Category Archives: Board

Failure of Fiduciary Duty?

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Sen. Bernie Sanders still may eke out a win in Iowa, and is the consensus front-runner in New Hampshire.

  • But most venture capitalists investing in America’s health care industry — the primary target of Bernie’s ire — have shoved their heads so deep in the sand that they’ve found water, Axios’ Dan Primack writes.

Why it matters: At some point, it could become a failure of fiduciary duty.

Health care accounts for over 20% of all U.S. venture activity.

  • A majority of that is in biotech/pharma, which last year saw 866 deals raise around $16.6 billion.
  • Investors view many of those deals as binary: Either the drug doesn’t work, resulting in a total write-off, or it does work and the financial sky’s the limit. Strike out or grand slam.
  • Sanders pledges to limit the upside, either by limiting drug prices under the current system or (if he gets Medicare for All) by establishing a single, centralized buyer.

Few health care VCs Dan spoke with are working on a Plan B in the event of their risk/reward models being made obsolete. Three main reasons:

  1. They don’t believe Sanders will win.
  2. Even if he does win, they don’t believe Sanders will get Medicare for All.
  3. If Sanders wins and implements his full plan, then it’s such a revolutionary shift that there’s not much health care VCs can do to counter it.

The bottom line: For now, health care venture’s strategy is see no Bernie, hear no Bernie. We’ll see how long that’s viable.

 

 

 

The top 10 questions from the 2020 J.P. Morgan Healthcare Conference that every CEO must answer

Posted on by • Posted in Advanced Planning, Affordability, Asset-Light Strategy, Board, Budget, Centers of Excellence, Collaborative Culture, Competition, Consumerism, Cost Management, Culture, Data, Data Analytics, Data Management, Digital Assets, Digital Health, Fragmentation, Health System, Holding Company, Hospital, Hospital Industry, Leadership, Market Consolidation, Market Power, Market Share, Operating Company, Performance Improvement, Performance Metrics, Physician, Physician Burnout, Physician Workforce, Social Determinants of Health, Strategic Leadership, Strategy, Trust, Virtual Hospital • Leave a comment

https://www.beckershospitalreview.com/strategy/the-top-10-questions-from-the-2020-j-p-morgan-healthcare-conference-that-every-ceo-must-answer.html

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As we enter a new decade, everyone is searching for something to truly change the game in healthcare over the next 10 years. To find that answer, an estimated 50,000 people headed to San Francisco this week for the prestigious J.P. Morgan Healthcare Conference. Every one of them is placing big bets on who will win and lose in the future of healthcare. The shortcut to figuring this out is actually a question — or 10 questions to be more precise. And what matters most is whether or not the right people are asking and answering those questions.  

While the prophets are ever present and ever ready to pitch their promises in every corner of the city, the pragmatists head up to the 32nd floor of the Westin St. Francis Hotel to hear from the CEOs and CFOs of close to 30 of the largest and most prestigious providers of care in the country. Why? Remember, this is an investor conference and if you want to understand any market, the first rule is to follow the money. And if you want to understand the future business model of healthcare, you better listen closely to the health providers in that room and take notes. 

What providers are saying matters to everyone in healthcare

Healthcare is the largest industry in our economy with over $4 trillion spent per year. Healthcare delivery systems and healthcare providers account for over $2 trillion of that spend, so that feels like a pretty good place to start, right? For that reason alone, it’s critical to listen closely to the executives in those organizations, as their decisions will affect the quality, access and cost of care more than any other stakeholder in healthcare.

Some will say that what they saw this year from healthcare providers was more of the same, but I encourage you to ignore that cynicism and look more closely. As the futurist William Gibson once said, “The future is already here — it’s just not evenly distributed.” The potential for any health system to drive major change is certainly there and the examples are everywhere. The biggest blocker is whether they are asking the right questions. One question can change everything. Here’s proof. 

The stunning power of and need for good questions 

Last year I titled my summary “The #1 Takeaway from the 2019 JP Morgan Conference – It’s the Platform, Stupid.” The overwhelming response to the article was pretty surprising to me  — it really resonated with leaders. One example was Jeff Bolton, the chief administrative officer of Mayo Clinic, who told me that the article had inspired their team to ask a single question, “Does Mayo need to be a platform?” They answered the question “yes” and then took aggressive action to activate a strategy around it. Keep reading to learn about what they set in motion. 

