 percent in July and fell to 4.3 percent in August. The national unemployment rate stood at 4.6 percent. New Jersey is one of the wealthiest states, ranking third in the nation in per capita income.
Even companies and consultants who did not choose the state cited positives about New Jersey in the chamber-commissioned study: It has a more favorable business climate than New York City. What’s more, interaction with New Jersey’s pharmaceutical companies is a plus, along with workforce quality and skills. Also attractive are state incentive programs such as the Business Employment Incentive Program and New Jersey’s workers’ compensation environment.
Other studies illustrate New Jersey’s benefits. The 2007 State New Economy Index, by the Ewing Marion Kauffman Foundation and the Information Technology and Innovation Foundation, ranked New Jersey as one of five states leading an economic transformation in adapting to an increasingly global-, knowledge- and innovation-based “new economy.”
And CNN.com listed New Jersey as having seven of the 100 fastest-growing tech companies in the U.S. for 2007—third behind California (37) and Massachusetts (8).
According to a 2007 biotechnology industry study conducted by Deloitte & Touche, the number of biotechnology-related jobs in New Jersey rose to 10,071 in 2006 from 7,834 in 2003, an increase of 28 percent.
To help promote the state, a number of business organizations are involved in a strategic alliance with Forbes magazine to create a special insert on benefits of New Jersey for businesses, Verplanck says. That insert, targeted at some of the bigger growth markets such as Asia, is expected to be published in January.
“We would very much like to have their North American headquarters somewhere in New Jersey,” she says.
3 Real Buildings Shed Light
by Robin Holleran
Whether you own your business or operate it for others, you’ll face the decision of when to own and when to lease facilities. Arriving at the right answer is often not all that straightforward. At times, the prices paid and motivations behind these acts seem to be more influenced by the pull of the moon than logic.
“The commercial market is a function of economic conditions, interest rates, and supply and demand,” says Steve Fleming, a senior vice president at The Staubach Company, an organization devoted exclusively to user representation in the office, industrial and retail markets. “We have some clients who’ve been able to sell their buildings at a considerable profit after 10 years, while others only expect to recover their initial investment after the same time period.”
Prior to committing to any real estate investment, the following questions should be considered, according to Fleming:
- What amount of flexibility is required in a company’s long-term business plan? (Flexibility applies to both finance and space requirements.)
- Where is the highest return on capital generated—in the core business or in a real estate investment?
- What are current and projected market values for both leased and owned real estate? How do the projected economics compare for both scenarios over a 10- or 15-year time frame?
- Are the assumptions used in the buy-versus-lease projections realistic? Assumptions can be manipulated to make any scenario attractive, and it’s easy to fall into the trap of being overly optimistic.
- What impact does a purchase/lease decision have on the balance sheet?
- Are there any specialized aspects of the property or business operations (such as machinery or equipment) that need to be considered?
Rick Coyne, a CPA with the Princeton office of Withum-Smith+Brown, recently advised a Monmouth County client on a $10 million building acquisition. The first, and simplest, financial test was determining how the monthly payments on a commercial real estate loan compared with the company’s current lease payments.
In doing this, he ran several different scenarios using a 20 percent cash deposit and either an 8 percent rate for a 20-year term or a 7½ percent rate for a 25-year term (we’ll skip the adjustable rate options). In addition, Coyne recommends a 6 percent opportunity cost be calculated on the deposit monies being committed to long-term real estate rather than being reinvested in the core business operations.
“Anything more than 6 percent would be a high-risk investment anyway; anything less and you might as well put the money in the bank or other safe investment vehicle,” Coyne observes. “I also generally don’t factor in capital gains, especially if this is a dedicated client that expects to stay in the building for some time, because depreciation is subject to recapture at the time of sale anyway. Besides, capital gains rates are difficult to reasonably project because they’re likely to be raised.
Coyne also tends to lean toward a conservative analysis of a real estate investment, especially in these less-than-certain economic times, and not consider any potential appreciation on the future sale of the building. If a proforma is still economically feasible with a sale 10 to 12 years down the road at the same price for which it was purchased, then the deal is a slam dunk.
