In 1979, Mr. Sweeney was director of marketing at McGaw
In 1979, Mr. Sweeney was director of marketing at McGaw Labs, an Irvine, Calif., maker of IV solutions. While visiting hospitals, he noticed that many otherwise-healthy patients, following surgery or because of illness, lingered in hospitals just to stay tethered to IV tubes. What turned his observation into an industry was a spark of an idea triggered by a magazine article that said health insurance for auto workers had become as costly as the metal in a car. He thought that insurers and employers might want to change things.
Mr. Sweeney and some other former McGaw employees say his home-care idea got nowhere with McGaw managers. However, one former McGaw executive, William Van Dessel, says he doesn’t recall such a presentation and contends that Mr. Sweeney wasn’t fired but quit when passed over for promotion. But Robert A. Ruh, then a vice president of human resources, says Mr. Sweeney ``was for sure fired. He was just a little too outspoken and independent for corporate life.″ Mr. Van Dessel’s former secretary also supports Mr. Sweeney’s account.
``It’s no fun being fired. It shakes you to your foundation,″ Mr. Sweeney says. ``But I came away feeling there are good reasons to be fired. My then-employer’s lack of vision was what caused this opportunity to be available.″
That this was an opportunity wasn’t clear to many others. They believed that patients couldn’t handle their own IV feedings. Moreover, insurers weren’t paying for such home care.
Despite repeated rejections at the hospitals he contacted, he kept trying to sell the idea because he believed it made sense. ``I looked underneath all the reasons they said this wouldn’t work, and I figured the need was there anyway,″ he says.
Finally, he signed up the Cleveland Clinic, which had already begun its own home-IV program. After losing hundreds of thousands of dollars a year on such care because insurers wouldn’t pay for it, the Ohio hospital was delighted to send patients to Mr. Sweeney. ``I kind of felt sorry for him,″ says Dr. Steiger, who supervises the hospital’s post-surgical nutrition. ``I thought he was going to lose his pants, his house and everything else.″
And Mr. Sweeney did struggle for months, trying to win over the naysaying insurers. Exasperated, he then took a calculated gamble. He went over their heads to employers and contended that his company could give them a saving of about 60 percent. He says the first employer he approached, Ford Motor Co., bought his argument and persuaded its insurers.
Within four years, his fledgling company had opened 75 centers around the U.S. Former employees say he insisted that nurses always accompany new patients home to teach them how to handle IV lines and that patients be treated whether or not insurers paid. Within six months of its incorporation, the company was profitable. Its stock soared.
Former employees also recount in glowing terms how he found time for low-ranking staffers and invited their ideas. ``It was the best company that’s ever been,″ declares Joan Martin, a former nursing manager in the Midwest. Mr. Sweeney often invited the entire work force at corporate headquarters to parties at his home in the hills above Santa Ana. Like the company, the parties were democratic affairs, with executives doling out food and the relaxed atmosphere engendering practical jokes. The employees once hired an actor who pretended to have smashed into Mr. Sweeney’s brand-new Ferrari.
In 1983, however, Home Health Care stock collapsed after the government decided not to pay for enteral therapy, another type of tube feeding, at home. ``Camelot was dead. We went from being a big success to a failure quickly,″ Mr. Sweeney recalls. ``But aside from the personal humiliation, nothing had really changed. It didn’t invalidate what we were doing.″ He pushed on with his original concept, home-IV nutrition, and the company’s profits and stock price resumed their growth.
Offered a high price and worried about the prospect of scandals in the industry, he sold his home-IV company in 1987 to Baxter International Inc. (which, in 1992, spun off Caremark, including the Sweeney business). At the time of the sale to Baxter, one San Francisco venture-capital firm’s $1 million start-up investment in his company had grown to $144 million. Even buyers at the company’s initial public offering came out ahead by nearly 7 to 1.