Soon after, I had a discussion with John Starcher, CEO of Cincinnati-based Bon Secours Mercy Health, one of the largest health systems in the country, who shared with me that he is taking his team off site for a few days to think about their future. It occurred to me that the most helpful thing for his team wouldn’t be a laundry list of ideas from the other 30 healthcare delivery systems that presented, but rather the questions that they asked at the board and executive level that drove their strategy. Any of those questions would have the potential to change the game for John’s team or any executive team. After all, if you’re going to change anything, the first thing you need to do is change is your mind. 

The wisdom of the crowd 

So, I set out to figure this out: If you were having a leadership or board retreat, what are the 10 questions you should be asking and answering that may change the future of your organization over the next 10 years? I didn’t have the answers, so I decided to tap into the wisdom of the crowd, listening to all 30 of the nonprofit provider presentations, spending additional time with a number of the presenters and reaching out to dozens of experts in the market to help define and refine a set of 10 questions that could spark the conversation that fires up an executive team to develop to the right strategy for their organization. 

A special thank you to a number of the most respected leaders in healthcare who took their time to contribute to and help think through these questions: 

  • Mike Allen, CFO of OSF Healthcare (Peoria, Ill.)
  • Jeff Bolton, CAO of Mayo Clinic (Rochester, Minn.)
  • Robin Damschroder, CFO of Henry Ford Health System (Detroit)
  • JP Gallagher, CEO of NorthShore University HealthSystem (Evanston, Ill.)
  • Kris Zimmer, CFO of SSM Health (St. Louis) 
  • Wright Lassiter, CEO of Henry Ford Health System (Detroit)
  • Mary Lou Mastro, CEO of Edwards-Elmhurst Health (Warrenville, Ill.)
  • Dominic Nakis, CFO of Advocate Aurora Health (Milwaukee and Downers Grove, Ill.) 
  • Dr. Janice Nevin, CEO of ChristianaCare (Newark, Del.)
  • Randy Oostra, CEO or ProMedica (Toledo, Ohio)
  • John Orsini, CFO of Northwestern Medicine (Chicago)
  • Lou Shapiro, CEO of Hospital for Special Surgery (New York City) 
  • John Starcher, President & CEO, Bon Secours Mercy Health (Cincinnati)
  • Vinny Tammaro, CFO, Yale New Haven Health (New Haven, Conn.)
  • Bert Zimmerli, CFO of Intermountain Healthcare (Salt Lake City)

Here are the top 10 questions from the 2020 J.P. Morgan Healthcare Conference

Based on the wisdom of the crowd including the 30 nonprofit provider presentations at the 2020 JP Morgan Healthcare Conference, here are the Top 10 Questions that every CEO needs to answer that may make or break their next 10 years.

1. Business model: Will we think differently and truly leverage our “platform?” As referenced earlier in this article, this was the major theme from last year — health systems leveraging their current assets to build high-value offerings and new revenue streams on top of the infrastructure they have in place. Providers are pivoting from the traditional strategy of buying and building hospitals and simply providing care toward a new and more dynamic strategy that focuses on leveraging the platform they have in place to create more value and growth. Mayo Clinic is an organization that all health systems follow closely. Mayo adopted the platform model around their ‘digital assets’ into what they refer to as Mayo Clinic Platform, which initially targets three game-changing initiatives: a Home Hospital to deliver more health in the home even for high acuity patients, a Clinical Data Analytics Platform for research and development and an Advanced Diagnostics Platform focused on predictive analytics, using algorithms to capture subtle signals before a disease even develops. Children’s Hospital of Philadelphia, one of the top pediatric hospitals in the world, is leveraging their platform to drive international volume, where revenue is 3.5x more per patient. They are also making investments in cell and gene therapy, where their spinoff of Spark Therapeutics returned hundreds of millions of dollars back to their organization. Both organizations were clear that any returns that they generate will be re-invested back into raising the bar on both access to care and quality of care.

 

2. Market share: Are we leveraging a “share of cup” strategy? Starbucks had dominant share in the market against Caribou Coffee, Peet’s Coffee and Dunkin’ Donuts. Instead of solely focusing on how to grab a little more market share, they reframed the definition of their market. They called it “share of cup” meaning that anywhere and any time a cup of coffee was consumed, they wanted it to be Starbucks. In that definition of the market, they had very little share, but enormous growth potential. Hospital for Special Surgery in New York is the largest and highest volume orthopedic shop in the world. Their belief is that wherever and whenever a musculoskeletal issue occurs, they should be part of that conversation. This thinking has led them to build a robust referral network, which 33 percent of the time leads to no surgical treatment. So instead of fighting for share of market in New York, they have a very small share and a very big opportunity in a “share of cup” approach. NorthShore University Health System in Illinois has taken a similar approach on a regional level, converting one of their full-service hospitals into the first orthopedic and spine institute in the state. The results have exceeded expectations on every measure and they already have to increase their capacity due to even higher demand than they originally modeled. 