This brings in the whole issue of assumptions and market values. Projections are only as good as the numbers used—and nobody, despite claims of any prophetic abilities, can accurately foresee future values.
Otteau Appraisal Group, a leading real estate consulting and appraisal firm in East Brunswick, tracks a multitude of variables throughout the residential and commercial markets. According to Niels Guldbjerg, vice president of the firm, there are four very distinct sectors of the office market, each experiencing different conditions. The top-quality, often very large, Class A headquarters buildings are currently experiencing the largest vacancy rates, while Class B is faring slightly better, and Class C is still holding strong. Flex buildings, a combination of storage or manufacturing spaces with a smaller component of low- to moderate-quality office space, are also holding their value.
Flex space works well for many businesses because the rental rate is significantly lower than that of regular office space, and as the name suggests, it provides for great flexibility for a tenant or an owner. “If an owner needs additional office space, he can often convert some of the warehouse space into office or vice versa,” Guldbjerg observes.
Each submarket in New Jersey also contains its own set of variables, making it all the more important to fully investigate each area prior to making a decision to purchase or lease. Many investors also buy buildings that are slightly larger than what’s required for their current needs. This way, they can lease the excess space, preferably on a short-term basis, and use the income to cover some of the building’s carrying costs yet still retain the option of retaking the space as their business grows.
In addition to financial considerations, Coyne points out that not everyone is well suited to handle the day-to-day headaches that accompany property ownership. It’s one thing to call the landlord when the air conditioning isn’t working; but it’s quite another to deal with the issue yourself and with potentially angry tenants.
Also, moving costs can vary considerably from one use to another. It doesn’t take much for an office to unplug a few computers and pack-up a few file cabinets, but a manufacturing business with 17-ton equipment bolted to the ground with an underground water system is an entirely different situation. In those circumstances, a business wants to move once and stay put for a long time.
Despite the words of warning contained in the news, Coyne believes the time may be ripe for investing in commercial real estate as many “old school” property owners are starting to divest of their holdings. This suggestion, of course, comes with the caveat that the company has sufficient cash flow to endure a recession should one come.
“The last thing anyone wants is to be put in the same dilemma as many homeowners now trying to carry variable rate mortgages on homes with values less than the mortgage,” concludes Coyne.
With more pharmaceutical companies than any other state, New Jersey is proudly known by many as the “Medicine Chest of the Nation.” But with dire newscasts about drying pipelines, heightening safety scrutiny, overseas competition from emerging low-cost countries and patent expirations, it’s hard not to wonder if those who rely on the pharmaceutical industry for their livelihood shouldn’t be scouring their own medicine cabinets for a strong sedative.
Despite the well-publicized problems, it’s not all doom and gloom. True, Big Pharma may never see the same dizzying growth it once enjoyed, but here in New Jersey, the industry continues to be one of the state’s largest employers, with compensation packages that reflect extraordinarily high education and skill levels, and it still contributes a stunning $26.5 billion to the local economy.
Thoroughly Ingrained
“The presence of the Pharma and medical industry in the New Jersey region goes back over 100 years, when General Johnson outgrew his bandage manufacturing facilities in Brooklyn. Soon thereafter, George Merck and the Squibb brothers followed, setting a migration pattern that continues today, observes Bob Franks, President of the HealthCare Institute of New Jersey (HINJ), a leading trade association for the research-based pharmaceutical and medical technology industry. Because of this rich history, the concentration of scientists here per square mile is greater than any other place on the planet. In addition, there are a large number of professional firms—legal, accounting and otherwise—that provide specialized services. This array of resources and infrastructure attracts firms from other states, as well as Europe and Asia.
Franks portrays the current hiccups in the industry as part of its natural evolution. For years, healthcare was largely a palliative practice with a limited number of antibiotics. As the science improved and ailments were better identified, more targeted and highly effective drugs were developed. “If you look in your cabinet, in most cases, the vast majority of medications probably weren’t available even 10 years ago,” adds Franks. “As spending increased on newly available drugs, it only makes sense that the industry would come under greater scrutiny.”
