building tomorrow’s healthcare system: persistence pays off · 2017. 11. 13. · persistence pays...

An Interview with Dennis VonderfechtPresident and Chief Executive Officer

Mountain States Health Alliance

Building Tomorrow’s Healthcare System: Persistence Pays Off

Profiles in Healthcare Leadership

An Interview with Dennis Vonderfecht

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Compass Clinical Consulting’s “Profiles in Healthcare Leadership”

These profiles are the result of interviews with transformational leaders in today’s healthcare industry—men and women who have demonstrated courage, ingenuity and the hard work needed to create dramatic, measurable and sustainable improvements in their hospitals. They challenge assumptions, see things differently and enable remarkable breakthroughs. These leaders freely convey insights that we all can use to improve the way we deliver healthcare, and in the process, give us new ideas on how to make better American hospitals.

This leadership profile features Dennis Vonderfecht, President and CEO of Mountain States Health Alliance (MSHA), the largest healthcare system serving Northeast Tennessee, Southwest Virginia, Southeast Kentucky and Northwest North Carolina.

Mr. Vonderfecht’s leadership was instrumental in developing the mission, vision and values for MSHA, along with the system’s 10 principles of patient-centered care. These ideals, coupled with a rigorous strategic planning process, have allowed the healthcare system to grow rapidly over the past 15 years while maintaining a culture centered on the patient’s needs. Today, MSHA operates a family of 13 hospitals, along with retail pharmacies, home health and hospice services, and the region’s only provider-owned health insurance company. MSHA’s 13,500 team members, associated physicians and volunteers are committed to the system’s mission of bringing loving care to healthcare.

MSHA’s dedication to fulfilling their missing of bringing loving care to healthcare has resulted in numerous prestigious awards including;

• National Quality Healthcare Award (2012)

• AARP Best Employer for workers over 50 (2013)

• The Tennessee Center for Performance Excellence Award

• The Health Care’s Most Wired Winner (2012)

Compass Clinical Consulting

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Key Lessons for Healthcare Leaders

PERSISTENCE PAYS OFF

When you or your organization might become dejected, give up or go some other direction that is not part of your vision of where you want to go, being persistent can get you through. Sometimes it takes more than a year or two, but persistence pays off.

HOW TO BUILD A PATIENT-CENTERED CULTURE?

It’s not that difficult. All healthcare providers exist for the benefit of the patient. Getting moving is the first step toward the common culture of serving patients and their families.

What do your patients and their family members expect of us as their healthcare providers?

• Clinical Excellence—great clinical outcomes;

• Operational Excellence—great value for the service being provided;

• Stakeholder Safety—a safe environment; and

• Service Excellence—they want great service.

THE FOUR CORE VALUES THAT WILL ALWAYS MATTER IN HEALTHCARE DELIVERY

You can change your mission, and you can change your vision, but there are really only four core values that will always matter:

1. Integrity – honesty in everything that we do;

2. Service – with caring and compassion;

3. Leadership – with creativity and innovation; and,

4. Excellence – always pursuing the higher standard.

TRANSITIONING FROM PAY-FOR-SERVICE TO POPULATION MANAGEMENT

• Capture premium dollars now going to insurers.

• Recognize the future is not on the inpatient side; the key is in outpatient care.

• The key to lowering costs is to redesign how you do what you do.


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THE INTERVIEWCary D. Gutbezahl, MD, Chief Executive Officer of Compass Clinical Consulting, sat down for an in-depth “Profile in Healthcare Leadership” interview with Mr. Dennis Vonderfecht, President and Chief Executive Officer of Mountain States Health Alliance.

Dr. Cary Gutbezahl (CCC): Why don’t we start with telling me a little bit about how Mountain States came together?

Mr. Dennis Vonderfecht (DV): I’ve been here for 24 years, or soon to be 24 years when I retire at the end of this year. But when I came here as CEO, it was just as CEO of Johnson City Medical Center, which today is our flagship. The hospitals that came together as Mountain States Health Alliance (MSHA) for the most part were acquisitions.

For several years, the focus was really growing and developing Johnson City Medical Center into truly being a tertiary referral center. When I came here, it had some tertiary care aspects but not totally. We did a lot to develop a trauma center—we had no trauma center designation at that time. We also developed the children’s hospital and rehab facilities and did quite a few things that added services and kept people here locally.

