David A. Jones Sr., a Golden Gloves boxer who grew up in a tough West End neighborhood, borrowed $1,000 to help found what became the nation’s largest nursing home chain, then transformed it into the world’s largest hospital company and finally a health insurance colossus worth $37 billion, died Wednesday September 18 2019. He was 88.
Jones was CEO of Humana Inc. for 37 years and its board chairman for 44 before retiring in 2007. With his son Dan, he raised a staggering $120 million, including $15 million from his own pocket, to build one of the nation’s largest new metropolitan parks, the Parklands of Floyds Fork, on 3,700 acres in eastern and southern Jefferson County.
Jones was humble in describing himself and Humana co-founder Wendell Cherry.
At its peak, Humana owned more than 100 hospitals in the U.S., Canada, Mexico, Spain, and Switzerland, and employed 45,000 people. Unlike some competitors, it remained highly centralized, achieving huge efficiencies by operating all patient billing and data collection out of its home office in Louisville.
In 1985, marking its success, the company built a soaring, $60 million, 27-story headquarters on Main Street designed by internationally famed architect Michael Graves.
Through his career, Jones zealously defended for-profit health care – he insisted on calling Humana a “taxpaying hospital” – and derided nonprofit healthcare organizations as sanctimonious.
Jones liked to brag that Humana never was involved “in any kind of a scandal" and contrast it with its chief competitor, HCA, which in the early 2000s paid $1.7 billion in fines, the most in U.S. history, to settle claims it defrauded Medicaid.
In Louisville, where Humana owned four hospitals, nobody was neutral on the company, The Washington Post reported in 1985. “The very name provokes sputtering outbursts of ire or rhapsodic psalms of endorsement,” it said.
David Allen Jones was born on Aug. 7 1931, in a Depression-battered home at 18th and Garland Streets, one of six children of Logan and Elsie Jones. His father was a contractor who did small repairs and was unemployed from 1938 to 1941. His mother was a teacher who worked nights at a laundry.
He graduated from Male High School, where he played basketball and football, then took what he joked was a “gap year” before moving on to U of L on a Navy ROTC scholarship. At U of L, he studied accounting, was named outstanding senior when he graduated, and, in what he called his luckiest break, met the woman who would become his wife, Betty Ashbury, whose mother was a teacher and whose father owned a drugstore in St. Matthews.
After a three-year hitch in the Navy, Jones worked his way through Yale Law School by teaching accounting at nearby Quinnipiac College. The couple returned to Louisville with their two children (they'd eventually have five) with everything they owned in a $15 rental trailer.
But he joined a rising law firm known today as Wyatt Tarrant & Combs, where he met Cherry, who had grown up in Horse Cave, the son of a wholesale grocer. And that is where Humana’s “creation story,” as Jones liked to call it, began. Cherry raised his $1,000 investment by floating a second mortgage on his 1960 Plymouth Valiant. Jones got his money from Household Finance Corp.
With help from other investors, they built their first nursing home, Heritage House of America, at 3535 Bardstown Road.
In 1968, they took their company – which they'd dubbed Extendicare – public, at $8 a share. By year’s end, it was selling for $80. Both Jones and Cherry – and many others – were millionaires.
They were called the “Gold Dust Twins” and described as a perfectly mismatched couple. Cherry was a fancy dresser and wine connoisseur who liked fine foods and collected Picassos; Jones was a meat-and-potatoes man who seldom drank. Cherry was usually dour, while Jones was unfailingly optimistic.
With 50 nursing homes in the U.S. and another 10 in Canada, by 1969, Extendicare was the largest nursing home company in North America. But so many companies had hopped onto the nursing bandwagon that the market became glutted.
Their move into the hospital business turned out to be epically more successful. In 1972, they sold their remaining 41 nursing homes and bought their first hospital, in Huntsville, Alabama. In 1974, they changed the company name to Humana, one of 500 alternatives proposed by a New York corporate identity consultant. And in 1978, they catapulted themselves in to the big time, winning a hostile bid for a Pennsylvania chain that increased their inventory of hospitals from 59 to 114 overnight.