Sink or Swim
Not everyone is quite so positive. PricewaterhouseCoopers’ survey Pharma 2020: The Vision—Which Path Will You Take? contends that despite unprecedented global demand for its product (tripling to an estimated $1.3 trillion by 2020), Pharma is at a pivotal point in its evolution. Many of the larger global corporations suffer from a pipeline shortage of new compounds, lagging financial performance, rising sales and marketing expenditures, increased legal and regulatory constraints, and a tarnished reputation. At the same time, current expenditure levels are unsustainable without solid evidence of long-term benefits.
“The PWC report is a bit harsh,” says Jeff Mraz, a partner with Deloitte & Touche, the firm that conducted a survey of HINJ members for a true reading of statewide activities. “The Pharma industry is making deliberate efforts to change and better address consumer needs. Research too has shifted to difficult medical issues rather than relaunching existing drugs or developing lifestyle treatments. Pharma also takes an unfair share of criticism. Medications are just 15 percent of total healthcare costs, but because they tend to require a larger percentage of out-of-pocket costs, they receive inordinate attention. The talent in New Jersey still remains a strong draw for pharmaceutical companies. It would be very difficult for these companies to find personnel with the necessary education and experience in many other parts of the country.”
A Very Fluid Business
One of the largest companies to relocate to New Jersey recently is Bayer. Its pharmaceutical commercial operations, global oncology, specialized therapeutics and U.S.-based global drug development divisions are consolidating and relocating from California and Connecticut to two headquarters locations in Wayne and Montville. Certainly Bayer did its homework and had faith in New Jersey before instituting such upheaval.
Other changes under way are centered around the science. Pharma is devoting considerable research and development resources to innovations based on genetic mapping and the human genome. Although mastering the tools of these emerging technologies has been much more difficult than anyone imagined, Franks believes that as the science improves, the industry will be poised for a renaissance as it capitalizes on new discoveries. He already sees Big Pharma casting nets farther than ever to secure what has become a record number of collaborations with the academic world, research-based manufacturers and innovative pharmaceutical companies.
The Kenilworth-based Pharma company Schering-Plough, for one, not only has four internally generated compounds on the fast track but also recently acquired Organon Biosciences NV, based in the Netherlands, for $14.4 billion. It also has entered into agreements with California-based biopharmaceutical company Novacea to commercialize a prostate cancer compound, three-year old Manhattan-based biopharmaceutical company PeriCor Therapeutics for rights to a treatment for a cardiac surgery complication, and Massachusetts-based AVEO Pharmaceuticals to develop and commercialize a targeted cancer therapy.
Innovations Underfoot
There is also a bio-buzz stirring within New Jersey’s borders. “In 1998, there were 80 biotech firms in the state. Today there are 235,” notes Debbie Hart, President of BioNJ (previously known as the Biotechnology Council of New Jersey). “New Jersey has all the important ingredients that attract these companies. The presence of Big Pharma and the skilled labor it brings is a major draw, but there are also top-notch research facilities, countless state programs designed to help the industry, large specialized venture capital firms in Princeton and on Wall Street, and the inherent ability to partner with nearby Big Pharma. Just last month, five small companies approached us about moving to the state—and yesterday alone brought two calls.”
Catering to smaller, more innovative firms has spawned a number of supporting businesses that also contribute to New Jersey’s overall economic health. “Big companies have their own budgets and won’t use outsiders. But smaller, specialized service companies are often more adept at measuring results and adapting,” says Michael White, President and CEO of PharmaKinnex, a marketing and sales support company that’s grown to $3 million annual revenue in three years. “New Jersey has not stopped growing and is a great place to start a business if you know what you’re doing and have the passion for the business.”
New Jersey is also making a concerted effort to support the life sciences. In December 2005, it was the first state to invest public funds in human embryonic stem cell research, with an advance of $5 million to 17 research teams from university, industry and nonprofit laboratories, and it also operates a number of programs to attract and retain the industry.
“Celgene is now the largest biotech firm in New Jersey, but in 1998, it had 35 employees and only six weeks’ cash in the bank,” adds Hart. “Right around that time, the state passed a tax credit program that allows qualified businesses to raise funds by selling unused operating losses to other companies. Now Celgene has 1,500 employees and a $25 billion market cap.”