We really became a system in 1998, when we acquired six hospitals from Columbia HCA. Eight hospitals or health systems acquired 21 hospitals from Columbia HCA, and we acquired six of those. We were actually the largest acquirer in terms of numbers of hospitals and literally doubled in size overnight. At that point, we became a regional healthcare system and within that year changed the name from Johnson City Medical Center Hospital Inc., which was our legal name at that time, to Mountain States Health Alliance.


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FORTUNE FAVORS THE BOLD BOARDCCC: It’s a pretty big bold move to acquire six hospitals at once when you haven’t acquired anybody before. How did you go about convincing the community and the board that this was the right risk to take?

DV: Prior to the actual acquisition, we had been in discussions with the previous hospital owners. As you know, Columbia HCA came about from acquisitions of other for-profit companies starting with HCA, and then they acquired several others. Some of those were owners of the hospitals here, and we had been in discussions with Health Trust in particular about acquiring several of these hospitals in the past and never could find a way to do that. Our goal, first of all, was to eliminate the unnecessary duplication of services that had developed over the years as the for-profits tried to duplicate the equipment and services that were already provided at Johnson City Medical Center.

This was an opportunity for us to be able to accomplish that goal. It wasn’t a new thought to the community. I don’t know if you’d call it luck or what that it came about.

CCC: Taking advantage of an opportunity.

DV: We were able to take those hospitals and eliminate the duplication that occurred with cath lab services, oncology programs, and rehab programs. We then rationalized the services here locally to make more sense, thereby improving the quality and reducing the cost of those services.

At the same time, getting Indian Path Medical Center in Kingsport allowed us to reach into Southwest Virginia, which we were not able to do previously due to our main competitor’s position between Johnson City and Southwest Virginia. Having an entity to the north of us with Indian Path Medical Center allowed us to reach to a bigger market and truly become a bigger regional player.

After that, we added other hospitals. We added Woodridge Psychiatric Hospital across the street from Johnson City Medical Center through an acquisition. Then we added five Virginia hospitals. We began with Smith County Community Hospital in Marion, Virginia, and then progressively added four others. Now, we have eight hospitals in Northeast Tennessee and five in Southwest Virginia. Soon,


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we expect to have another hospital to the south, almost to the North Carolina line, called Unicoi County Memorial Hospital. It’s with the Attorney General’s office for review right now. That will be 14 hospitals in total.

We’ve accomplished a lot of growth and change over 15 years, from being a single tertiary medical center to becoming a truly regional healthcare system.

PERSISTENCE PAYING OFFCCC: Obviously, when you take on a big initiative like that, there are some lumps and bumps. What did you learn through the process?

DV: First of all, you have to have a vision of where you want to go and commit to a plan on how you will get there. Often, there will be others that have agendas that aren’t the same as yours, and they are going to throw obstacles in the way. The main thing is to keep your eye on the goal, and you can overcome the obstacles.

I always like to use that phrase about “persistence paying off” because persistence has paid off multiple times in our organization when we could have become dejected, given up, and gone some other direction. But it would not have been the direction that was a part of our strategic plan that was based upon a vision of where we wanted to take the organization. Being persistent can get through that. Sometimes it takes more than a year or two, but persistence pays off.

A good example of this payoff was how we were ultimately able to bring these local hospitals into MSHA and consolidate and rationalize healthcare services after years of frustration and getting nowhere with the prior owners.

BUILDING SUPPORT FOR YOUR VISIONCCC: How do you build support for that vision?

DV: First, you have to have really strong engagement with the board of directors because ultimately, they are the ones that have to approve that strategic plan. It is their plan, and they have to have the buy-in to it. It requires good communication


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and a good working relationship with the board. I think that’s key number one, because there are going to be lot of obstacles thrown in the way. Sometimes people aren’t happy with the direction, and the board members often are the ones to hear about it. If the board members weren’t engaged or didn’t understand where we were trying to go, then we wouldn’t have their support and would never have gotten where we needed to go.

It works the same way with physicians. We tried along the way to keep the physicians involved and engaged, but there are always some physicians who have different agendas. At some of the hospitals that were part of Columbia HCA and ultimately became a part of Mountain States, physicians actually had ownership in those facilities. They did not like Johnson City Medical Center, and that’s why they became owners in these other facilities. Unbeknownst to them, Columbia HCA acquired their ownership so they could sell the hospitals to us and the other not-for-profit health systems.

