Donald E. Lorton

Donald Edward Lorton, Sr. was born January 7, 1948, in Radford, VA to Sally Alberta Williams Lorton and Willard Norman Lorton.  Both of Don’s parents came from large families, however Don was an only child who was surrounded by cousins and good buddies.  He was educated in Radford city schools until 6th grade when he and his family moved mid-year to Pulaski where he remained until high school graduation.   Don had a great passion for competition and was a member of the football, wrestling and track teams.  When asked about his grades Don admitted they were strong because they were a factor in his ability to join the school sports teams.  With a father, grandfather, and several uncles being mechanics or carpenters it was natural for Don to enjoy tinkering with most machines and building things.  Don had a brief stint in the Civil Air Patrol that led to summer camp at Langley Air Force base to learn the particulars of search and rescue training, creased pants, and spit shine shoes.  

Based on his love for sports Don always dreamed he would have a degree in Physical Education and become a coach.  However, life changed as he became a teenage dad and married while in high school and then the birth of his son, Don Jr. occurred in 1965.  From his early teens he held a job, starting first as a farm hand and while in high school he became a bagger at the local Kroger store.   It was there that Mr. Palmer the local Kroger Manager and neighbor to the Lorton’s made a great impression on young Don.  He realized that if you had a management job that it also meant opportunity to make a difference for the employees and the customers.

 As a young breadwinner, Don headed off to National Business College in Roanoke to obtain his associate degree in business.  To supplement the cost for his college he was able to be transferred to the Kroger at Crossroads Mall and was able to live with his brother-in-law.  It was upon the insistence of his accounting instructor Richard Adams at National Business College that Don changed his degree from business to accounting.  Mr. Adams realized Don’s ease with numbers would open doors and increase his options with an accounting degree and sitting for the CPA exam.   Upon graduation from National Business College Don returned to Pulaski and sought work with a local CPA, who referred him to Pulaski Community Hospital for an accounting position.  The advent of Medicare in 1965 forced hospitals to implement new and better accounting and financial management systems.  It was apparent that each hospital needed to build a solid team of number crunchers to keep pace with Medicare regulations and payments.

Don describes the management of health care industry finances in the late 1960s as being reminiscent of the “wild west”; compared to his National Business accounting classmates who were hired by Norfolk Western, or Appalachian Power who had very structured jobs.  Hospital financial jobs were fluid and developed definition after Medicare had been in place for several years.   Don began as the controller for Pulaski County Hospital covering payroll, preparing financial statements, tax returns, typing up refund checks and all other duties as assigned.  By the time he had completed three years with PCH he was departing as the Chief Financial Officer to start his career at Roanoke Memorial Hospital.  The growth in his career was complemented by his membership in the Hospital Financial Management Association (HFMA).  HFMA is a professional association focused on the continuing education of its members and serving as a trade association in matters of hospital financial management.  In the very year Don started work with PCH he was called upon by the association to give a 45-minute overview of the Ameriplan Bill, a version of healthcare reform.  This was a stretch for young Don because while he had studied the bill thoroughly presenting it to a crowd of more than a hundred of his peers was a bit intimidating.  Don describes this presentation as “45 minutes of agony for him and his audience”.

In addition to the CFO position at Pulaski Hospital Don was holding down a weekend job that he started working in 1967 at Burlington Industries. The job consisted of loading freight, and they were pushing him to obtain his CDL so he could drive a big rig and make more money than he could at the position of CFO; however, at Burlington there would be no growth.  The time spent working both jobs helped him pay off two loans, one for his first car and the other for school.

Through HFMA meetings he came to know Thomas (Tom) L. Robertson, Financial Officer of Roanoke Memorial Hospital.  Tom was revered by many as a gentleman that had a strong knowledge and command of hospital finances.  Roanoke Memorial, like other hospitals of the era, had a trusty CPA firm conducting the day-to-day books prior to the formation of a controller and staff.  Tom offered Don a job as Assistant Controller at the Roanoke Memorial and he loved the idea of working for a bigger hospital. However, he still had to study for his CPA exam which he took two times to pass.  Tom was most supportive of Don trying to acquire his CPA license along with the mandate to perform services in a CPA firm.  Don’s early time on the job at Roanoke Memorial was filled with long hours as he and Tom worked to bring the financial and management reporting system up to speed.  Don did not bring his family to Roanoke until late in 1972 because his second son John was born in February of the same year.  At the end of his workday Don would spend his free time running the track at Patrick Henry High School.  Don’s diligence did not go unnoticed by Tom Robertson in his three-year stint.  Don went to Tom in 1975 and shared his desire to complete 18 months with a CPA firm as required by the Board of Accountancy to obtain his long-desired CPA license.  Tom encouraged Don who had planned for a smooth transition with the hiring of Curtis Mills to be budget director. 