Dan Greenleaf, President of VioQuest Pharmaceuticals, a startup company that specializes in targeted, genome-driven cancer therapies, spent much of his early career with Big Pharma during the heyday of double-digit growth. In a recent interview, he spoke frankly about the state of affairs of the pharmaceutical industry: “We will never see that type of Big Pharma wealth generation again, but there are now some incredible opportunities for smaller companies. Because the blockbuster model is essentially broken, larger companies are striking deals, sometimes paying 50 percent premiums over Wall Street valuations for companies with compounds at the end of Phase II trials. It is also a good time for smaller organizations to recruit top talent. Ten years ago, people wouldn’t leave the mother ship. The ones who want to make a difference now will.”
Giving Back
And it’s not just individuals who have adopted a more altruistic philosophy. This past year, pharmaceutical companies elevated their corporate citizenship efforts as well, increasing their donations by a whopping 74 percent. Of the $4.1 billion contributed globally by HINJ members, an estimated $264 million directly benefited New Jersey causes. The largest chunk of these funds was composed of product contributions to patient assistance programs aimed at improving access to healthcare to the needy. That gives a whole new spin to the promotional motto “New Jersey and You—Perfect Together.”
A conversation with William J. Pesce President and CEO of John Wiley & Sons
by Janet McDonough 
Since its founding, John Wiley & Sons has survived the War of 1812, the Civil War, two world wars, the Great Depression, hyperinflation and countless recessions. As one of the world’s oldest publishers celebrates its bicentennial, sixth- and seventh-generation Wiley family members are still actively engaged in the company.
There have been 41 U.S. presidents since 1807 but only 10 Wiley presidents. As for President and CEO William J. Pesce, his name may not be on the building, but he couldn’t be more ardent about Wiley if it were. NJ CEO recently caught up with Pesce, who shared his vision for the years ahead.
NJ CEO: As Wiley celebrates 200 years of business success, how might your vision compare with that of the company’s founders?
WJP: Our culture—one that values enduring relationships and quality—distinguishes us from other companies in this industry. And our willingness to adapt and evolve has helped us sustain momentum since 1807.
Charles Wiley started out primarily as a publisher of American literature—the back room of his shop was a gathering place for young authors such as James Fenimore Cooper and Washington Irving. Today, we provide “must-have” information and services, in print and online, ranging from scientific, technical and medical information to higher- education textbooks to “For Dummies”® books, Frommer’s® travel guides and Betty Crocker® cookbooks.
The common ground is our belief that publishing is a noble endeavor. We place tremendous value on relationships and the quality of our publications.
NJ CEO: How is today’s sophisticated technology playing a role at Wiley?
WJP: We’ve invested hundreds of millions of dollars in “enabling” technology, digitizing content to make it more accessible, flexible and customizable. Our goal is to serve our customers better. To the extent that technology can make that happen, we’re interested. When print on paper works best, we continue to support print.
NJ CEO: Some fear that technology threatens print publishers. What’s your take on that?
WJP: It’s not print or electronic—it’s print and electronic. Our experience is that technology enables us to serve customers better and has created opportunities that would be very difficult to take advantage of in a print-only world. There’s a role for us in the electronic world, helping busy people find information they need as efficiently as possible—helping them achieve their personal and professional dreams and aspirations.
In September 2001, we acquired Frommer’s as part of an acquisition of Hungry Minds, which also included the For Dummies series and Webster’s New World™ dictionaries. We launched frommers.com, allowing us to more actively engage customers through blogs, online forums, maps and walking tours. Frommers.com brings value to our customers through a wider range of services (e.g. trip booking), reinforces our brand, helps sell more books and opens new revenue streams for Wiley through sponsors and advertisers.
NJ CEO: You’ve made a lot of acquisitions in recent years. Is that an important part of Wiley’s growth?
