Latest / Becker’s Healthcare Podcast / Rethinking What Health Systems Should Own, Build, and Partner On with Laura Dyrda

Transcript

Rethinking What Health Systems Should Own, Build, and Partner On with Laura Dyrda · Becker’s Healthcare Podcast

• 0:02
  - There's a small circle of people who truly
• 0:04
  - understand what it takes to lead a health
• 0:05
  - system right now. The decisions are enormous.
• 0:08
  - The variables are constantly shifting, and the stakes
• 0:11
  - of getting a call wrong don't stay contained.
• 0:14
  - That's not a complaint. It's a structural reality.
• 0:17
  - And it's why the most effective c suite
• 0:19
  - leaders are deliberate about where they go to
• 0:21
  - pressure test their thinking.
• 0:22
  - Becker's fourteenth annual CEO and CFO roundtable
• 0:26
  - brings together more than 1,500
• 0:28
  - executive level attendees
• 0:30
  - and nearly 400 speakers for four days built
• 0:32
  - around growth, financial sustainability,
• 0:35
  - workforce strategy, and the leadership questions that don't
• 0:38
  - have easy answers.
• 0:39
  - Join us November second through the fifth in
• 0:41
  - Chicago.
• 0:42
  - For the agenda and event details,
• 0:45
  - visit beckershospitalreview.com
• 0:47
  - and click on the events tab in the
• 0:49
  - upper right.
• 0:50
  - This is Scott Becker with the Becker's Healthcare
• 0:53
  - podcast.
• 0:54
  - I'm thrilled today to join with Rory Dirda,
• 0:57
  - editor in chief of Becker's Healthcare
• 0:59
  - and a fantastic and brilliant leader.
• 1:02
  - Now before we get started, I I will
• 1:04
  - mention to the audience
• 1:05
  - that Laura happens to be a a huge
• 1:08
  - fan of the Chicago White Sox. And the
• 1:11
  - Chicago White Sox won their first playoff series
• 1:14
  - after having three years in a row of
• 1:15
  - a 100 losses plus.
• 1:17
  - They had the biggest turnaround, I think, essentially,
• 1:19
  - in Major League history this year. They've won
• 1:22
  - the first round of the playoffs, and they're
• 1:23
  - two and o in the second round. So
• 1:25
  - a quick shout out to Laura Dierdott and
• 1:27
  - her Chicago White Sox. Laura, before I ask
• 1:30
  - you to comment on that, let's turn to
• 1:32
  - health care. We'll wrap up at the end
• 1:34
  - with your comments on the White Sox, but
• 1:36
  - let's start with health care. What are a
• 1:37
  - couple of key stories that you're watching currently
• 1:39
  - in health care? What's top of mind?
• 1:42
  - Absolutely. Well, thank you so much, Scott. I
• 1:44
  - I think there's a a lot of interesting
• 1:47
  - and exciting things happening in health care today.
• 1:48
  - And, you know, we're watching very closely, especially
• 1:51
  - some of how... Some of the larger systems
• 1:53
  - are thinking about restructuring and what they're doing
• 1:55
  - on the partnership side, how they're,
• 1:58
  - really reorganizing in preparation for the next few
• 2:00
  - years to put themselves in a more stable
• 2:02
  - situation. And the most recent example is CommonSpirit
• 2:05
  - Health. CommonSpirit is reshaping how it runs one
• 2:07
  - of the largest health systems in the country.
• 2:09
  - It's a Chicago based organization with five regions.
• 2:12
  - It's folding those five regions into three service
• 2:14
  - areas, the West, Central, and East starting in
• 2:17
  - January.
• 2:18
  - Thomas Barrett's CFO, Michael Browning, announced the change
• 2:21
  - on the system's 2026
• 2:23
  - earnings call on October 2, and this is
• 2:25
  - the second major restructuring that the system has
• 2:28
  - had in about two years. In 2024,
• 2:30
  - common spirit cut eight operating divisions down to
• 2:33
  - five regions.