In 1976 Don was rehired by Tom Robertson to Roanoke Memorial as the Vice President of Finance.    In the hospital arena Don returned to more exciting times with exploration into tax exempt debt to lower costs of capital for not-for profit hospitals.  Traditional loans had been taken out for expansion.  Yet new ideas were percolating for financing capital needs like CT scanners and operating room equipment from an innovative investment banker at First Merchants in Richmond.  Don gained a mentor in “Ham” Sherra who he describes as one of the most innovative thinkers he has ever met.  Harnessing Mr. Sherra’s creativity, Don began implementing a series of debt issues leveraging both the tax-exempt status and yield curve.  This put RMH at the forefront of capital financing which would later attract New York investment bankers.

In our nation during the late 1970’s and early 1980’s health care was experiencing run-away costs.  Virginia implemented a voluntary rate review program that was later replaced with a legislated program administered by the Virginia Health Services Cost Review Council.  Its mission is to “promote the economic delivery of high quality and effective institutional health care services to the citizens of the Commonwealth”.  Don Lorton was appointed to the Council as one of three hospital representatives where he served two (2) three-year terms.  Ultimately the concept of a rate setting agency proved unsuccessful in controlling healthcare costs. 

To identify an alternative solution Virginia’s Secretary of Health and Human Services, Howard Cullum called together business leaders, hospital leaders, insurance executives, physician and State agency heads.  Don’s contribution at that meeting landed him a seat on a special task force to create a vehicle to share pricing and cost information to drive competition and innovation.  From that work came the Patient Level Database Act and Virginia Health Information, a public private partnership.  Don served as a founding board member and Treasurer of VHI.  Today, VHI remains Virginia’s home for cost, quality, and efficiency healthcare information, with links to nursing, health insurance, physicians and long-term care/nursing homes and hospital patient information.   

Debt issues at RMH got the attention of a group of New York investment bankers and one individual Rondy Jennings.  In the early 1980s he was an innovative investment banker for J P Morgan who made multiple trips to Roanoke to explore financing options with Don.  It was Rondy’s “servant” attitude towards his clients that cemented a bond with Don and the hospital that has lasted close to three decades.  Don recognizes Rondy and others like local bond attorney Al Knighton as valuable mentors. 

In this same decade Roanoke Memorial Hospital evolved into Carilion Health System and took on the management of several smaller community hospitals.   Don and his finance team were assigned the task of performing due diligence and the developing of financial improvement plans.  Growing up in Pulaski, Don felt at home as his team worked from motels in Big Stone Gap, Wytheville, and Lebanon. 

In 1982, Roanoke Memorial Hospital was reorganizing and adopted a new name, Carilion Health System.  By 1986 new administrators evolved by pulling existing personnel up through the ranks.  In 1986 Thomas Robertson is named CEO and Don is named CFO.  Don now has a deeper pool of talent for his Finance Department.  And they were focused on reducing cost and providing new forms of revenue to support Carilion’s mission.  The use of prepackaged surgical trays was adopted to reduce costs in the OR.  Carilion leadership recognized the growth potential for companies producing these trays.  Carilion purchased a small Richmond based producer, Sterile Concepts.  Carilion grew this $3 Million company to more than $100 million in sales before diversity through an IPO.  The proceeds of this sale boosted Carilion’s investment fund and contributed to Don’s Treasury Department being a significant source of funds to support Carilion’s mission.

In the 1990’s two new trends were developing for hospitals, the formation of Health Maintenance Organizations (HMO’s) and the employment of more physicians.  Don’s familiarity with deal making and business structure made him a natural to take on these tasks.  Don was attracted to the fundamental concept of the Health Maintenance Organization; accept a fixed payment in exchange for keeping patients well.  In contrast the old fee for service model provided an incentive to treat patients for illness but nothing for keeping them well.  Don pulled together physician investors, a management team, and obtained a license from the Bureau of Insurance for Carilion to operate an HMO.  In a little over two years Carilion had gone from concept to having the largest HMO market share in the region. 

