Continuity

Rice Powell

Dr. Ben J. Lipps

In an interview about the
CEO transition and
the meaning of “continuity”
at Fresenius Medical Care

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On January 1, 2013, Rice Powell succeeded Dr. Ben J. Lipps as
Chief Executive Officer (CEO) and Chairman of the Management Board of
Fresenius Medical Care. Rice Powell previously served as Vice Chairman
of the Management Board and Member of the Management Board
responsible for the region North America. In an interview, they both describe
their personal view of ongoing developments at Fresenius Medical Care
as well as the challenges and opportunities arising from these, and why the
Company is well positioned for long-term success in the future.

Rice Powell
Dr. Ben J. Lipps
How would you assess the performance of Fresenius Medical Care in fiscal year 2012?
2012 was a very successful year for Fresenius Medical Care. We achieved record results yet again – for the 16th year in a row. We continued to expand our strategic growth initiatives, specifically our global clinic network. But more importantly, we are very proud of the continued progress we are making to promote the best possible patient care and the highest product quality, while growing the business profitably and in line with our values.
It has also been a rewarding year for North America. We successfully grew our core business and achieved our key quality goals. We made significant progress with the integration of the acquired Liberty Dialysis business and worked through the new U.S. reimbursement system for dialysis that was introduced in 2011. We also provided support for our dialysis patients and fellow employees who were affected by Hurricane Sandy. Nevertheless, we can never be complacent about what we have achieved in the past since we know that the overall environment will not get any easier. I think we are very well positioned to meet potential future challenges and opportunities on the product as well as on the therapy side of our business.
Dr. Lipps, can you comment on Fresenius Medical Care’s financial performance in the past years in more detail?
Since Fresenius Medical Care was founded back in 1996, we have been able to build our business organically as well as through acquisitions from about $1 billion in revenues to very close to $14 billion in 2012. At the same time, our net income has grown from less than $100 million to $1.2 billion. But more than that, we have treated countless patients in our clinics over the years. Today, we provide more than 38 million dialysis treatments a year to nearly 260,000 patients worldwide in our clinics; that’s about six times as many as in 1996.
Dr. Lipps, you have more than 40 years of experience in the dialysis industry. Do you have any personal highlights?
I remember most clearly when – after a number setbacks – we built the first artificial kidney and were able to treat the first patients. You have to consider that up to the early 1970 s, kidney failure was a death sentence. Soon, we were able to increase the life expectancy of patients with the help of dialysis and the artificial kidney by a month. One month became two, then years. And of course today, we have thousands of patients living on dialysis for decades. In the U.S., for example, we have been able to reduce the mortality rates in our clinics by 35% in the last ten years. So it has been a real pleasure for me to see all the efforts in the industry to improve the quality of life of patients. Today, products that are used for dialysis really differ in quality compared with those available when I started. I am proud to be part of the company that has spearheaded these advancements for patients.
Mr. Powell, you have been with the Company since 1997, the past eight years as a member of the Management Board responsible for North America. What has stood out from your perspective?
For me, it is the scope of our business and how it is grown. Throughout its history, Fresenius Medical Care has been the market leader in an industry that is expected to carry on growing steadily in the future. One key reason for this is our vertically integrated company structure. This means, for instance, that we can introduce and study new products, therapies and additional services in our Fresenius Medical Care clinics. Our own staff there are encouraged to look critically at new products and give us feedback immediately. On the one hand, this guarantees very high success rates for Fresenius Medical Care, while improving efficiency in delivering health care on the other.
Dr. Lipps, you handed over chairmanship to Rice Powell on January 1, 2013. Is there any advice you would like to give your successor?
First of all, I have to say that I am really proud that Rice joined Fresenius Medical Care back in 1997. He has done an excellent job of running our business in North America. I think Rice and myself, we both share the same dedication to the quality of care that we provide to patients, and that has paid off over the years. So it was a real pleasure for me to pass over the baton to Rice at the beginning of 2013. I have total confidence in him and in the whole management team. But we have been working together for over a decade. So there is no advice I can give him from a business perspective that he does not already know. Maybe one personal tip: I have realized over the years that the quietest time of the day in any office around the globe is 4:30 in the morning.