• 2:34
  - Now it's making another consolidation,
• 2:36
  - and the goal, according to mister Browning is
• 2:39
  - to remove duplication on the management layers and,
• 2:42
  - some of the complicated legal structures in order
• 2:44
  - to really just simplify things and bring the
• 2:46
  - system into a more of an operating like
• 2:48
  - a system.
• 2:50
  - Each of the three new service areas have
• 2:52
  - presidents, which will sit on the system's enterprise
• 2:53
  - leadership cabinet.
• 2:55
  - The changes are also going beyond really the
• 2:57
  - geographic map as CommonSpirit is combining its acute
• 3:00
  - care entities into one entity per state, and
• 3:03
  - it has also brought all 27 of its
• 3:05
  - critical access hospitals under a single rural operating
• 3:08
  - model in the Eastern service area.
• 3:11
  - The financials also show why, the system is
• 3:13
  - pushing so hard for some of these changes.
• 3:16
  - Excluding some of the special charges, common spirit
• 3:18
  - loss around 430,000,000
• 3:20
  - from operations in the fiscal year 2026,
• 3:22
  - with a negative 1% margin. And that's an
• 3:25
  - improvement from,
• 3:27
  - a larger loss the year before around $687,000,000,
• 3:30
  - but the system is still in the red
• 3:31
  - and and looking very much to,
• 3:34
  - be brought out of that.
• 3:35
  - Revenue grew in the last year to 8.5%
• 3:38
  - to around 42,400,000,000,
• 3:41
  - but expenses were also up. The system reported
• 3:44
  - around $42,900,000,000
• 3:46
  - in expenses,
• 3:47
  - over 7% increase from the previous year. And
• 3:50
  - the fastest growing cost was purchased services,
• 3:53
  - which were up around 12%.
• 3:56
  - Another change to note,
• 3:57
  - is
• 3:58
  - common spirits
• 4:00
  - operating loss reached about 3,200,000,000,
• 4:02
  - which is driven by, $2,100,000,000
• 4:04
  - on onetime charges.
• 4:07
  - In in most of that was from exiting
• 4:10
  - Conifer Health Solutions.
• 4:12
  - The system sold its stake in the revenue
• 4:13
  - cycle company and is end service contract on
• 4:16
  - December 31.
• 4:18
  - Other charges include,
• 4:20
  - some additional things from the system's brand and
• 4:23
  - and restructuring and consulting, etcetera.
• 4:26
  - Then the cost targets ahead are aggressive. So
• 4:28
  - common spirit wants to bring down a central
• 4:30
  - overhead from around 15.8%
• 4:32
  - of operating revenue from this fiscal year to
• 4:35
  - 14.5%
• 4:36
  - next year. And a review of the management's
• 4:39
  - bands of control has already produced more than
• 4:42
  - a $103,000,000
• 4:43
  - in run rate savings. So they're starting to
• 4:46
  - make those changes and really looking at other
• 4:48
  - ways they can
• 4:49
  - streamline and and really bring the health system
• 4:52
  - into a place where,
• 4:54
  - it's more
• 4:55
  - financially stable as you look into the future.
• 4:57
  - A lot of uncertainties ahead, a lot of
• 4:59
  - things that, you know, headwinds that health systems
• 5:02
  - are looking at across the board, whether it's
• 5:03
  - workforce, looking at Medicaid cuts, trying to figure
• 5:06
  - out what's gonna happen with three forty b.
• 5:08
  - And so being in a position where, you
• 5:10
  - know, the health system has more of that
• 5:12
  - close structure in in the, a different,
• 5:16
  - leadership,
• 5:17
  - structure as it transitions will...
• 5:19
  - The the executive team hopes to make this
• 5:22
  - a little bit more stable for the future.
• 5:24
  - Thank you. I was watching the common spirit
• 5:26
  - loss, and I saw the big number report
• 5:28
  - of 3,000,000,000.