 

3. Structure: Are we a holding company or an operating company? There has been a tremendous amount of consolidation over the last few years, but questions remain over the merits of those moves. The reality is that many of these organizations haven’t made the tough decisions and are essentially operating as a holding company. They are not getting any strategic or operational leverage. You can place all health systems on a continuum along these two endpoints — being a holding vs. an operating company — but the most critical step is to have an open conversation about where you’re at today, where you intend to be in the future, when you’re going to get there and how you’re going to make it happen. Bon Secours Mercy Health’s CEO John Starcher shared, “It makes sense to merge, but only if you’re willing to make the tough decisions.” His team hit the mark on every measure of their integration following their merger. They then leveraged that same competency to acquire the largest private provider of care in Ireland, as well as seven hospitals in South Carolina and Virginia. Northwestern Medicine has leveraged a similar approach to transform from a $1 billion hospital into a $5 billion health system in a handful of years. Both of these organizations prioritized and made tough decisions quickly and each has created an organizational competency in executing efficiently and effectively on mergers and acquisitions. 

 

4. Culture: Do we have employees or a team? Every organization states that their employees are their most important asset, but few have truly engaged them as a team. Hospitals and healthcare delivery systems can become extraordinarily political, and it’s easy to see why. These are incredibly complex businesses with tens of thousands of employees in hundreds of locations and thousands of departments. Getting that type of organization to move in the same direction is incredibly challenging in any industry. At the same time, the upside of breaking through is perhaps the most important test of any leadership team. JP Gallagher, CEO of North Shore University Health System, shared his perspective that, “Healthcare is a team sport.” The tough question is whether or not your employees are truly working as a team. Christiana Care provides care in four states — Delaware, Maryland, Pennsylvania and New Jersey. They have taken a unique approach that they frame as “for the love of health,” incorporating the essence of what they do in every communication both internally and externally, in their values and in their marketing. In a multi-state system, it is tricky to create a caring and collaborative culture, but it’s critical and they’ve nailed it. Their CEO shared that, “If you lead with love, excellence will follow.” That’s not only well said but spot-on. Creating a world-class team requires not only loving what you do, but the team you’re part of.

 

5. Physicians: Are our physicians optimistic or pessimistic? There’s a lot of concern about “physician burnout” with a reflex to blame it on EHRs, cutting off the needed conversation to dive deeper into where it really comes from and how best to address it. The challenge over the next decade is to create an optimistic, engaged and collaborative culture with physicians. In reading this, some will react with skepticism, which is exactly why leadership here is so important. One suggestion I was given was to make this question edgier and ask, “Are our physicians with us or not?” However the question is asked, the bottom line is that leadership needs to find a way to turn this into a dynamic, hyper-engaged model. A little while back I spent the day with the leadership team at Cleveland Clinic. At the end of the day, their CEO Dr. Tom Mihaljevic was asked what he would tell someone who was thinking of going to medical school. He said he would tell them that, “This is absolutely the best time to be a doctor.” His answer was based on the fact that there has never been a time when you could do more to help people. He wasn’t ignoring the challenges, he was simply reframing those issues as important problems that smart people need to help solve in the future. Those who adopt that type of optimism and truly engage and partner with their physicians will create a major competitive advantage over the next decade.

 

6. Customer: Do we treat sick patients or care for consumers? Words matter here – patients vs. consumers. Most hospitals are in a B2B, not B2C, mindset. Patients get sick, they try to access care, they check into an ER, they get admitted, they are treated, they get discharged. People get confused, anxious and concerned, then they seek not only care, but simplicity, compassion and comfort. With half of America coming through their stores every week, Walmart is already the largest provider organization that no one thinks of as they provide ‘consumer’ care, not ‘patient’ care. But they are starting to broaden their lens, and health systems will need to make moves as well. Competing with Walmart, CVS and other consumer-centric models will require a different mindset. I think Dr. Janice Nevin, the CEO ChristianaCare, captured this really well when she said, “Our mindset is that our role is to ensure everything that can be digital will be digital. Everything than can be done in the home will be done in the home.” Henry Ford Health System CEO Wright Lassiter commented, “Trust is the fundamental currency in healthcare.” Building that trust will require a digital experience in the future that is just as compassionate and caring as what health systems strive to deliver in person in the past. 