WJP: We’re not looking at growth for growth’s sake. We’d rather be among the best than the biggest. The growth Wiley has experienced is a blend of organic growth—existing businesses outperforming the industry—and strategic acquisitions. We consider whether Wiley and a potential acquisition can deliver synergistic value that couldn’t be achieved as individual companies. You must prove that there’s a strategic benefit and pay a responsible price—or walk away if it’s too expensive.
NJ CEO: One big change for Wiley happened in 2002 when, after being located in New York City since 1807, its world headquarters moved to Hoboken. What prompted that move to New Jersey?
WJP: Our long-term lease expired in 2001, so we took a comprehensive look at where to relocate. We looked at surrounding states, urban and suburban locations, and outside the region. That process brought us to the Hoboken waterfront—Wiley is the first global headquarters to move here in a very long time. Our main reasons: lower cost, a train station within walking distance, proximity to New York and airports, a great building and an urban atmosphere. Wiley people like to be around culture and the arts.
NJ CEO: What are your personal goals?
WJP: I love what I do at Wiley—it’s my idea of a good time! I’m as committed as ever to leading Wiley and, hopefully, continuing to generate outstanding results. I also very much want to serve as a role model for the next generation of leadership.
I place a lot of importance on treating our colleagues with dignity and respect, as human beings first and professionals second. There’s nothing I care more about than proving that you can lead an organization this way and be strong financially. Wiley’s numbers wouldn’t happen without our culture, strategy, attention to detail and execution.
NJ CEO: What do you see as the essential qualities of a CEO?
WJP: They’re pretty fundamental points that, sadly, too many people miss. One is that you should never, ever forget where you came from—it keeps you humble. In my opinion, the business scandals we read about come from arrogance and greed. My father was a plumber with a third-grade education, functionally illiterate. I’m a first-generation college graduate—and I say that proudly. A lot of what I believe in as a leader—treating people with dignity and respect no matter what their title—came from my upbringing.
A leader must have a clear vision of the future and the credibility to lead people to places they would not have gone on their own. I believe you must be passionate and have conviction, articulating that vision so people will be inspired to embark on the journey with you. And you have to walk the talk, always backing your words with actions, because ultimately that’s what people will remember. That’s a CEO’s legacy.
The ultimate sports car sparks passion
By Susan Brierly
It was a car enthusiast’s dream. Row after row of pristine Ferraris gleaming in the morning sunlight—more than 90 of them meticulously aligned with hoods propped up, ready for inspection, as if in military salute. The scene would have brought a tear to the eye of any member of the venerable Ferrari Club of America.
It was the Penn-Jersey region’s 20th Annual Garden State Ferrari Fall Festival in Florham Park—a special members-only event that attracted die-hard auto fans from several states.
While most luxury cars were driven to the event by their owners or “handlers,” others were transported by motor coach. The large turnout was attributed to the clear skies—because many of these cars never would have made it out of their garages if rain had been in the forecast.
“You gotta love these cars,” said Dr. Jerry Molitor of Chester, co-founder of the region, past president and former host of the Fall Festival.
“The history of Enzo Ferrari and the Ferrari mystique lives on for all of us here. Whether you’re passionate about the vintage varieties or the newer models, there’s only one Ferrari, and we think it’s worth all the time and money and care that ownership requires.”
When Molitor isn’t discussing, restoring and racing cars, you’ll find him cruising around the fast-paced radiology department at Union Hospital in Union.
“This goes way beyond a hobby for me,” he says with a grin.
Living Enzo's Dream
Security was tight at the Fall Festival, and that’s a good thing. Molitor estimates that a cool $20 million in world-class sports cars basked in the sun that day, and many different types of Ferraris were in attendance—coupes, Spiders and competition cars.
At the top of the hill, the vintage models congregated in casually elegant colors like silver, gray and brown. And assembled in the central parking area were the newer, flashier models—most of them in the traditional Italian racing car shade of “rosso corsa” red with prancing horse logo—being waxed and buffed and re-waxed and re-buffed by guys who clearly relish every minute of it. After all, why else would these sane and successful business executives be eager to fork over about $300,000 for a vehicle that wouldn’t be delivered for 12 months?
Larry Gardner of Sparta, V.P. of Operations/Franchise for Toys “R” Us International, brought two of his playthings to the event—a 2003 red 360 Modena (sporting license plate TRUINTL) and a 1980 blue 400i.