Is it true that you yourself hired Mr. Powell back in 1997?
Absolutely, I still remember the interview. We had some interesting discussions and, after a short time, we decided that it would work for both of us and the Company. I literally locked the door so that he couldn’t get away, got a contract and Rice signed it before he left.
Mr. Powell, where do you see the biggest personal challenges in your new position as CEO?
Obviously, running global operations means that a lot of responsibilities are being added to my daily schedule. We are a decentralized vertically integrated company with a global footprint and a very international management team. I think that sounds like a challenge in itself. Creating trust is a major task – internally as well as externally – with any kind of CEO transition. I am very thankful to have such deep support from my colleague and predecessor Ben Lipps. And being in the office at 4:30 am certainly sounds like a challenge for me as a father with two daughters.
And from the Company’s perspective, where do you see the major challenges in the years ahead?
Let me give you a couple of examples relating to our service and our product business. On the service side of our business, we are, of course, keeping an eye on how reimbursements develop globally. In the U.S. we have already successfully transitioned to the bundled reimbursement system. With our main focus on quality and our vertically integrated company structure, we have built a solid base to deal with any further developments in reimbursement schemes. On the product side, we are paranoid about product quality – you have to be in the health care industry. We regularly review our global production management systems and try to identify any irregularities in the production process that could cause harm to patients. Obviously no one can guarantee that there will be no issues, but I think our strength is that we do everything we can to eliminate any problem as soon as possible. Additionally, Fresenius Medical Care is in a strong position with a long-standing and proven management team that has extensive and unique experience in the global renal industry.
Dr. Lipps, when you look back – where do you see Fresenius Medical Care’s key achievements?
I feel blessed to have been part of this industry for 46 years, 13 years of which I served as the CEO of Fresenius Medical Care. The tremendous support and dedication of all our employees in providing the best care in our more than 3,000 dialysis clinics, along with the best dialysis products, has allowed our Company to be highly successful and become a unique global company. I am so proud of Fresenius Medical Care’s many achievements over the past years. More than 1.5 million dialysis patients around the world depend on our life-saving products. Every 0.8 seconds we provide a dialysis treatment somewhere on the globe, and over four million people rely on Fresenius Medical Care to some degree.
Mr. Powell, what targets have you set for the years to come?
As we have tried to show with the guiding theme of this year’s report, we will be focusing on continuity. That also means we cannot stand still since our environment is not static. There are so many opportunities but also challenges to meet in the future and my goal is to make sure that we are in a position to deal with them as well as we have in the past, or even better. Of course, we give top priority to providing the best-quality products and services. You cannot be in the health care business without putting quality first. Lots of people count on us delivering on our promises: patients, employees, shareholders. So that will be a focus of mine, as it has been Ben’s.
Dr. Lipps, what has influenced you the most during your time as CEO?
I derive my strength from the dedication of our employees. Some of them have been working with us for over two decades now and lots of strong relationships have evolved during that time. Also, as CEO of a company that is committed to taking care of patients, you have the opportunity to meet patients who have managed to survive on dialysis for many years. That is really satisfying to see. One example I remember very well was meeting a patient who had been on dialysis for more than 30 years. I handed over an award created for patients who are on dialysis that long. Thepatient’s reaction and his feedback showed me that all the energy and time we invest as a management team and as a company is worthwhile.
Mr. Powell, what are you especially looking forward to as CEO of Fresenius Medical Care?
It is very impressive to see how Fresenius Medical Care has expanded and in particular to see how many employees have grown in their work and in their teams. I am really looking forward to promoting further growth – for Fresenius Medical Care and for our employees. I want to be a builder, not a renovator, and look forward to building or adding new businesses. Moreover, in the last 15 years and especially during my time as a Management Board member, I have had the opportunity to meet many people, mainly in North America. Now, I am really looking forward to meeting people from all the divisions worldwide and spending more time understanding the cultural differences in our businesses.
Mr. Powell, Dr. Lipps,
thank you for the interview.