 

7. Data: Will we make data liquid? The most undervalued and misunderstood asset of health systems may be their data. While some at the conference refer to this as having the economic equivalent of being the “oil of healthcare,” the real and more practical question is whether or not your organization will make data liquid, available and accessible to the right players on your team at the right time. Jeff Bolton from Mayo commented that, “The current model is broken. Data and tech can eliminate fragmentation.” In a recent Strata survey, we asked leaders in health systems whether they had access to the information they needed to do their job, and 90 percent said no. For many health systems, data is a science project, hidden behind the scenes primarily used for research and impossible to access for most stakeholders. The call to action is activating that data to improve clinical outcomes, operations and/or financial performance. 

 

8. Cost: Are we serious about reducing the cost of care and delivering value? Affordability is a hot topic, and for good reason, as high deductible plans, price transparency and other factors have accelerated its urgency. As Intermountain Healthcare CEO Dr. Marc Harrison shared, “We have an absolute responsibility to make healthcare affordable.” While the consumer side will be a moving target for some time, the No. 1 challenge for hospitals right now is to lower their cost structure so they can compete more effectively in the future. Advocate Aurora Health, Baylor Scott & White Health, CommonSpirit Health and many others are targeting cost reductions of over $1 billion over the next few years. As most hospitals are now in a continuous process to reduce cost in order to compete more effectively in the future, organizations like Yale New Haven Health in Connecticut have implemented advanced cost accounting solutions to better understand both cost and margins. Yale is using this data to understand variation, supporting an initiative that drove over $150 million in savings. Additionally, they have combined cost data with clinical feeds from their EHR to understand the cost of harm events, which turn out to be 5x more expensive. As more providers take on risk, having a “source of truth” on the cost of care will be essential. Advocate Aurora Health CFO Dominic Nakis shared that, “We believe the market will continue to move to taking on risk.” Many of the presenting organizations shared that same perspective, but they won’t be able to manage that risk unless they understand the cost of care for every patient at every point of care across the continuum every day.

 

9. Capital: Do we have an “asset-light” strategy? Traditional strategy for health systems was defined primarily by what they built or bought. Many hospitals still maintain an “if you build it, they will come” strategy at the board level. Yet, Uber has become the biggest transportation company in the world without owning a single car and Airbnb has become the biggest hospitality company in the world without owning a single room. These models are important to reflect upon as healthcare delivery systems assess their capital investment strategy. Intermountain Healthcare CFO Bert Zimmerli refers to their overall thought process as an “asset-light expansion strategy.” In 2019, they opened a virtual hospital and they have now delivered over 700,000 virtual interactions. The number of virtual visits at Kaiser Permanente now exceeds the number of in-person visits at their facilities. With that said, there will be a balance. I really like how Robin Damschroder the CFO of Henry Ford Health System framed it: “We believe healthcare will be more like the airline and banking industry, both of which are fully digitally enabled but have a balance of ‘bricks and clicks’ with defined roles where you can seamlessly move between the two. Clearly, we have a lot of ‘bricks’ so building out the platform that integrates ‘clicks’ is essential.” 

 

10. Performance: Do we want our team to build a budget or improve performance? The most significant barrier to driving change that many organizations have baked into their operating model is their budget process. The typical hospital spends close to five months creating a budget that is typically more than $100 million off the mark. After it’s presented to the board, it is typically thrown out within 90 days. It creates a culture of politics, entitlement and inertia. According to a Strata survey of 200 organizations, close to 40 percent are now ditching the traditional budget process in favor of a more dynamic approach, often referred to as Advanced Planning. OSF HealthCare leverages a rolling approach, radically simplifying and streamlining the planning process while holding their team accountable for driving improvement vs. hitting a budget. When it comes to driving performance, SSM Health CEO Laura Kaiser captured the underlying mindset that’s needed: “We have a strong bias toward purposeful action.” Well said, and it certainly applies to all of the questions here among the top 10.

 

5 additional questions to consider

As you would imagine or might suggest, the questions above can and in some cases should be replaced with others. Additional critical questions to answer that came from the group included the following:

  1. Competition: Who else will we compete with in the future and are we positioned to win?
  2. Digital health: Are we going to be a “digital health” company, providing tech-enabled services?
  3. Affordability: How are we making care more affordable and easier to understand and access?
  4. Social determinants: Is this a mission, marketing or operations strategy?
  5. Leadership: Have we made the tough decisions we need to make, and will we in the future?

 

Start asking questions

The point here isn’t to get locked into a single list of questions, but rather to force your team to ask and answer the most important and challenging ones that will take you from where you are today to where you want to be in the future. After reviewing these questions with your team, the one additional question you need to consider is one of competency: Do you have the ability and bandwidth to execute on what you’ve targeted? In the end, that’s what matters most. While there are many interesting opportunities, too many teams end up chasing too much and delivering too little.