So the physicians who were involved with that, who didn’t care for Johnson City Medical Center at first, weren’t very happy. One of the challenges we faced right off the bat was that some of those physicians aligned with our competitor to try to put a new hospital in Johnson City to compete with us, with them having ownership in it.

That was another case where persistence paid off. During the CON review process, the agency at the time by a one-vote margin approved the facility. However, we challenged that decision on a couple of bases—one was the conflict of interest of the chairman of the agency. Then, we found out that the formula used by our competitor in calculating bed need had transposed two numbers and with the right numbers didn’t show a need for beds. That was quite an interesting turn of events. Based on those objections, we won at the administrative law judge level. Our competitor then challenged it all the way to the state supreme court, and we won every step of the way.

It was a clear case of persistence paying off. Additionally, during that time, many of the physicians who were working against us found out that we weren’t such bad guys after all. We have been able to collaborate with them ever since, and they never attempted to do anything like that again.


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CCC: A lot of folks are intimidated by having to confront longstanding animosity of relationships. How do you overcome those?

LEAVE BAD BAGGAGE BEHINDDV: It’s a philosophy that I personally have. Although sometimes you have to swallow hard, it is water under the bridge. If you try to look forward instead of backward, there are a lot of opportunities to work together. That’s what we found with a number of these physicians—we’ve just been able to forget the past, get rid of the baggage, and move forward.

CCC: It takes a lot for an individual to say, “I am going to put the baggage behind me.” How can you help the other person get to that point?

DV: Mainly through enough communication that the other people start developing a sense of trust. If they don’t trust you, then they are never going to get rid of the baggage, and they are always going to have that same view of you from the past—whether that’s real or not. It’s through good dialogue and communication that people can start thinking about the future and think less about the past, which ultimately gets rid of that baggage.

GETTING THE BOARD ON BOARDCCC: In discussing the work that you’ve done in putting this organization together, you’ve talked about rationalizing services and really a lot of system-type thinking. How do you take the board from thinking at the hospital level to thinking more like a real system?

DV: We had a very good process to do that. The board and I realized the issue as a hospital board at the time we made this acquisition and became Mountain States Health Alliance. We had a large board—23 people—that was a representational board from the standpoint that the county executive and the Johnson City administrator were on it. But we were no longer just a Johnson City or Washington County Tennessee organization; we are much bigger than that.

The board realized that, so at one of our board retreats, we brought in Barry Bader, a governance consultant, to facilitate these discussions at the retreat.


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Through these discussions, it became apparent that we needed to modify the board structure. We engaged Barry over the next year to work with a board committee on governance as a regional healthcare system.

Over the next year, we progressively developed a plan of what that governance was going to look like. At the end of the year, the board resigned en masse, and we created a smaller system board with 13 people on it, including myself.

We set up a community board for every county in which we had a hospital at that point in time. These community boards had a common set of bylaws that made very clear that they were committees of the system board and that had delegated responsibilities. Those delegated responsibilities were the same in every community.

The appointment of those board members lies with the MSHA board, the new board that was developed. At the same time, we did away with a number of committees and brought in a couple of new committees to simplify things. The result was very good working committees that have authority to do what they need to do with designated levels of approval authority below the Mountain States board.

We also put in competencies for the MSHA board, as it is a competency-based board, not a representational board. The same applied to our community boards. We developed a set of competencies for each community board that identifies the types of people that should be on the board and the skills and talents that are needed.

We set this up in 1999, and as we sit in 2013, we’ve never had any issues with the allocation of responsibility. So it has worked out extremely well.

When we acquired the Virginia hospitals, we had to establish a different model because of how they came into the system. With these four hospitals, we acquired less than 100% of the assets (80% in one case and in the other cases, 50.1% of the existing 501(c)(3) corporation). We structured those boards differently because these were the true governing boards. When Mountain States Health Alliance owns 50.1%, we control 50% of the board membership, and the local foundation that was created out of the transaction has a 50% representation on


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that board. If there is ever a tie, management breaks the tie. Because we are management, in essence, Mountain States has control of those boards. In the hospital where we own 80%, the board is 80% controlled by MHSA versus 20% controlled by the community.

And that has worked very well. I can only recall twice that we’ve actually had a 50-50 vote. And that was early on at one facility, and it became clear to the other 50% of the board that we really were sincere about integrating this facility into the system. Since that time, we’ve had no issues at all.

