Larry Kaiser remembers the charge he got when he took over as chief of Temple University's struggling health system in 2011.

"I was told in no uncertain terms by one board member that I basically had 18 months to turn it around because they didn't think we could last much longer than that," he said.

The enterprise had been running a deficit since 2007, and between 2008 and 2010 had accumulated nearly $133 million in operating losses. It also was recovering from a strike by its registered nurses and technical professional employees.

And its anchor institution, Temple University Hospital, was strained by, but committed to, its mission - serving a largely indigent and older population as Philadelphia's de facto public hospital.

More than five years later, challenges remain, but the financial outlook has improved. For the last two years, the system has achieved small but positive operating margins in its $2 billion budget and expects the margin to grow to nearly $16 million in 2016-17.

"Under Dr. Kaiser, the organization has really strengthened," said Eva Thein, a primary analyst for Fitch Ratings, which recently gave the university a "stable" outlook. "Their challenges are pretty significant and I think they are addressing them in an optimal manner."

Kaiser, a thoracic surgeon, attributes the improvement in large part to his strategy to increase the number of acute-care patients, who require high-end procedures such as transplants, cardiac work, and neurosurgery. The hospital system recruited 58 doctors in those fields since Kaiser arrived.

"We've seen since 2011 our acuity volume increase by over 20 percent," Kaiser said, explaining that the more acute cases draw higher insurance reimbursement.

This year, the lung-transplant program is on target to complete more than 100 transplants, he said.

The hospital also lowered costs, he said, in part by decreasing the average length of time patients stay in the hospital, when adjusted for the increase in acute-care patients.

At the same time, the system expanded its footprint, acquiring the Fox Chase Cancer Center for $83.8 million, opening four urgent-care centers - two in the Northeast, one in Jenkintown, and one in Port Richmond - and starting outpatient clinics in Center City, Fort Washington, and Oaks, which helped attract higher-paying patients. More inpatients at Temple hospital now come from outside Philadelphia.

"For us, one of the challenges is to keep the cost down but also to maintain high quality," said Kaiser, 64, who is in the third year of his second three-year contract. "We've been able to transcend that barrier, allowing us to improve our operating margins, which is no easy feat considering that almost 50 percent of discharges from Temple Hospital are on Medicaid and another 35 percent are on Medicare."

The government pays less than commercial insurers such as Independence Blue Cross.

Moody's recently upgraded the health system's financial rating from Ba2 to Ba1, citing the "durability of TUHS' financial turnaround."

The system improved while implementing a new electronic medical records system for inpatients, a nearly $100 million endeavor over the last few years, Kaiser noted.

Kaiser came to Temple in April 2011 from the University of Texas Health Science Center at Houston, where he worked three years. He spent the previous 17 at the University of Pennsylvania, rising to chairman of surgery. He started Penn's lung-transplant program, which just performed its 1,000th transplant.

He still makes time for surgeries.

"What a rare thing that you have a guy who is a visionary and can make it happen but still stands side-by-side with us in the operating room and in our offices," said Amy Goldberg, Temple's chair of surgery.

Goldberg, a trauma surgeon who has been at Temple since 1987, said Kaiser thinks big and gets people to act on it.

"That's what's really made the difference," she said.

Kaiser serves in a dual role as CEO of the health system and dean of the medical school. The health system includes the 722-bed hospital in North Philadelphia, as well as Episcopal and Jeanes Hospitals, Fox Chase, and another Northeast campus. The 870-student medical school receives about 11,000 applications for 210 spots each year.

Under his leadership, the medical school began a master's in urban bioethics, which explores health disparities among different populations, and started a department of dermatology, which it hadn't had since 1989. A new physician assistant program also was launched.

The medical school received its largest gift under Kaiser, a $25 million commitment from the late Lewis Katz whose name the school now bears. Kaiser in September was installed as the inaugural Lewis Katz Dean, now an endowed position. The school awarded an additional $2 million in scholarships this year, using the Katz gift, Kaiser said.

"One of the things Larry has been able to do is synchronize relations between the health system and the medical school, so they're arm and arm going forward," said Joseph W. "Chip" Marshall III, a Temple trustee who headed the health system from 2000 to 2009. "That's very important."

The health system has had turnover in some high profile positions under Kaiser. Goldberg became surgery chief a year ago, replacing Selwyn O. Rogers, who took a job in Texas. The president and CEO of the hospital moved on in the last year, and the cardiothoracic surgeon that Kaiser recruited to head heart transplants left, too.

"I don't think we've had any more turnover here than in most places," Kaiser said. "We've got great chairs in place right now."

Patrick O'Connor, chair of the board of trustees, said Kaiser has brought a new energy to the system, while getting it on firmer financial footing.

"For him to have turned the corner, notwithstanding the fact that the largest constituency we serve are the poor. . .is close to being a miracle," he said.

O'Connor, vice chairman of Cozen O'Connor law firm, said he goes to Temple for his health care. It wasn't always that way.

Kaiser lives in Bryn Mawr with his wife, Lindy Snider, daughter of the late Flyers owner Ed Snider. Snider has a skin-care business that caters to cancer patients and recently became active in the emerging cannabis business. The couple has an 11-year-old son and several children from previous marriages.

Kaiser said he still has work to do. It takes too long to get an appointment in some specialities, he said. He also would like to increase the use of "telehealth," managing chronic patients through technology.

He acknowledged that the hospital's share of liver transplants has lagged.

"It's a very competitive market with Penn being the dominant player [in liver transplants]," Kaiser said. "We have struggled with growing our liver-transplant program despite hiring additional hepatologists."

And financial challenges remain. The system needs to continue to receive supplemental payments from government entities, said Fitch's Thein. Moody's noted the system's keen competition in the Philadelphia market, which is experiencing consolidation.

Potential consolidation with other hospitals or health centers remains a possibility for Temple. O'Connor said Temple has talked to Einstein and Jefferson, but no current negotiations are underway.

"We continue to explore any and all arrangements that would strengthen Temple University Health System - including talks with other hospitals and health systems - as the market continues to evolve," Kaiser said.

Temple University Health System

Budget: $2 billion

Employees: 9,128

Anchor: Temple University Hospital, North Philadelphia.

Other hospital sites: Jeanes, Fox Chase Cancer Center, Northeastern campus

Lewis Katz School of Medicine: 870 students

• Acute-care operations at Temple University Hospital have increased since Kaiser arrived: (Fiscal years, ending June 30.)

• Cardiovascular surgeries, from 184 in 2011 to 371 in 2016.

• Neurosurgery and spine surgery, from 305 in 2011 to 668 in 2016.

• Heart transplants, from 5 in 2012 to 24 in 2016.

• Lung transplants, from 7 in 2012 to 89 in 2016.

• Total transplants, from 126 in 2012 to 296 in 2016.

More inpatients at TUH are coming from outside Philadelphia:

• In 2011, 10 percent of inpatient discharges were from outside Philadelphia, compared with 13 percent in 2016.

• In 2011, 12 percent of inpatient revenue came from outside Philadelphia, compared with 17 percent in 2016.

SOURCE: Temple University Health System

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