When asked if Ferraris are a hobby or an obsession, Gardner reflected while his wife, Gloria, shot him a playful glance. “Let’s just say this is a lifestyle choice for us,” she chided. And Gloria should know—she’s the self-appointed V.P. of Logistics, chief coordinator of Gardner’s many shows and races. “I admit, automobiles are my passion,” he said, “and Ferrari remains the standard to which we aspire.”
The Best of the Best
Midmorning, as car owners made final preparations before judges began their rounds, Jim Wickstead, CEO of Wickstead Design Associates in Cedar Knolls, made a grand entrance in his 1961 silver 250 SWB. Every head turned as his short-wheelbase beauty was personally directed to the top of the viewing area to be displayed alongside the other vintage models. As Wickstead navigated up the driveway and parked (very carefully) in his spot, more than one Ferrari enthusiast was overheard remarking, “Now there’s the car I’d love to own.”
No wonder—the gorgeous and valuable 250 SWB is in pristine condition after the entrepreneur and industrial designer personally and painstakingly restored its every element in a 10-year labor of love. “I acquired it at the Paris Auto Show more than a decade ago, and it’s been my hobby ever since,” Wickstead said.
Meanwhile, Jerry Morici of Clifton, President of Jerome S. Morici LLC, coolly parked his 1967 275 GTB4 Spider convertible in a sunny spot. Those in the know quickly gathered around, noting that his model was conceived as a hardtop but re-engineered to be a Spider. A mere technicality, everyone agreed, because it’s a stunning model that looks jaunty in its hunter-green color.
For purists who prefer a Ferrari in its original condition, a favorite was the 1972 365 GTC/4 owned by Dr. Brian Silverman of Cranford, Director of Overlook Hospital’s Dental Center. The 12-cylinder engine was immaculate, and Silverman beamed as he showed it off to assembled fans. “Only 500 of this model were made in 1971 and 1972,” he said. “You don’t see many of them on the road any more, and this one has its original leather and ‘Colorado marrone’ brown paint.”
But enough of the waxing, buffing and hobnobbing. Morici checked his watch and concluded it was time to hit the road. He slid behind the wheel of his exquisite dark-green Spider and, as he put pedal to metal, proclaimed, “This is why I love my Ferrari. This car is for driving.”
This Mendham CEO’s business is buzzing
By Susan Brierly
For Steven Goldthwaite, President and CEO of New Jersey–based Metem Corporation, life is abuzz on all fronts—personal and corporate.
In his personal time, Goldthwaite enjoys beekeeping because it’s a relaxing hobby that produces a big return on minimal effort. “Beekeeping suits my business schedule because I don’t have to tend to it every day,” he says. “You just set up the hives and let the bees work their magic. The biggest challenge is keeping bears away from the honey.”
When not attending to the hives at his Mendham and Rockaway, N.J., homes, Goldthwaite runs a 200-person manufacturing business started in 1962 by his father, Val Goldthwaite. Metem Corporation specializes in high-precision metal- working for industrial gas turbines and aerospace engines. Its primary customers are GE and Siemens.
“In the midst of global warming, gas turbine technology is a significantly cleaner technology than coal-fired power plants,” notes Goldthwaite. “In fact, 30 percent of all North American energy comes from industrial gas turbine technology.” Metem is experiencing steady growth from its privately held facilities in Parsippany and Allentown, Pa. And the company just established a European presence by opening a facility in Budapest.
“We’re making a real difference by manufacturing energy-efficient parts that help turn the lights on for millions of people around the world,” Goldthwaite adds. “My role as CEO is to grow our business globally and introduce new technology and processes to the manufacture of turbine engine components.”
That really sounds like a honey of an opportunity.
Six hospital and healthcare system CEOs discuss challenges and opportunities
By Barbara Ross
How healthy is New Jersey’s healthcare delivery system? Uwe E. Reinhardt, the well-known economist and Princeton professor, has been sounding a warning for years: Hospitals here and across the country are straining under the burden of economic, technological and other forces, most of which are beyond their control. In New Jersey, many hospitals are beyond strained—they’re in fiscal crisis.
