Serial CEO and Entrepreneur Takes On A New Challenge

Mickey Herbert, 71, is a classic entrepreneur and CEO. Last month Herbert was appointed to the position of CEO of the Bridgeport Regional Business Council. 

herbert vyAs early as the 1970s, Herbert was leading a change to the nation’s health care system and would go on to commandeer Connecticut’s first wide-scale Health Maintenance Organization (HMO), Physicians Health Services, to huge success. Business New Haven interviewed Herbert as its inaugural interview back in 1993. After taking PHS public, he would eventually manage a sale of the company. Herbert took his money and invested in bringing minor league baseball to Bridgeport. After nearly a decade, he sold the team to take the helm at ConnectiCare and guide that health plan to greater success.  We are fond of saying that Herbert doesn’t think outside the box, “he brings his own cardboard.” He needed that cardboard to help break another HMO into the market, the non-profit Harvard Pilgrim. 

Herbert is well known for his choice of colorful footwear, that began when PHS sponsored fundraising  walks. We asked him to bring his latest pair to our office for the photoshoot.

Herbert’s latest challenge is a real one; he takes over the Bridgeport Regional Business Council after a decades-long run by Paul Timpanelli, a chamber and Bridgeport business stalwart. 

You’re known for running your own course, but weren’t you taking a personal risk being an early supporter of Mayor Joe Ganim’s controversial new run for mayor of Bridgeport?

Finch didn’t expect to lose, but yes, I supported Ganim full bore because he was so good [at Mayor] the first time around, that’s when we were building the Ballpark, the Arena, he made things happen.  Rowland became an inner city guy and in tandem with Ganim, they worked together, that’s how things got done.

You you were Connecticut’s first healthcare Entrepreneur, running the first break-out HMO, Physicians Health Services. How did you get there?

I grew up outside of Washington, D.C. in Maryland in Prince George’s County. Eventually went to Harvard Business School and joined a consulting firm after, Crescent McCormick. They had some financial difficulties and then laid off all the MBAs. 

Suddenly I was unemployed and I went to Minneapolis to work for Dr. Paul Elwood, a Pediatric Neurologist who had coined the term Health Maintenance Organization.

He was a really charismatic guy, it was in the 1970s, Nixon was in office and his big health initiative was going to be to promote private health plans all over America.  

That was Elwood’s vision, so all of a sudden he was thrust into the national scene going down to Washington working with [Bob Finch] who was the secretary of HEW.  I was working for him as his assistant, right with him. 

He [Elwood] was running a health policy research firm and the Sister Kinney Institute,  which was a post Polio Hospital, it had treated Polio patients and was a leader in the country. Along comes the Salk Vaccine and it became a quadriplegia recovery institute. He was running the hospital and running this research organization, doing health policy.

That’s an odd combination of effort?

Patients used to be in for six months. He got so efficient in treating them, they were getting out in a month and he was bankrupting the hospital. He became a huge advocate of pre-paid healthcare and that’s how he developed this health maintenance organization concept. 

He was remarkably successful in convincing the Nixon Administration to make it part of Federal health policy. The Health Maintenance Organization Act was passed the last day of 1973, providing $375 million to start new health plans all over America. Nixon’s vision was to start 2000 new health plans.  

As non-profits?

Virtually all were non-profits, the funding could only go to non-profits. There was some loan money that could go to for–profits, but it had to be paid back. We got nowhere near 2000 health plans, we did get six or seven hundred started up using that money.

Is that really any different than what Obama did, helping start Healthy CT and a bunch of other health plans around the country as part of the Affordable Care Act?

Different era, and the money was much bigger this time, but against much greater odds. Some of my colleagues that were at the {Elwood] firm went off to start their own health plans. I had hired Rich Burke to come to work for the research firm, he went off and founded what is now United Healthcare. 

He did okay.

I stayed through most of 1976 and decided I wanted to do one of these too. I had three job opportunities, one was in L.A., one was in Boston, and one was in Bridgeport. So why would you choose Bridgeport?

They had the defending national champion softball team, that was the real avocation of my life— was to play fast pitch softball.  I traveled around the Midwest doing that, I decided to come here and play with this defending national championship team, it was the Raybestos Cardinals. 

So the job was to start a new health plan [Physicians Health Plan] from scratch to compete against Blue Cross and Blue Shield. They were insuring more than half the people in the state, there wasn’t much competition.  There were others that started taking the federal dollars.

We didn’t take Federal money initially, we didn’t have a lot of money. We got licensed and were off in 1977. Well, when I arrived it was called Greater Bridgeport Medical Foundation, a crazy name.

One of the first things I did was change it to a marketable name, Physicians Health Services and it became known as PHS. We went back in ‘78 and got some of the Federal HMO Act money, about $1.6 million, and that helped capitalize us a little better and we started growing.  

By 1984, we were the largest health maintenance organization in Connecticut [not counting Blue Cross, an indemnity insurer at the time]. We didn’t really have many HMOs in the east yet. The closet thing was Community Health Care Plans CHCP [operated on Long Wharf], a bricks and mortar staff model HMO.

So you’re saying the HMOs were not able to intervene and that drove costs, but there was technology and drug discovery and mergers, and a lot of
unhealthy people, weren’t there?

There were a number of factors that created a perfect storm [for cost increases]. Certainly technology accelerated. A new technique would come along, cost four times the old technique, and everybody wanted it, patients, doctors. The population was a factor, certain illnesses like AIDS, [Cancer] we would insure them and they would have very substantial healthcare costs. 

You would have the relaxing of the tight controls. 

Another thing is that in fee for service medicine, doctors want to maximize their income.  If health plans are watching utilization, the one thing that had never been controlled is what doctors charge, so they would raise fees. 