• 5:30
  - It's helpful to see that a lot of
• 5:32
  - that is special charges
• 5:33
  - in the
• 5:34
  - quarter to quarter comparative operating losses were actually
• 5:37
  - better
• 5:38
  - than I think a year before. So that,
• 5:40
  - I think, is good news, obviously,
• 5:42
  - But but fascinating to watch, when you look
• 5:44
  - at that first number, 3,000,000,000 plus,
• 5:46
  - I didn't realize that 2.2 of that was
• 5:48
  - the termination of the conifer arrangement,
• 5:51
  - or or the sale of that, whatever it
• 5:53
  - was with that. And so the real operating
• 5:55
  - losses declined, got better versus worse. Thank you
• 5:59
  - so much for helping me better understand that.
• 6:01
  - That... That's that's really helpful. Thank you.
• 6:04
  - Laura, talk about what else are you watching
• 6:06
  - currently? What else is top of mind?
• 6:08
  - Absolutely. And so I I think zooming out
• 6:11
  - a bit in the bigger picture philosophy that
• 6:13
  - we're hearing from health system executive leaders. I...
• 6:16
  - I've been interviewing many of the CEOs, COOs,
• 6:18
  - and CFOs ahead of our CEO and CFO
• 6:21
  - roundtable in November second through fifth, in Chicago
• 6:25
  - to talk about
• 6:26
  - how they're really thinking about the future, what
• 6:28
  - some of their strategies are, and in some
• 6:30
  - of the different ways that they're trying to
• 6:32
  - build and grow.
• 6:34
  - And it's been fascinating because for years, the
• 6:37
  - goal for many hospitals was to be the
• 6:38
  - one stop shop for care. They wanted to
• 6:40
  - own every piece of that care journey.
• 6:43
  - Hospitals, physician practices, imaging centers, labs, surgery centers,
• 6:46
  - and more. The thinking was that the ownership
• 6:48
  - was that surest path to quality and control,
• 6:51
  - but
• 6:52
  - I think we're seeing some of that thinking
• 6:54
  - change in in some areas.
• 6:57
  - Many of the executives I talked to are
• 6:59
  - asking a different question than they were before.
• 7:01
  - You know, instead of asking, can we own
• 7:03
  - this all ourselves? They're really thinking through
• 7:06
  - who is the best in the world at
• 7:07
  - this and how do we build a deep
• 7:09
  - relationship with them. And so I think it's
• 7:12
  - more of that partnership model, more of the
• 7:14
  - way,
• 7:15
  - that they're kind of looking out across the
• 7:17
  - landscape and saying, what are we the best
• 7:19
  - at? What should we keep doing in house?
• 7:21
  - And then how do we find those people
• 7:22
  - within the community or
• 7:24
  - national partnerships or or whatever that is that
• 7:26
  - looks like that can provide some of these
• 7:28
  - services,
• 7:30
  - in a a way that's the best for
• 7:32
  - our patients, and how do we bring them
• 7:34
  - in, thoughtfully and smart... Smartly. So it's not
• 7:36
  - really about cutting corners or cutting costs or
• 7:39
  - any of those kinds of things, but really
• 7:41
  - that ownership, that cost, capital, time, leadership, attention
• 7:45
  - that they may not be able to deliver
• 7:47
  - the right kind of outcome. So often the
• 7:49
  - fastest way to serve patients is then to
• 7:51
  - work with those organizations that have spent years
• 7:54
  - mastering,
• 7:55
  - a service line or a particular,
• 7:58
  - a particular,
• 8:00
  - kind of service that the system hasn't done
• 8:02
  - yet. So one of those folks was doctor
• 8:05
  - Benjamin Schwartz, president of the academic delivery at,
• 8:08
  - Banner Health in Phoenix, and he said the
• 8:10
  - organization has moved completely past that instinct to
• 8:13
  - own everything and lead, discoveries all in house.