Unfortunately, many HMOs across the country were more focused on managing costs, through obstacles to care and limiting access to hospitals and physicians.  By the late 90’s a national backlash to these tactics had undermined the real intent of Health Maintenance Organization and members began to move back into more traditional forms of insurance like PPO’s.  With falling volume and rising overhead, Carilion closed its HMO in 2002. On the physician front Tom Robertson and Don structured Carilion’s acquisition of a large regional primary care physicians’ group.  Many of the original 81 physicians remain with Carilion today and were an important part of the core around which Carilion Clinic was formed. 

HFMA served as an industry advocate, but its primary goal was the professional development of hospital leaders.  Each state chapter held periodic conferences with speakers covering a variety of topics.   Tom Robertson was very active in the association.  During his term as the President-elect, he was to lead the development of four conferences for the year.  However, Tom was very resourceful and created a programs committee and appointed Don to head up the work.   Once Tom Robertson became the Association chair, he advocated having programs be independent of the chair-elect and it was approved once again with Don now appointed Programs Chair.  By the time Don was elected chair-elect several years later programs were once again the responsibility of that position.  This equated to Don establishing twelve programs for the statewide membership and getting on a first name bases with many state and national health care experts.  Today the whole staff in Carilion’s finance department is enrolled and active members of HFMA.

The Virginia Health and Hospital Association (VHHA) was another place Don was always willing to volunteer his time.  He served on many committees, Task Forces, and Study Groups across 4 decades.  He credits his appointments to the Virginia Health Services Cost Review Committee and Virginia Health Information to his work at VHHA.  He was the first recipient of VHHA’s Meritorious Service Award. 

In the 1990s, Carilion’s Vice President of Human Resources Tony Bongiovanni realized not only that Don was great at taking on challenges to create a fiscally sound hospital, but he rarely said no when it came to assisting others.  Tony’s wife Jane was the Volunteer Coordinator of Junior Achievement (JA) and convinced Don to teach a William Fleming class of High School seniors the fine points of running a business. This one JA classroom experience led to meeting some bright students who were in their last high school semester and most had all been accepted to college.  This was a JA program that had 16 lessons built around setting up a student run business.  While Don was attempting to teach them about organization, leadership, and finance they were teaching him the virtues of a sales driven organization.  The company was a financial success, paying a 2 to 1 return to its investors, nice bonuses to its top salespeople and administrative leaders and a franchise tax to JA.

Don was asked what advice he would give young people preparing for the world of work and he shared he realizes there are a lot of pressures on young people to pick a college and course of study.  He continued that frequently individuals find careers not directly related to their degree.  His advice is that a good education provides one with options.  Seek a good education and you can adapt it to meet your career and life goals.  It is good to plan even though it may not work out the way you envisioned.

Outside of building a strong reputation in hospital financial management, Don also served on Family Services of Roanoke Valley board, and he continues to serve on the national board for the Alliance for Children and Families in Milwaukee, WI and the Junior Achievement of Southwest Virginia where he has the distinction of serving 22 years and two times as board chair.  Don does not have a bucket list but in his newfound hours of leisure he vows to spend more quality time with his family.  Plus carving out time to do more than write a check for the less fortunate and put in some sweat equity.

Don was an integral part of the team that led Carilion through its transition to Carilion Clinic.  The anticipated financial burdens of this transition were amplified by the worst economic downturn since the Great Depression.  Dealing with huge financial losses was a new experience for Don and his team.  Don realized the losses were not sustainable but that too abrupt a response could damage the young clinic with its focus on coordinated, integrated, patient centered care.  Don feels that helping Carilion maintain a balance approach to turning around its finances while continuing to grow the clinic is the most significant accomplishment of his career.  “Yes, I retired from Carilion after it once again achieved profitability but more importantly, with Carilion being a leader in developing a patient centered, integrated model of care bent on improving the health status of its patients.”

Donald E. Lorton was inducted into the Southwest Virginia Business Hall of Fame in 2013.

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