The other thing that’s worked out well is that we only have one tertiary hospital, Johnson City Medical Center. When systems get into issues about rationalizing services, there is competitive conflict between the physicians and specialists of one tertiary facility, and those of another tertiary facility. They don’t want heart programs consolidated or oncology programs consolidated or anything like that. We had the good fortune of having only one tertiary facility.

COMMUNITY BOARD RESPONSIBILITIES—QUALITYCCC: What are the kinds of issues that are handled at the community board level versus those that are reserved for the system level?

DV: First and foremost, quality is delegated to the local communities. We do have a system quality committee, and people from across the system are on that committee. But we prefer that quality issues be handled locally because the medical staffs are separate. Because we don’t have one medical staff, there are different issues within medical staffs that have to be resolved. For these reasons, most quality issues are delegated to the local boards.

That said, because of the way we’re structured and because of the way the laws work in Tennessee, all physician privileging and credentialing must work their way through the local community boards, but they ultimately have to be approved by the system board. So ultimately, the system board is in control of that. But as much as can be delegated is because, as they say, all healthcare is local. And even though we share common interests in our region, each community is different because they have a different make-up of physicians and so forth.


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From a financial standpoint, the local boards are involved with budget approval for both operating and capital budgets. They have delegated responsibilities for capital items up to $200,000 before it has to come to the system finance committee. The system finance committee can approve anything up to $1 million. Any expenditure at $1 million and above has to be approved by the system board. The approval authority by board level is clearly laid out in a chart.

In terms of public relations, we rely heavily upon the local community boards to give us advice and work very closely with our marketing department. We also have local marketing people who report centrally to the marketing department at Mountain States, but they are positioned within the communities. They work very closely with the local boards to try to meet their needs as we develop the marketing plans for their community.

Beyond that, a big purpose for the local boards is to provide us with feedback. What are they hearing in the community? What does Mountain States need to do differently from their perspective? We like to get that kind of feedback because if we see a trend, then we probably need to make some changes.

COMMUNICATING THE CULTURECCC: As you’re preparing to take on another hospital, assuming it gets regulatory approval, what are the types of things that you do to help bring that new acquisition into your way of thinking?

DV: First and foremost, we have a lot of orientation. We’ve already had a lot of orientation with that facility even though it isn’t officially part of Mountain States because we have a management contract with them now. We work hard to get the team members, the physicians, and the board to understand the culture of Mountain States. To me, that’s where it lies—an understanding and acceptance of the culture and becoming a part of that culture.

Our culture is structured around the patient, through what we have defined over a 10-year period as patient-centered care. We’ve articulated our culture through a philosophy statement, 10 guiding principles, initiatives, and all of those things that fall underneath that. We spend a lot of time orienting all those constituents with respect to the culture. After that, the focus is really just engaging them.


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Even though these folks still aren’t part of Mountain States, we’ve had them involved in all of our meetings. We’ve had them involved with our leadership forums. The sooner that we can immerse them in all this, the more they feel that they are part of the organization, and the more they become a part of the organization.

Beyond that, if you look at all the functional areas, our folks have all been to that hospital. Our lab leadership, the IT leadership—every one of our leaders in every functional area has been there. Together, we have decided that when the hospital becomes a part of Mountain States, we know what we need to do to integrate it in each area.

CCC: How much of that discussion about culture begins before the actual decision to merge?

DV: That’s the very first thing we do during our first presentation because I’m a firm believer that if you can’t have common cultures, it is not going to work. We tell them what our culture is and that if they don’t buy into this culture, then it probably won’t be a good marriage, and they are probably looking at the wrong partner. Quite frankly, that has always worked out very well for us. All the people that have come into the organization have appreciated the culture that we present to them. It’s easy to understand, it’s simple, and it’s logical, and it is what we ought to be supporting as a healthcare provider.

CCC: It sounds like you spend a lot of time communicating and reinforcing the culture. Would you share a little bit about that with us?

THE MSHA DIFFERENCEDV: I do. And I know other people in the organization do as well. One of the things that we have developed over the last 10 years is a very understandable way to discuss the culture with our frontline team members all the way up to the board of directors. It’s called The MSHA Difference.

The MSHA Difference really was a convergence of two different pathways we were going down over the past 10 years. One of those was the patient-centered care route that I talked with you about earlier. I had been doing a quite a bit


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of reading 12 years ago or so about patient-centered care and what had been happening on the west coast with Planetree, and I thought it sounded very interesting. I really was interested to see: is there a difference? Is it just words, or can you really see, touch, and feel that experience?

