When Dr. Paul Klotman became chairman of medicine at Mount Sinai School of Medicine in 2001, the New York City institution was in a severe financial crisis. Under his guidance the school doubled research funding, jumping from 24th to 14th in National Institute of Health rankings, and rose to 18th (from 32nd) in U.S. News & World Report's annual ranking of top medical schools.

When Klotman takes over the presidency of Baylor College of Medicine on Sept. 1, it will be deja vu all over again (to quote Yogi Berra). His task: Resuscitate the beleaguered Houston institution that has a glorious past but is mired in a shaky financial situation as a result of a nasty split from Methodist Hospital in 2004 and an ill-fated attempt to build an adult hospital of its own.

But Klotman appears undaunted. "When I took the job, every Baylor graduate I had ever known wrote me about how happy they were that I was going to do this," he said during a telephone interview from New York. "People from Baylor take it very personally and they are very committed."

Some excerpts from our conversation:

Q: Your grandparents are from Houston, so you often visited as a kid. Does anything stick out in your mind?

A: Yes. The heat. I remember thinking it's too hot to live down there.

Q: So why did you take this job?

A: Baylor is one of the top medical schools in the country. People there are fantastic. It's one of the few places that is viewed as a family. I don't want to offend anyone, but it's the major medical school in Houston. Who wouldn't want to be part of that?

Q: What are the biggest challenges?

A: The immediate problem for Baylor revolves around some financial issues around the loss of affiliation with Methodist. The major issue is putting in place some financial discipline so they can get their house in order. It's a really terrific institution. It's just fallen on financial hard times. It needs to get a little financial discipline around itself and it will be fine.

Q: Do you plan to revisit the affiliation with Methodist?

A: I'm open to anything. Whether it's Methodist or St. Luke's or some for profit or another institution, it doesn't make a difference to me. Baylor needs an affiliation for an adult medical/surgical hospital relationship. They don't have to own it. It's important to do what's right to make Baylor a better place. Whatever that is, I will do.

Q: Does that means the planned hospital is not going to happen?

A: I wouldn't totally rule that out. It's not happening in the time frame that it was suggested. If it is going to happen, it's going to need a partner. But there's no reason why it can't be Baylor/Some Other Partner Hospital. The type of hospital it could or should be in still up in the air. But there are a lot of positives to that campus (a 35-acre site adjacent to the Michael E. DeBakey Veterans Affairs Medical Center).

Q: What are those positives?

A: There are a lot of possibilities. It's easy to get to. It has a clinic building, so that's a great growth opportunity to be there. But it doesn't have to be a Baylor only campus. It can involve a lot of other parts. Baylor is a critical element of almost everything that goes on in the Texas (Medical Center) campus and everyone knows that Baylor plays a critical role. It's the institution that's training the most physicians. They're the ones who are going to be leading the way.

Q: You have been successful at raising the level of research funding at Mount Sinai. Will that be a priority at Baylor?

A: Absolutely. If you look at what distinguishes Baylor from the competition, it's the outside scientists. They have led the way in translating some brilliant science in the community. That is definitely something that is unique and needs to be cultivated there.

Q: What will it take to get Baylor back?

A: Focusing on what people do well. When Mount Sinai had its problems, which was around a failed merger, it was not so much the fact that the merger failed. It was that everybody put too much effort into the merger and stopped focusing on what we do. If you look across the country at failed mergers, entities all say the same thing: It's the lack of focus on your essential business that really does you in. It's not the failure of the merger.

Q: What are your top three priorities?

A: The first thing I hope to change is the feeling and morale of the place by being a fresh leader and to get (staffers) focused on something other than financial woes. The second thing is to make sure we have a budgeting process that makes sense. The third thing is growth in clinic and research.

Q: How do you do that?

A: By empowering the best faculty and giving them resources. And recruiting top people into the organization.

Q: If I were to look at Baylor in five years what would I see?

A: I hope you see a vibrant medical school where the faculty has great pride and patients feel it's the best place to be seen and the scientists are all in a growth mode and really doing well. I like people to have that "can do" kind of feeling again that really characterized Baylor for many years.

Q: What changes are you going to make to the institution to adapt to the changes you foresee happening in health care?

A: A lot of this is data driven, getting the systems in place so physicians can see the quality of work they do. One of the reasons why a hospital partner is so important is that over the next 5-10 years, the government must shift the risk of the cost of medicine from government to providers.

We live in a fee for service world. We do the work. We get paid. I think we're going to go to a world where we're given a certain amount of money for hospitals and doctors to take care of a patient with a certain diagnosis. If we do it well and efficiently, we will make money. And if we do it poorly and inefficiently, we won't. This is a huge change in the way things are done now. But I think it has to happen for Medicare not to go broke.

That's going to require a lot more discussion and work between hospitals and doctors. So to get ready for that you really have to have electronic medical records. You have to have good data set for outcomes. There's a lot of variability in the way doctors practice and some of that accounts for the excesses in medicine. So one of the best things to do is "best practices" type of medicine and figure out what the best way to do things is and try to generalize that.

Q: As an outsider coming into the Texas Medical Center, what do think about it?

A: It's a very interesting place because all of the competing health centers are right next door to each other.

Q: Is that unusual?

A: It's extremely unusual. I thought Manhattan was bad because we had Cornell, Columbia, NYU and Mount Sinai within three miles of each other, but not right next door. (The Texas Medical Center ) is a big sandbox. You have to be able to play in the sandbox with others. It's competitive, but in a civil way. Relationships are complex. The institutions are interrelated. You can't just come in and say, "We're doing it my way and that's it." I have a learning curve. I recognize that even though I've been in the brutally tough competitive environment in Manhattan, Texas is going to be a totally different kettle of fish.