The Evolution of Strategy at HealthSouth

Tarr Group Picture 2Mark J. Tarr, Chief Operating Officer of HealthSouth Corporation, made his first visit to the UAB Collat School of Business on October 1, 2013 when he met with students in the combined MBA and undergraduate capstone class “Strategic leadership through the eyes of the C-Suite.”

Mr. Tarr is one of the few senior management members of HealthSouth who was with the company before a large-scale accounting fraud was uncovered a decade ago. Tarr told students that he was working for the company but living in Dallas overseeing its facilities there on the day that the FBI raided the Birmingham corporate headquarters in March 2003. He described how the next several years were a day-to-day struggle just to figure out how to keep the company up and running.

Using the term coined by strategy expert Jim Collins in Good to Great, HealthSouth began a “hedgehog” strategy in the years following the discovery of the fraud and shed all of its lines of business other than its inpatient rehabilitation hospitals. Today, Tarr told students, the company has number one market share in this sector of the healthcare industry, and believes that it is poised for above-average growth because demographic trends point to greater need for inpatient rehabilitation services.

Students asked Mr. Tarr what challenges are faced by a company so heavily dependent on the federal government for its revenues. Tarr responded by saying that the company has to be vigilant to respond to particular cost-cutting efforts by the government that occur periodically in the reimbursement for the various services it provides. He also noted that the recent “sequestration” process in the federal government budget would cause a net decrease in the company’s net operating revenues of approximately $28 million.

A group of students who had studied the strategy of HealthSouth in depth made a presentation to Mr. Tarr and made several recommendations, one of which was that the company consider expansion into the long-term care segment of the healthcare market.

“Strategic leadership through the eyes of the C-Suite” is taught by Collat School of Business professor Stephen Yoder, and features visits from “C Suite” executives from public or other large complex organizations who discuss their organizations’ strategies and how they are developed and implemented.