The next 10 years can and should be the best 10 years for every health system and every healthcare provider, but making it happen will require some really tough questions. “The current path we’re on will leave us with a healthcare delivery model that is completely unsustainable,” stated Randy Osstra, CEO of ProMedica Health System. “We need to take meaningful action toward creating a new model of health and well-being — one that supports healthy aging, addresses social determinants of health, encourages appropriate care in the lowest cost setting, and creates funding and incentives to force a truly integrated approach.”

Strong leaders are needed now more than ever. The rest of healthcare is watching, not just professionally but personally. We are all grateful to you for the extraordinary and often heroic care that you deliver without hesitation to our family and friends every day both in our communities and across our country. But now we all need you to not only deliver care, but a new and better version of healthcare. So, ask and answer these and other tough questions. We know you will do everything that you can to help make healthcare healthier for all of us over the next 10 years.

 

 

 

U of Iowa Hospitals & Clinics CEO: ‘Everything in healthcare doesn’t need to be done by a hospital CEO’

Posted on by • Posted in Board, CEO, Connected Care, Health System, Hospital, Hospital Industry, Maternal Care, Mental Health, Retail Healthcare, Strategic Leadership, Strategy, Team-Based Care, Urgent Care, Womens Health • Leave a comment

https://www.beckershospitalreview.com/hospital-management-administration/u-of-iowa-hospitals-clinics-ceo-everything-in-healthcare-doesn-t-need-to-be-done-by-a-hospital-ceo.html

Despite branching out through nearly 60 outpatient clinics, the University of Iowa Hospitals & Clinics in Iowa City — which includes the only comprehensive university medical center in the state — by and large remains a healthcare destination.

As such, demand for inpatient services hasn’t waned, but has kept on par with the surge in outpatient demand that the entire industry is seeing, Suresh Gunasekaran, the CEO of University of Iowa Hospitals & Clinics and associate vice president for the University of Iowa Health Care, told Becker’s Hospital Review.

That’s not to say strategic threats don’t exist. The biggest ones threatening the University of Iowa Hospitals & Clinics are retail medicine providers that cherry-pick services but aren’t able to provide coordinated care, Mr. Gunasekaran said.

“It’s great that today there’s more convenient care being provided by retail providers. The biggest threat, though, is if healthcare consumers start believing that getting disconnected care is worth it,” he said. “We’re in the business of connected care.”

Tackling this challenge will require input from all parties, not just the hospital CEO, he said. Here, Mr. Gunasekaran expands on how University of Iowa Hospitals & Clinics is facing the threat of uncoordinated retail medicine, and answers questions on board oversight and the changing role of the hospital CEO.

 

Question: What do you consider your biggest strategic threat?

Suresh Gunasekaran: Major threats are those healthcare services that don’t believe in team-based care, that focus on cherry-picking a corridor of healthcare without thinking about the health of the whole person.

There’s unmet demand in communities for [accessible healthcare]. If Walmart is willing to offer a clinic, they may be the only clinic for 20 miles. What I’d hope is these kinds of Walmart and CVS providers look at how they partner with players like us. In that sense, we don’t view retail medicine as a threat as much as an opportunity. But when they’re not collaborative, that’s a threat to us. It’s only good if the care is coordinated.

Q: U of Iowa Hospitals & Clinics has its own retail clinics. How do they play into the larger consumerism trend healthcare is seeing?

SG: We’re in our fifth year of offering retail urgent care clinics. We offer a setting that’s lower cost and very competitive with other retail clinics. We’ve seen a lot of uptake and growth within this model, but it’s our ability to say: Hey, urgent care and retail healthcare absolutely have a place, but they need to be connected to our lab in radiology and to our specialists.

The next frontier for us is how to partner with other retail clinics. It’s easy to partner with yourself, but it’s more challenging to make it work with others.

Q: U of Iowa Hospitals & Clinics is a state agency, so your board is really the board of regents of the state of Iowa. Have you faced increased pressure from the board to take up any initiatives?

SG: The board of regents has asked we keep a couple issues front and center. There continues to be inadequate maternal healthcare resources for the young moms of Iowa, with more and more hospitals unable to recruit staff to deliver babies. Data shows maternal death is increasing in Iowa, which is a very, very troubling statistic. So we are bringing the full strength of the University of Iowa together on this. We just got a huge research grant from the federal government to create better models for maternal health across the state.