We would turn around and try to negotiate a better fee schedule, but it was always off a higher base. All of these factors combined in the late nineties to raise premiums. During the Bush era, in order to keep premiums so that employers wouldn’t quit or go ballistic, that’s when they started to introduce these high deductible health plans, started increasing deductibles, and co-insurance. 

You were holding premiums in check seemingly, but people didn’t have as good coverage. Which is what has continued and by 2008, health care costs had gotten incredibly high. Obama gets swept into office, controls both houses and passed this huge act.

Just to go backwards for a second, how did you do on the sale of PHS?

I basically got cashed out and became reasonably wealthy for the first time. I took that money and invested a large amount of it in the Bridgeport Bluefish.

 So you’re really not that smart? 

[laughs] I figured I would become a minor league mogul, and probably never go back into healthcare and the Bluefish would make money every year and because I was the owner…

I like to call myself a serial entrepreneur and the Bluefish were the next serial. 

I owned that team for eight seasons and I loved everything about it, except I did lose money every single year. 

I realized that probably after about the third year, but I loved it so much that I deceived myself that next year was going to be better, when I knew the business model was an enormous challenge.

But we still have the Bluefish.

I am an enormous fan of the Bluefish and one of my missions in my new job is to see what I can do to keep the Bluefish in Bridgeport. They just got a one year lease extension so we just have one year to get it thriving again. Even though we lost money in those first three years, we drew record crowds, we had the enthusiasm, we had sell outs. 

What made you want to take on this new challenge as President of the Bridgeport Regional Chamber?

I’m under no illusion as to how challenging this new job is. But when I invested in the Bluefish in 1996, I was under the illusion that Bridgeport was about to undergo this great economic renaissance and things would be marvelously better. There were good things happening, the dot com burst, the mayor went to jail, everything came apart. 

It’s kind of easy to identify what New Haven or Stamford looks like a decade or two from now. If it’s a few years from now and you’re successful and Mayor Ganim is successful, what is Bridgeport going to look like?

I don’t know if we’ve found the particular niche yet. The way I would have answered that question a few years ago is if you can look at how Stamford gentrified and brought in the big companies. You look at what happened to its downtown, all those vibrant restaurants and the same thing happened in South Norwalk. I thought the natural evolution is it would continue up the road and it would happen in Bridgeport, and Main Street would become many great restaurants. 

I think Steel Point [new development on the Harbor] still has enormous promise now that we’ve cleared some of the road blocks, and we’ll get some housing there. The [Long island, Port Jefferson] Ferry is going to move across to that side and they’ve begun the work for that. 

Is it going to be Arts and Culture? Is it going to be manufacturing? I don’t think so. There are things that are happening in different parts of Bridgeport. There is an area we call the “smile,” which is a little strip as you leave Bridgeport heading to Fairfield.  It’s been burnt out factories for decades, now it’s being converted to housing. There is a shopping center going in there. My challenge is to make sure that happens, developers are in there, they’re ready to go.

I guess what I’m saying is that I see Bridgeport on the verge of a comeback and I can be a catalyst to help make that happen like it didn’t happen twenty years ago. 

Well, membership is one of the things you did excel at with PHS and ConnectiCare?

Yes and I have to go out and convince those members that their membership is valuable and go out and recruit new members. We need them to help us promote the economic well-being of the region, new economic development and promoting the vibrancy of the existing companies. 

Well isn’t there some push back in places like Trumbull not wanting more economic development?

When I was on the Trumbull board, our concentration was trying to push any economic development to the absolute outside borders. And not to let anything come into that nice residential center. 

In New Haven, the demographics of four growing colleges, including Yale University, means that New Haven will progress pretty much.. What is the driver for Bridgeport?

Things are happening, there is a substantial amount of capital directed to projects both public and private. The big power company that has the great smokestack next to the ball park, they’re involved in a [hundreds of million of dollars] building of a new power plant right there. 

There is a lot of housing being built in the downtown area now, I don’t think it is at a sufficient mass to start creating things all by itself. It’s a necessary step, we certainly didn’t have that in the nineties.  My challenge is to help get more and keep it going.

What was the pull for you personally by seeking the role of Bridgeport Regional Council President?

When I was CEO of PHS in 1981, I was on the board and have been on the executive committee for years and years. The search committee failed to produce a candidate that they could bring to the board. They said “we had a candidate but they said we weren’t able to reach an agreement, we’re going to have to start all over again, people were groaning in the room.”  I went home that labor weekend and said, I’m healthy, I still have a lot of energy, I’m familiar with the organization, I’ll make a commitment for [at least two years]. 

They put me through the process, it just happened a week ago. 

Sometimes when you’ve been around something for a long time, you’re just steeped in the problems. Where are the fresh eyes?

The Mayor’s been in office just a year now, he’s now really eager to concentrate full bore on economic development. I intend to make this organization really transformative and take all the years I have as an entrepreneur to figure out how to really boost economic development.

How do you see the role of the chambers of commerce today?

We have an eco-technology park, there is a bunch of businesses in there, they almost all are small businesses. There’s a mattress recycling company, it has finally gotten to where it is breaking even. There are a whole bunch of towns, including in Fairfield County, that do not send their mattresses into that facility. They put them in the chute at the dump. Fairfield’s on the list, and I live in Fairfield, and the Fairfield dump is about three miles from the mattress recycling center.

That is an example where I can be helpful in getting these other towns to help out in some fashion so that can become a really thriving company. 

For us [BRBC] it can be acting as a real catalyst for projects, many already on the drawing board, others that need a further boost to bring to fruition and some handholding to keep them developing. BNH