Reinhardt is the chair of Governor Jon S. Corzine’s Commission on Rationalizing Health Care Resources, a 12-member team charged with making policy decisions on a wide range of healthcare issues, from managed care to the identification of essential New Jersey hospitals. A full report with recommendations for the redistribution of healthcare services is due in December.
But New Jersey’s hospital and healthcare system executives don’t need to wait for the report to know they need to make changes if they are to thrive, or even survive, in the coming decade. NJ CEO asked leaders from five healthcare systems and one independent hospital—each holding the title of president and chief executive officer—to provide a view from 30,000 feet of the healthcare landscape in the next five to 10 years. Participating were Gary Blan, Saint Clare’s Health System; Ronald J. Del Mauro, Saint Barnabas Health Care System; Gary S. Horan, Trinitas Hospital; Richard P. Miller, Virtua Health; Audrey Meyers, Valley Health System; and Joseph A. Trunfio, Atlantic Health.
INVESTING IN TECHNOLOGY
Hospital executives agree that the recent explosion of clinical and information technologies will continue to transform the healthcare landscape. Technologically advanced hospitals have greater potential to improve outcomes in patient care, reduce medical errors and compete for market share against other hospitals.
On the clinical side, telemedicine is opening new diagnostic possibilities by enabling real-time consultations between specialists in different locations. Virtua Health, a four-hospital system serving Burlington, Camden and Gloucester counties, was the first in the state to launch a teleneurology program in its emergency department. When a stroke patient comes into the ER at a Virtua hospital, doctors there can consult with neurologists at the University of Massachusetts on the best course of treatment. “The goal is speed and quality of care,” Miller says.
New Jersey hospitals are also pioneering advances in robotic surgery, which allows surgeons to perform complex and delicate procedures through very small incisions. Surgeons at Saint Barnabas Health Care System were the first in the state to perform a robot-assisted closed-chest mitral valve repair. Morristown Memorial Hospital, part of Atlantic Health, was the first hospital on the East Coast to correct female pelvic prolapse using robotic instruments. While robotic surgery is not appropriate for every patient, it can speed recovery times, decrease the risk of infection and shorten hospital stays.
On the IT side, hospitals are investing in digital and wireless technologies to manage clinical, administrative and financial information more efficiently. Benefits include significant reductions in medication errors and service costs (such as chart management and medical transcription), as well as fewer inappropriate denials and delays with payers.
Trunfio says instant communication is a big benefit of the new technologies. Atlantic Health physicians can access patient information—including digitized images—from the hospital, office or even their cars. A wireless voice communication system connects nurses on hospital floors to physicians and other nurses, enabling them to spend more time at the patient’s bedside. The system also reduces noise levels by eliminating pages.
Many hospitals, such as those of Virtua, have adopted process-improvement tools more familiar to manufacturing environments to reduce costs and waste while improving safety and quality. Miller says Virtua was one of the first healthcare systems in the state to train its clinicians in Six Sigma and Lean methodologies.
A TREND TOWARD SPECIALTY HOSPITALS
Increasingly, technologically sophisticated medicine will be practiced at specialized regional healthcare centers that provide resources community hospitals can’t afford. Atlantic Health, which serves a six-county area in northwestern New Jersey with pediatric, women’s health, cardiovascular, cancer and neuroscience facilities, has $1 billion in annual revenue, and the budget for some of its specialty service lines “approaches that of an entire community hospital,” according to Trunfio.
As a result, Atlantic is able to hire subspecialists in areas such as neonatology, pulmonary medicine and cardiology. The system also has its own ambulances and helicopters to transfer patients, including high-risk mothers and newborns, from community hospitals to Atlantic facilities for treatment.
“It’s a ‘chicken and egg’ business model,” Triunfo observes. “As the patient base grows, so does the need to recruit subspecialists—who in turn attract more patients.”