Mental health is another area, and a huge area of priority for our governor. We are looking at expanding our residency program to rural areas that are underserved for mental health. Other things we’re looking at is the workforce shortage and social determinants of health.

Q: How do you think the CEO role will evolve over the next decade? Will we see more hospital CEOs take stances on bigger public issues?

SG: Hospitals within the healthcare industry have [historically] been very insular. You almost could run your business without worrying about the rest of the system. Now with healthcare reform and greater governmental and employer scrutiny of healthcare costs, folks are asking hospital systems to answer for what’s going on in a broader industry. And of course, CEOs have to embrace that journey.

Are we going to get involved in those multiple different steps? Not just access to care, not just the pricing of care, not just care coordination, not just how to get the community to get engaged in their own health. The CEO of the future has to have a stance on all of these, because it’s impossible to go where we need to go without being involved.

Perhaps the CEO is not that important. At the end of the day when you look at these issues, it’s important that we’re at the table, but the community needs to come first. It’s an opportunity for employers to take the lead. It’s an opportunity for the government to take a lead. Everything in healthcare doesn’t need to be done by a hospital CEO, and in the future, probably isn’t best done by a hospital CEO. We need to be one part of the team.

Q: You’ve been leading the University of Iowa Hospitals & Clinics for a little over a year now. Is there any piece of advice you would go back and give yourself on day one?

SG: Never lose the voice of the patient. I got that at the end of my first year, and I think that beginning with the voice of the patient would’ve been very, very powerful. It’s somewhat impractical that you show up to a new job, and of course, you’re going to meet the people within your organization first. But never forgetting the voice of the patient and being able to hear who you are in their eyes and in their words would have been very powerful [on day one]. But I’m making up for lost time.

 

Former UMMS board member indicted in fraud scheme

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https://www.beckershospitalreview.com/legal-regulatory-issues/former-umms-board-member-indicted-on-11-counts-of-fraud-tax-evasion.html

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Former Baltimore Mayor Catherine Pugh, who served on the board of University of Maryland Medical System for 18 years, was indicted on charges of wire fraud and tax evasion related to a children’s book scandal that involved the Baltimore-based health system and Oakland, Calif.-based Kaiser Permanente, a local CBS affiliate reports.

The indictment was unsealed Nov. 20, ahead of Ms. Pugh’s scheduled hearing on Nov. 21. If convicted, Ms. Pugh could face up to 100 years in prison and be required to forfeit her home and repay more than $769,000 allegedly obtained through the scheme.

The indictment alleges Ms. Pugh conspired with city employees to defraud buyers of her Healthy Holly children’s books, according to CBS, which published the indictment in full. It alleges Ms. Pugh arranged five $100,000 deals with UMMS to donate a total of 100,000 books to Baltimore public schools. The books were allegedly never delivered, and instead rerouted to alternate storage facilities around the city, distributed at campaign events and double-sold to other customers.

The indictment also alleges Ms. Pugh used Healthy Holly profits to fund straw donations to her mayoral campaign and to buy a house in Baltimore. She also faces allegations of tax evasion related to Healthy Holly sales, according to the report.

CBS notes Kaiser Permanente also disclosed buying $114,000 of the books at a time that overlaps with winning a $48 million contract from the city, according to the report.

The two city officials connected to the scheme pleaded guilty to conspiracy and tax evasion, according to the report.

Read the full story and access the full indictment here.

 

Bruising labor battles put Kaiser Permanente’s reputation on the line

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Bruising labor battles put Kaiser Permanente’s reputation on the line

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The ongoing labor battles have undermined the health giant’s once-golden reputation as a model of cost-effective care that caters to satisfied patients — which it calls “members” — and is exposing it to new scrutiny from politicians and health policy analysts.

Kaiser Permanente, which just narrowly averted one massive strike, is facing another one Monday.

The ongoing labor battles have undermined the health giant’s once-golden reputation as a model of cost-effective care that caters to satisfied patients — which it calls “members” — and is exposing it to new scrutiny from politicians and health policy analysts.

As the labor disputes have played out loudly, ricocheting off the bargaining table and into the public realm, some critics believe that the nonprofit health system is becoming more like its for-profit counterparts and is no longer living up to its foundational ideals.

Compensation for CEO Bernard Tyson topped $16 million in 2017, making him the highest-paid nonprofit health system executive in the nation. The organization also is building a $900 million flagship headquarters in Oakland. And it bid up to $295 million to become the Golden State Warriors’ official health care provider, the San Francisco Chronicle reported. The deal gave the health system naming rights for the shopping and restaurant complex surrounding the team’s new arena in San Francisco, which it has dubbed “Thrive City.”