So I took about 14 of us on a flight on a little plane about 10 years ago to the West Coast and we visited two facilities there that we’d heard about or read about that were very involved with patient-centered care. One of them was a Planetree facility; the other one wasn’t. One was in Oregon, and one was in Washington. After we visited those facilities, the group came back very impressed and knew there was a difference.

PATIENT-CENTERED CAREDV: We formed a steering committee and developed a philosophy statement for patient-centered care—the same one we have today. We also defined 10 principles that have guided us in terms of how we implement that philosophy and make it real in the workplace to our patients, team members, family members, and so on. These principles evolved over time—we now have initiatives under each of those as well as metrics to measure our performance and demonstrate that we’re actually making a difference.

The second pathway was trying to identify a quality model for us. We had some starts and stops with respect to quality early on in my career here, and I wasn’t very happy with our accomplishments at that time. So 10 years ago, I blew up our quality department—literally did away with it. All the leadership and all the people who were in the department disappeared overnight.

I asked an executive who was not involved with quality models to head up our future with respect to quality. She was actually in charge of our Quillen Rehab Hospital, but she always struck me as a really out-of-the-box thinker and an aggressive type of person. I took her out of her responsibilities and asked her to do all the reading she could on quality. I wanted her to visit sites and come back to me with a recommendation of the direction that we should go.

She came back with the recommendation that we get on the Baldrige journey. So we adopted the Baldrige National Quality Award criteria as our business


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model in Mountain States Health Alliance and through that, adopted PDCA as our performance improvement methodology. During the past year, the main tool we’ve used in PDCA is Lean.

BRINGING LOVING CARE TO HEALTHCAREDV: There are two components of the MSHA Difference. One is called, “What is the MSHA Difference?” The other is, “How do we implement it?”

When we started we asked: How do you get to a common culture when all these pieces that came into the organization each had their own culture? We figured the best way to do that is around the patient. Hopefully, all of these entities exist for the benefit of the patient; we are all healthcare providers, so it’s pretty easy to move people toward the common culture of the patient and their family.

Within that common culture we have what we call our “house of quality.” Any house has to have a foundation. For us, the foundation for our house was the mission, vision, and values of the organization. These are all tied in very closely with that philosophy statement for patient-centered care. The mission statement is, “Bringing loving care to healthcare.” There’s another sentence there too, but everyone remembers “bringing loving care to healthcare” because we use that as the tagline in all of our advertising and in our logo.

The mission statement is also easy for our team members to remember, and it’s meaningful to them. For instance, when Baldrige examiners come to Mountain States and ask our team members what the mission of the organization is, they answer, “Bringing loving care to the healthcare.” When asked how they do that, it is easy for our team members to say what they’re doing that makes a difference to their patient and the members of the patient’s family.

HOLISTIC APPROACH TO HEALINGDV: The same applies to our vision: “Passionately pursue healing of the mind, body and spirit as we create a world-class healthcare system.” We define “world-class” to be the top-decile performance with respect to all of our metrics. Of course, we’re not there yet. We are in some, and in others we’re not. But that healing of the mind, body and spirit is that holistic approach to healing that is


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part of our philosophy statement of patient-centered care and that is in the vision statement.

FOUR CORE VALUES THAT REALLY MATTERDV: We have four values that we stress, and as I always tell all of our team members, we could change our mission, and we could change our vision, but these are really the core values of the organization that are not going to change:

1. Integrity – honesty in everything that we do;

2. Service – with caring and compassion;

3. Leadership – with creativity and innovation; and,

4. Excellence – always pursuing the higher standard.

That’s our foundation, and on that foundation, we have four pillars that I think of in using Baldrige’s language as our customer requirements.

PATIENT-CENTERED EXPECTATIONSDV: What do our customers (who we defined as our patients and their family members) expect of us as their healthcare providers?

First and foremost:

• Clinical Excellence—great clinical outcomes;

• Operational Excellence—great value for the service being provided;

• Stakeholder Safety—a safe environment; and,

• Service Excellence—they want great service.

DV: We know that our desire is top-decile performance in all these areas. And we know we aren’t in all of them, which creates gaps. And how do we close the gap? We do that through the strategic planning process and initiatives that we develop. So, that’s what the “what” part of the MSHA difference is.