The next year, revenues for the first time topped $1 billion, and Humana broke into the ranks of the Fortune 500 as one America’s largest companies.
In what turned out to be a brilliant marketing move, Humana decided to slap its name on the front of every one of its hospitals – Audubon Hospital became Humana Audubon Hospital, for example – something no other chain did.
Then, when Humana wrested control of the artificial heart experiment from the University of Utah – and implanted the world’s second Jarvik 7 into the chest of Bill Schroeder on Nov. 24, 1984, at Audubon – overnight the company's name spread around the world.
When Humana offered to take over the failing University of Louisville Hospital in the early 1980s, Jones said shareholders “thought I was losing my mind – that you couldn’t make money running a charity hospital.” Despite agreeing to give 20% of revenues to the university’s medical school – and treating an unlimited number of indigent patients – Humana made $1 million in profit the first year and $40 million in the 10th and last.
In the mid-1980s, though, seeing it was losing business to HMOs, health maintenance organizations, that were steering patients to other hospitals, Humana jumped into that business itself. It sold 600,000 policies the first year, in 1986, and while it lost $150 million that year, the move set the stage for the company’s third incarnation – as an insurance business.
Jones initially was hailed as a visionary for operating hospitals and insurance plans that would pay for the medical services delivered inside them. But later he conceded there was a fundamental conflict between the two.
In 1993, the year after Cherry died of cancer and on the heels of Humana's worst annual earnings ever, Jones announced Humana was getting out of the hospital business to focus solely on insurance.
The hospitals were spun off to Louisville-based Galen Healthcare, which was quickly swallowed up by Scott’s Columbia Healthcare and in short order moved to Nashville and consolidated with Hospital Corporation of America. The insurance company kept the Humana name and its iconic headquarters, and Jones stayed on as CEO and chairman of the slimmed down enterprise, which was still worth $4 billion.
Four years later, Jones stepped down from day-to-day management. He returned as CEO for a couple of years, but in 2005, when he turned 73, he was forced under company rules to retire as chairman.
He was immensely wealthy when he left. The 7 million shares of Humana stock he reported controlling that year were worth $220 million. By 2019, if he held on to those shares, their value would have grown to $2 billion.
He owned a Citation V jet, and with his wife, Betty, eventually bought a waterfront condo in Naples, Florida, an apartment just off Central Park in Manhattan, and a home on 27 acres in Louisville.
Jones later railed against runaway executive salaries. Although his total compensation in 1985 – $17.4 million, including stock options, made him the second-highest paid executive in the U.S., trailing only Texas oilman T. Boone Pickens Jr. – he liked to say his salary alone never was more than $1 million.
With his retirement from Humana, he devoted himself full time to his next career, philanthropy. Through their CE & S Foundation, he and Betty gave millions of dollars to an array of nonprofits, from the annual AIDS Walks to the Americana Community Center, from the Boys and Girls Clubs to Nepalese earthquake relief.
The foundation, which was endowed by the Joneses and had grown to $74 million in assets by 2019, distributed $63 million over the 10 years ending in 2016, including more than $25.8 million to U of L through 2017.
He was blunt in his support for educating poor children and minorities, whom he long claimed the school district left behind.
Jones was a lifelong registered Democrat; he once said he registered that way out of respect to his mother, a party loyalist. But he made most of his political contributions in his later years to Republican causes.
He was particularly generous to Mitch McConnell, who as Senate majority whip in 2005 helped land a $38 million federal earmark for the Parklands.
In 2009 Jones donated $1 million to the Mitch McConnell-Elaine Chao Archives at U of L’s McConnell Center. The elder Jones and foundations to which he was tied ultimately gave $4.6 million to the center, a nonpartisan program to identify and nurture future leaders.more » « less