• 8:16
  - The health system is now finding its best
• 8:18
  - partners to build strategic relationships with them. And
• 8:21
  - they pointed to,
• 8:23
  - Banner's has a decade long partnership with the
• 8:25
  - University of Arizona, which has generated an estimated
• 8:28
  - $59,000,000,000
• 8:29
  - economic impact for the state as they've been
• 8:31
  - working together on developments,
• 8:34
  - a variety of things, both on the clinical
• 8:36
  - side as well as, you know, how are
• 8:38
  - they reorganizing,
• 8:39
  - things
• 8:40
  - from operations and technology,
• 8:42
  - everything else. And so really bringing those expertise
• 8:45
  - together, has been very beneficial.
• 8:48
  - And then we also talked to the chief
• 8:50
  - development officer at LifePoint Health, Marty Mann, and
• 8:53
  - he said that,
• 8:55
  - the shift,
• 8:56
  - takes honesty about where the system creates unique
• 8:59
  - value and where it doesn't. So scale helps,
• 9:02
  - but it doesn't really make the system an
• 9:04
  - expert at everything. So these partnership models,
• 9:07
  - have really made a big difference,
• 9:09
  - and it can also work in reverse. LifePoint,
• 9:12
  - now owns... Offers its own acute care rehab,
• 9:15
  - behavioral health expertise, and can share with other
• 9:17
  - health systems and hospitals as a partner. So
• 9:20
  - it's looking out there and and finding others
• 9:22
  - who,
• 9:23
  - really could benefit from what they've spent years
• 9:25
  - developing and and, bring that in a smart
• 9:28
  - way.
• 9:29
  - And then finally, even for independent hospitals, they're
• 9:31
  - thinking along these same lines. Christine Shuster, who's
• 9:34
  - the CEO of Emerson Health in Massachusetts,
• 9:37
  - said the partnership has helped, the health system
• 9:40
  - expand its access, improve quality, and keep care
• 9:43
  - closer to home while protecting its finances.
• 9:46
  - In in her view,
• 9:47
  - staying independent didn't necessarily mean they had to
• 9:50
  - do everything themselves, which, you know, some might
• 9:53
  - think they have to be completely independent, but
• 9:55
  - it actually means,
• 9:57
  - being able to choose the right partners and
• 9:58
  - find the right people,
• 10:00
  - to work with. And so I think that
• 10:02
  - seed shift is something that's not completely new,
• 10:04
  - but having so many different organizations now, really
• 10:07
  - identifying,
• 10:08
  - opportunities and partnerships with each other,
• 10:11
  - with outside organizations
• 10:13
  - and more has really been interesting to see,
• 10:15
  - and I anticipate we'll see a lot more
• 10:17
  - of it too.
• 10:19
  - It it is fascinating to see how that
• 10:21
  - goes back and forth
• 10:22
  - between systems wanna do everything themselves,
• 10:24
  - systems wanna outsource a lot, and the constant
• 10:27
  - back and forth reminds you sort of the
• 10:29
  - best in class
• 10:31
  - versus using a platform first approach for a
• 10:33
  - lot of stuff, and it's a constant seemingly
• 10:35
  - evolution and almost a back and forth too.
• 10:38
  - Reminds me to talk about common spirit doing
• 10:40
  - restructuring.
• 10:41
  - You know, it seems like big systems go
• 10:42
  - into lots of different subdivisions, and they come
• 10:45
  - back to restructure again. And this seems like
• 10:47
  - a similar discussion where you start to, again,
• 10:49
  - outsource stuff that's on your core with things
• 10:51
  - that others can do better than you, you
• 10:52
  - know, versus that mentality of wanting to own
• 10:55
  - everything. And it seems to be a constant
• 10:57
  - shift back and forth, but I I appreciate
• 10:59
  - the concept that you've got, again, people looking
• 11:01
  - at these outsourced opportunities, joint venture opportunities, partnership
• 11:04
  - opportunities versus trying to do everything themselves. They
• 11:06
  - just can't afford it, and and they can't
• 11:07
  - be best in class on it. Fasting to
• 11:10
  - watch. Laura, I wanna thank you as always
• 11:12
  - for joining us on the Becker's Healthcare podcast.