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THE BLUEPRINT PERFORMANCE MANAGEMENT PROCESS

DV: Then how do we implement it? Through what we call the “Blueprint Performance Management Process.” We call it that because to build a house of quality, we felt it took a blueprint, so we use that terminology. We identify the metrics that will be associated with accomplishing our strategies and initiatives and to close those gaps that I mentioned earlier, and then we cascade those metrics down through all of our facilities, through our departments and units, down to all 9,000 of our team members in Mountain States Health Alliance. They each have their own Personal Blueprint, as do I.

My Personal Blueprint metrics are the system ones. If we keep our team members focused on the key objectives they have within the Blueprint, they’re going to be successful. That means their department will be successful, our facilities will be successful, and the system will be successful in achieving all of its measures, which means we’ll accomplish strategy and will begin closing that gap through improvement as shown in our performance measures.

BLUEPRINT METRICS DEPLOYMENTDV: Deployment starts with the system board’s approval of what we call “Blueprint metrics” at the system level. Cascade this down all the way to the 9,000 team members, and the results happen. We have 9,000 team members successfully achieving their Personal Blueprint goals and objectives. That’s how we implement everything in Mountain States Health Alliance, through the MSHA Difference and the Blueprint Performance Management Process.

That process helps team-member engagement because frontline team members can clearly see how their Blueprints and their annual goals are supporting their department goals and how the department goals are supporting the system goals. Sometimes the things that we’re doing as a system seem so big that it feels like an individual team member can’t have any effect or impact on that. But every year when we go through this Blueprint process, it brings it back to those frontline team members that the little decisions that they make every day in their work can and do impact the direction of the system.


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ORGANIZATIONAL DEVELOPMENT CCC: It sounds like a lot of time and effort is spent on these cascading goals. What other efforts do you make to help people achieve their goals?

DV: We have a very robust organizational development department that provides a wide range of education programs. We assess needs and provide development through the organization development process. As far as our management team, we’ve assigned specific courses to those individuals. We also have development plans for all of our department directors and above in the organization that identify where they have gaps in their current position. Through the succession planning process, we target some people as candidates for the next level in the organization if we should have a vacancy. Then we ask, “What are the developmental needs for that position?” And then again we try to close those gaps.

SUCCESSION PLANNINGCCC: It sounds like succession planning is a big part of your overall management system. Will you tell us a little bit about how you do that here at Mountain States?

DV: When we started this, we started with just the executive team, which is identified as the assistant vice presidents and above. We brought in the Hay Group to help us develop this process. We use several survey instruments that identify potential gaps in our executives.

The Hay Group helps us interpret those gaps, and then we develop plans that are shared with the individual and his/her immediate supervisor. At quarterly intervals, they get together to see that we are making improvements. After about two years, we’ll retake those survey instruments and see if we can objectively show that we closed the gaps and that our people are performing at a higher level.

CCC: One of the challenges in evaluating people’s performances is getting an honest and fairly consistent way of assessing one another. What does the organization do to promote honesty as well as make sure that everybody is evaluated fairly and consistently?


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PERFORMANCE EVALUATION & INCENTIVESDV: We have a set of behavioral standards, and the consistency lies with respect to the definition of those. We all know that there are a lot of people that do evaluations, and no matter how objective you want to make the process, subjectivity occurs in an individual’s view and interpretation of the behaviors. But we work toward standardization.

At the highest level of the organization, we have a pay-at-risk program; that’s a big part of our compensation at the executive level. We have metrics taken from the system Blueprint that are approved by the board, so we are all working toward the same thing; most are team goals around quality, finance, and patient satisfaction. We have a common set of metrics around which we are evaluated.

PAY “AT RISK”DV: We also have an incentive pay plan for our team members. The program is based on their department’s Blueprint goals for the year. We establish a pool by the end of the year based on our financial performance. If their department achieves their goals, then they get paid more. Having some component of compensation, be it incentive pay or as we call it executive-level “pay at risk,” has helped to keep people focused on our goals.

CCC: It’s interesting because a lot of hospitals have had challenges with incentive programs, particularly down in the trenches at the non-executive levels. How long have you been providing incentives?

DV: We’ve been doing the incentive pay plan for our frontline teams for close to 15 years. It’s been there a long time.

CCC: At new facilities, how do they take to the idea when they are introduced into it?