The organization reported $2.5 billion in net income in 2018 and its health plan sits on about $37.6 billion in reserves.

Against that backdrop of wealth, more than 80,000 employees were poised to strike last month over salaries, retirement benefits and concerns over outsourcing and subcontracting. Nearly 4,000 members of its mental health staff in California are threatening to walk out Monday over the long wait times their patients face for appointments.

“Kaiser’s primary mission, based on their nonprofit status, is to serve a charitable mission,” said Ge Bai, associate professor of accounting and health policy at Johns Hopkins University. “The question is, do they need such an excessive, fancy flagship space? Or should they save money to help the poor and increase employee salaries?”

Lawmakers in California, Kaiser Permanente’s home state, recently targeted it with a new financial transparency law aimed at determining why its premiums continue to increase.

There’s a growing suspicion “that these nonprofit hospitals are not here purely for charitable missions, but instead are working to expand market share,” Bai said.

The scrutiny marks a disorienting role-reversal for Kaiser, an integrated system that acts as both health insurer and medical provider, serving 12.3 million patients and operating 39 hospitals across eight states and the District of Columbia. The bulk of its presence is in California. (Kaiser Health News, which produces California Healthline, is not affiliated with Kaiser Permanente.)

Many health systems have tried to imitate its model for delivering affordable health care, which features teams of salaried doctors and health professionals who work together closely, and charges few if any extraneous patient fees. It emphasizes caring and community with slogans like “Health isn’t an industry. It’s a cause,” and “We’re all in this together. And together, we thrive.”

Praised by President Barack Obama for its efficiency and high-quality care, the health maintenance organization has tried to set itself apart from its profit-hungry, fee-for-service counterparts.

Now, its current practices — financial and medical — are getting a more critical look.

As a nonprofit, Kaiser doesn’t have to pay local property and sales taxes, state income taxes and federal corporate taxes, in exchange for providing “charity care and community benefits” — although the federal government doesn’t specify how much.

As a percentage of its total spending, Kaiser Permanente’s charity care spending has decreased from 1.29% in 2012 to 0.8% in 2017. Other hospitals in California have exhibited a similar decrease, saying there are fewer uninsured patients who need help since the Affordable Care Act expanded insurance coverage.

CEO Tyson told California Healthline that he limits operating income to about 2% of revenue, which pays for things like capital improvements, community benefit programs and “the running of the company.”

“The idea we’re trying to maximize profit is a false premise,” he said.

The organization is different from many other health systems because of its integrated model, so comparisons are not perfect, but its operating margins were smaller and more stable than other large nonprofit hospital groups in California. AdventHealth’s operating margin was 7.15% in 2018, while Dignity Health had losses in 2016 and 2017.

Tyson said that executive compensation is a “hotspot” for any company in a labor dispute. “In no way would I try to justify it or argue against it,” he said of his salary. In addition to his generous compensation, the health plan paid 35 other executives more than $1 million each in 2017, according to its tax filings.

Even its board members are well-compensated. In 2017, 13 directors each received between $129,000 and $273,000 for what its tax filings say is five to 10 hours of work a week.

And that $37.6 billion in reserves? It’s about 17 times more than the health plan is required by the state to maintain, according to the California Department of Managed Health Care.

Kaiser Permanente said it doesn’t consider its reserves excessive because state regulations don’t account for its integrated model. These reserves represent the value of its hospitals and hundreds of medical offices in California, plus the information technology they rely on, it said.

Kaiser Permanente said its new headquarters will save at least $60 million a year in operating costs because it will bring all of its Oakland staffers under one roof. It justified the partnership with the Warriors by noting it spans 20 years and includes a community gathering space that will provide health services for both members and the public.

Kaiser has a right to defend its spending, but “it’s hard to imagine a nearly $300 million sponsorship being justifiable,” said Michael Rozier, an assistant professor at St. Louis University who studies nonprofit hospitals.

The Service Employees International Union-United Healthcare Workers West was about to strike in October before reaching an agreement with Kaiser Permanente.

Democratic presidential candidates Kamala Harris, Bernie Sanders, Elizabeth Warren and Pete Buttigieg, as well as 132 elected California officials, supported the cause.

California legislators this year adopted a bill sponsored by SEIU California that will require the health system to report its financial data to the state by facility, as opposed to reporting aggregated data from its Northern and Southern California regions, as it currently does. This data must include expenses, revenues by payer and the reasons for premium increases.

Other hospitals already report financial data this way, but the California legislature granted Kaiser Permanente an exemption when reporting began in the 1970s because it is an integrated system. This created a financial “black hole” said state Sen. Richard Pan (D-Sacramento), the bill’s author.