• 11:14
  - Cannot wait to see you at the CEO
• 11:15
  - CFO roundtable.
• 11:17
  - And any quick comments on the amazing resilience
• 11:20
  - of your Chicago white sox?
• 11:22
  - No. It's been an incredible run. So much
• 11:24
  - fun to watch and really, really a fun
• 11:27
  - fan base. I think anybody,
• 11:28
  - you know, who's on social media has been
• 11:30
  - able to see they've allowed these players who...
• 11:32
  - I would challenge you, anyone outside of Chicago
• 11:35
  - to name a single white sox player at
• 11:37
  - the beginning of the season. I don't think
• 11:38
  - they could, and I think many people still
• 11:41
  - may not be able to name a single
• 11:42
  - Chicago white sox player. But,
• 11:45
  - in seeing kind of they've allowed these players
• 11:47
  - to be themselves, have a lot of fun.
• 11:50
  - And on social media, they are putting out
• 11:52
  - videos that are unpolished, but a ton of
• 11:55
  - fun. You can tell they enjoy being together
• 11:57
  - and that they're playing for each other. They're
• 11:59
  - winning together. They have lost a lot together
• 12:01
  - too to your point. In previous years, many
• 12:03
  - of them lost a 100 games for the
• 12:05
  - last one, two, three years.
• 12:07
  - And so to to come together and have
• 12:09
  - those right, people in place, I I think
• 12:11
  - has been incredible. And looking at their, manager,
• 12:14
  - Will Venable too, it struck me that after
• 12:16
  - their first playoff,
• 12:18
  - clinch victory,
• 12:19
  - instead of giving the speech himself, he handed
• 12:21
  - the the microphone over to a player who's
• 12:23
  - been injured all season in Mike Vassell, but
• 12:25
  - it was really the the cultural heart, of
• 12:28
  - keeping these players excited, motivated all throughout the
• 12:31
  - seasons. And even when they've been down, you
• 12:32
  - know, to bring some of that magic in
• 12:34
  - and to have him give a quick speech,
• 12:37
  - somebody who could have easily been counted out
• 12:39
  - since he's been injured nearly all season.
• 12:41
  - But instead, he'd stuck with the team and
• 12:43
  - has really contributed in a strong way. And
• 12:45
  - so I do think it's fascinating to see
• 12:47
  - this group of,
• 12:48
  - White Sox players who are all talented as
• 12:51
  - they've come together, and we'll be excited to
• 12:53
  - see how far they go.
• 12:55
  - Right. It is great to see an underdog
• 12:56
  - do well too. I mean, it is no
• 12:58
  - fun watching the Dodgers with their $500,000,000
• 13:00
  - payroll win everything.
• 13:02
  - Most of us, unless you're New York Yankee
• 13:05
  - fan, don't wanna see the Yankees win. So
• 13:06
  - it sure is exciting to see one of
• 13:08
  - the underduct teams with the lower payroll compete
• 13:10
  - well. It... It's really been fun to watch.
• 13:12
  - And, you know, you watch the TikToks and
• 13:13
  - these guys dancing in the dugout, and it
• 13:16
  - is fun to watch. I mean, I I
• 13:17
  - challenge our health system leadership
• 13:20
  - to dance in the dugout like the White
• 13:21
  - Sox do, and then we would have some
• 13:22
  - real excitement in health care as well. No.
• 13:24
  - It's it's really something. It really is fun
• 13:26
  - to watch.
• 13:27
  - Absolutely. Absolutely. Well, thank you so much, Scott.
• 13:29
  - I really appreciate it and, you know, hopefully...
• 13:31
  - Hoping to challenge some of the Spice Fox
• 13:33
  - energy as we finish out the year here.
• 13:35
  - God bless you. Thank you so much. Gloria
• 13:37
  - Deirdre, one of the best in the business.
• 13:38
  - Thank you so much.