DV: They like it. In fact, one of our facilities that came into Mountain States has a union. We don’t have any other unions, but this hospital had a union, and according to the contract, they don’t have any incentive pay. But we let them participate anyway, and they love it. Obviously, it’s additional dollars, so they


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wanted to be in it. But we’ve had a couple of years where we haven’t been able to give the incentive pay because we didn’t meet our financial target. People are always disappointed when they don’t get it, so people are very supportive of the program.

The accomplishment of your Blueprint goals is a requirement for receiving that incentive pay, and so that reinforces the importance of the contribution that you make. Team members are constantly asking throughout the year how we are on our system Blueprints because we don’t get that incentive pay if the system doesn’t meet its Blueprint. And so that further increases team member engagement in that overall system plan as well. They really care about whether those numbers are red or green.

CCC: How would they respond if their department does well, but there’s no money in the system to fund the distribution?

DV: That does happen at times, and obviously, people are disappointed. But we made it very clear that there’s only an incentive pool if the organization as a whole meets its cash flow target. And because the pool is self-funded, we have to do better than just meet the target—if we do above that, then the pool is established from which we pay incentives out. That’s the way we established that plan 15 years ago. There are always going to be people who are high performers or departments that are high performers that will always meet their goals; unfortunately, not everyone is, and sometimes the organization doesn’t meet its goals. It’s unfortunate, but that’s the way it is.

DEALING WITH REGIONAL HEALTHCARE COMPLEXITIES

CCC: You operate in two different states, and geography plays a factor as a regional health system. How has that helped and how has that hindered your ability to operate?

DV: It adds a level of complexity, particularly when you’re dealing with state regulations; CON is different in each state. But it hasn’t been a big problem. The way we develop the system is what we call a “hub-and-spoke” model. We truly


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have a hub that is Johnson City Medical Center because that’s our only tertiary hospital.

We’ve developed two sub-hubs within the system: Indian Path Medical Center in Kingsport, Tennessee, and Johnston Memorial Hospital in Abingdon, Virginia. These hospitals provide a fairly high level of secondary services; for instance, they both have cath labs, and they both have cancer center radiation oncology. These sub-hubs are surrounded by our other facilities, so they serve as feeders, with the tertiary care going to Johnson City Medical Center.

We’ve been able to rationalize services very well using that hub-and-spoke model. Within each, we’ve actually broken it into three regions: northeast, northwest, and southern regions. We have tried to rationalize within each of those regions as well, and we tried to do it on a system-wide basis.

CCC: I fly in airplanes a lot; hub-and-spoke speaks to me.

DV: With that type of model, the state lines are pretty irrelevant because one of those regions, the northwest region, actually takes in parts of Tennessee and Virginia. Thus, the hub for that region is in Tennessee, and spokes actually are in Virginia. But it’s logical road systems that feed all of these, and that’s really what the spokes are representative of—the major highways in the system and how traffic flows.

CCC: Has the geography helped make people want to be part of the Health Alliance?

DV: I would say so because we have had a lot of opportunity to buy other hospitals. But we really set our geography, and we said that we want to be a regional healthcare system. Our 29-county service area is based on the travel patterns that feed into the Tennessee and Virginia tri-cities area. Anything outside of that doesn’t make any sense because people aren’t going to come for those higher levels of service when they’re used to going to Roanoke, Knoxville, Asheville, or some other places like that; we can’t reverse longstanding traffic patterns.


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The geography to some extent sets those traffic patterns because of the mountains. We’ve got a set of big mountains between Asheville and us, for instance; on one side of the mountain people come this direction, and on the other side of the mountains they go to Asheville, and we are not going to change that. So, facilities over in North Carolina wouldn’t logically meet the requirements that we have in the development of this system at this time.

CC: How is your organization preparing for the transition from pay-for-service to population management?

TRANSITIONING FROM PAY-FOR-SERVICE TO POPULATION MANAGEMENT

DV: We’re doing a lot in that area. I would consider us to be on the leading edge of what’s going on in the country. I have to give you a little background on this because we talked about this in our strategic plan a little over three years ago. We realized that we are truly in for transformational change in healthcare, and this was before the Affordable Care Act passed.

But we felt like we needed to take a longer view of where we thought healthcare was going as opposed to our three-year strategic planning cycle that we typically use. Through that process, we also felt like we needed to bring in an outside consulting firm to work with us. We went through a process of identifying a firm to use, and we selected Oliver Wyman out of Chicago. They work with a lot of Fortune 500 non-healthcare clients on a global basis. We had to pay a pretty price tag for them, but they worked with us for about eight months, and I think we ended up with a really very good strategic plan. We chose three core strategies and then three supporting strategies. From that, over the last three years, we’ve developed a number of initiatives and have accomplished a good of number of those goals.