“They’re the biggest game in town,” said Anthony Wright, executive director of the consumer group Health Access California. “With great power comes great responsibility and a need for transparency.”

Patient care, too, is under scrutiny.

California’s Department of Managed Health Care fined the organization $4 million over mental health wait times in 2013, and in 2017 hammered out an agreement with it to hire an outside consultant to help improve access to care. The department said Kaiser Permanente has so far met all the requirements of the settlement.

But according to the National Union of Healthcare Workers, which is planning Monday’s walkout, wait times have just gotten worse.

Tyson said mental health care delivery is a national issue — “not unique to Kaiser Permanente.” He said the system is actively hiring more staff, contracting with outside providers and looking into using technology to broaden access to treatment.

At a mid-October union rally in Oakland, therapists said the health system’s billions in profits should allow it to hire more than one mental health clinician for every 3,000 members, which the union says is the current ratio.

Ann Rivello, 50, who has worked periodically at Kaiser Permanente Redwood City Medical Center since 2000, said therapists are so busy they struggle to take bathroom breaks and patients wait about two months between appointments for individual therapy.

“Just take $100 million that they’re putting into the new ‘Thrive City’ over there with the Warriors,” she said. “Why can’t they just give it to mental health?”

 

 

 

Planning ahead to avoid a long goodbye

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https://mailchi.mp/699634d842fa/the-weekly-gist-november-1-2019?e=d1e747d2d8
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Succession planning is a frequent topic of conversation among the boards and executive teams we work with at health systems, and for good reason. There’s a large cohort of CEOs and other C-suite members in their late 50s to mid-60s who are probably two or three years away from retirement. Smart organizations are way ahead of these transitions, creating a deliberate bench of next-generation leaders, and explicitly evaluating their performance at a board level to determine who will fill key leadership spots in the future.

One aspect of succession planning that’s gotten less attention but can prove equally disruptive to the organization if ignored, is what role the CEO will play after retirement. We’ve worked with a number of systems over the years whose CEOs have been in seat for a decade or more, and who are reluctant to take a full step away from the post once their time is over. Of course, it’s ideal to have a transition period that lasts for a defined time, to give the new executive time to get up to speed and build confidence.

But what we sometimes see is former CEOs whose shadows loom large over the system, as they continue to provide (often unsolicited or unwanted) advice, stay in close touch with former subordinates, or keep a running dialogue with board members. This creates an awkward situation for the new CEO, who finds her own plans and ideas constantly tested, sometimes explicitly, against the “What does [former CEO] think of that?” standard.

The key to avoiding this problem is to address it well in advance. We’ve been part of explicit conversations between incoming and outgoing CEOs about expectations and role definition post-exit, and even seen a few outgoing CEOs engage career counselors to help them manage the personal challenge of letting go of the organizations they’ve poured their hearts and souls into. A delicate situation to be sure—but a critical one to get right.

 

Phoenix hospital CEO gets $85K raise despite criticism from board members

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https://www.beckershospitalreview.com/compensation-issues/phoenix-hospital-ceo-gets-85k-raise-despite-criticism-from-board-members.html

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The CEO of a public and nonprofit safety-net health system in Phoenix will get an $85,000 raise despite objections from two board members who questioned if the increase was excessive, according to the Arizona Republic.

Under a new five-year contract effective Oct. 25, Steve Purves, CEO of Valleywise Health, will see his annual salary rise to $685,000. Mr. Purves could also receive a discretionary $171,250 performance bonus and is eligible for a $68,500 retention bonus on Oct. 25, 2020. In 2020, Mr. Purves’ base pay will climb to $753,500, and by 2023 his base salary will be $872,191, according to the contract cited by the Arizona Republic.

The hospital’s governing board approved the contract in a 3-2 vote. The two board members who voted against the contract raised concerns about its length as well as the rise in salary and bonuses. They questioned whether a raise of that magnitude was appropriate, given that the hospital has faced federal penalties for five consecutive years over patient injuries and infections. They also noted Valleywise Health anticipates a $3 million deficit this fiscal year.

But the three board members who supported the contract said it was necessary to ensure Mr. Purves remained at Valleywise Health. They argued the package is similar to other CEOs at comparable health systems. They also praised Mr. Purves for steering Valleywise’s finances in a better direction, according to the Arizona Republic.

The final contract is $15,000 lower than one proposed in September. In that proposal, Mr. Purves would have received a $100,000 pay hike with a discretionary performance bonus of up to $175,000.

Read the full report here.