At the other end of the continuum, many of the same-day surgical and diagnostic procedures now performed at acute care hospitals are shifting to outpatient facilities. In New Jersey and elsewhere, the trend is toward multiple-service centers. One of the most comprehensive is the Saint Barnabas Ambulatory Care Center in Livingston, which claims to perform more ambulatory surgeries than any other in the state. In addition, the center offers a wide range of nonsurgical services, from dialysis and wound care to sports medicine.
Not everyone agrees that the mass migration to outpatient facilities is beneficial. Gary S. Carter, President and CEO of the New Jersey Hospital Association (NJHA), worries that these facilities aren’t required to meet the same quality and licensing requirements as hospitals. Nor do they provide vital community services such as emergency departments. For many New Jerseyans, the ER remains the front door to the hospital. Hospitals statewide treat 2.6 million patients in their emergency rooms in an average year.
BUILDING FOR THE FUTURE
Aging physical structures are also a concern for hospital executives. Meyers says hospitals across the country are treating patients in facilities that were constructed decades ago, when the knowledge base and technological resources were much more limited. She points out that the rapid changes in medical equipment and technology can’t be accommodated easily in outdated facilities.
Through its Renewal plan, Ridgewood-based Valley Health System is seeking approval—and a change in the village zoning code—to replace two of its oldest buildings with three new structures featuring single-patient rooms. Meyers says extensive research shows that patients cared for in such rooms benefit from shorter stays, lower rates of hospital-acquired infections and reduced risk of medication errors.
Other hospitals around the state have also embarked on costly modernization programs. In November, Virtua Health broke ground for a 376-bed full-service medical center in Voorhees Township and it is also planning an ambulatory care center. The combined project is scheduled for completion in late 2010.
Financing modernization is a challenge for many hospitals, particularly those once operated by religious orders. Saint Clare’s Health System, with four hospitals in northwestern New Jersey, is now part of the Marian Health System in Tulsa, a not-for-profit Catholic healthcare system sponsored by the Sisters of the Sorrowful Mother. The system is seeking approval from the state of New Jersey to change its sponsorship to Catholic Health Initiatives, a Denver-based nonprofit health corporation with facilities in 19 states. Blan says this affiliation would provide greater access to capital, as well as savings through shared services and best practices.
A FISCAL CRISIS FOR HOSPITALS
Financial pressures have forced the closing of 21 New Jersey hospitals in the last 15 years, with others close to bankruptcy. In September 2007, Pascack Valley Hospital in Westwood announced that it would close after years of operating losses and an unsuccessful attempt to merge with the larger, more financially stable Hackensack University Medical Center.
For hospitals in inner-city areas, consolidation is often the key to survival. Trinitas Hospital in Elizabeth emerged in 2000 from the consolidation of two hospitals and the closure of a third. Trinitas now operates an acute care hospital as well as an outpatient facility.
“The consolidation strengthened us financially. We were able to improve our physical plant, replace all of our hospital beds, upgrade technology and significantly increase our ER capacity,” Horan says. The Trinitas emergency department now treats 65,000 patients annually, with growth capacity for 85,000.
As the board chair of the Hospital Alliance of New Jersey, which consists of 12 “essential safety net” hospitals, Horan is concerned that other hospitals might not pull through. “More than half of the hospitals in New Jersey are operating in the red,” he says. “When so many hospitals are not doing well, it’s clear there’s an underlying cause.”
Most would agree that lack of appropriate reimbursement for hospital services—along with a growing uninsured and Medicaid population—is the major cause of financial distress. According to the NJHA, which represents more than 100 New Jersey hospitals, Medicaid covers just 70 percent of hospital costs on average, while Medicare pays roughly 90 percent.
Furthermore, New Jersey law requires hospitals to provide care for all comers, regardless of their ability to pay. The state in turn pays hospitals to provide charity care. But as the number of poor and uninsured patients in New Jersey increases, the gap is widening between the actual cost of such care (an estimated $1.2 billion in 2007) and the state’s reimbursement to hospitals ($716 million).
“Clearly, one of the biggest challenges for hospitals in New Jersey and elsewhere is to deliver a wide range of quality healthcare services within the financial constraints of reimbursement,” Del Mauro says. “The next five years will be difficult, but on the plus side we have opportunities to create a new kind of delivery system.”