The first of those strategies is the one that’s moving us in that transformation from fee-for-service to population health management. We had an entity called Integrated Solutions Health Network that was a contracting entity for us that represented the vast majority of our physicians that are in the system to contract with the payers.


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We’ve taken that organization to the next level and developed it into an ACO, and we were approved by the federal government in July last year as one of the ACOs. At the time, there were no other ACOs in Tennessee. We now have under the Medicare Shared Savings Program about 13,500 Medicare recipients that have been attributed to our ACO.

Also through Integrated Solutions Health Network, we have developed the infrastructure to move us toward population health management. We brought in a CEO from BlueCross BlueShield who headed up the Medicare Advantage plans for the state of Tennessee. He brought in several other people from BlueCross and other payers, so within Integrated Solutions Health Network, we have built insurance technical knowledge that we did not previously have.

We also acquired an insurance company, so we can have a provider-sponsored health plan. The first product was a Medicare Advantage plan introduced in January of this year. We have a small number of enrollees now, but it is growing, and we have about 275 Medicare Advantage folks in our plan called CrestPoint Health.

We also brought about 15,000 of our own team members and dependents in under CrestPoint Health as a self-funded program. We contracted with a TPA for administrative services.

We’re shareholders in Premier. I’m on the board of Premier, and early on, they established collaboratives around ACO development. We joined the Implementation Collaborative along with other large organizations that already had health plans like Geisinger and Fairview. We have learned a tremendous amount by being in that Implementation Collaborative.

We’ve given Integrated Solutions Health Network the role of development of care models across the continuum for the system. They are engaging clinical leadership in the hospitals as well as in our physicians’ practices; there are about 400 physician practices, and we are taking that care model development across the entire continuum to manage the health of our population.


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We’ve been approved for eight of the federal government’s bundled payment pilot projects in three of our facilities, and that’s being run through Integrated Solutions Health Network, too.

ONE FOOT ON THE BOAT, ONE FOOT ON THE DOCKCCC: It sounds like you’re very much supportive of the idea of creating an entity that’s particularly focused on this new way of business without interrupting the existing operating units.

DV: Right. Using the analogy of a foot on the boat and one on the dock, I’d say we are closer to having most of our weight on the boat at this time. We know it’s impacting us to some degree in reduced hospitalizations. We’ve seen our volumes come down, and some of that I know is because of the results the ACO is already getting because we’re already getting some shared savings from the MSSP program.

Our physicians are starting to keep people from being readmitted, number one, but also even from being admitted. They use care coordinators and all the things that will go along with patient-centered medical homes that we have developed.

CCC: There’s really a lot of opportunity to make improvements, particularly over what I call “baseline” Medicare. When you think about how that changes the financial distribution of expenses as well as revenues, that’s an enormous savings opportunity. It really can make a big difference in the way patients are cared for.

SMART GOWTH ADDRESSES A 30% INPATIENT VOLUME DROP

DV: It does. Of course, it is a concern for the health system because our consultants told us that over the next 10 years, we could expect 30% of our inpatient volume to disappear as a result of moving toward population health management. Which leads to the second or third strategies.

Strategy Two is that we still have to grow by what’s called “smart growth.” The future is not on the inpatient side; it’s on the ambulatory/outpatient/retail side and


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trying to backfill some of that lost inpatient revenue. Strategy One is focused on capturing some of the premium dollars now going to insurers.

CCC: Right. That’s why you want to provide your own plan because the reality is, if you do it right, your outpatient costs will increase, but it’s never going to come close to what you may lose on the inpatient side. So, owning the risk is where the opportunity is. Sharing the risk is only going to get you part of the loss—you are still going to be having a net loss with shared savings. But when you are on your own plan, you capture all the premium dollars and all the savings. I think that’s where the real opportunity is.

DV: Over the 24 years since I’ve been here, that is what has taken the most education and time with our board to get them to understand. But I think they are beginning to understand. We just had a board retreat during which a lot of focus was on Strategy One and why it’s important that we try to capture that premium dollar. There is obviously an associated risk, but it can be managed just like any other type of risk.

DV: I just talked about our board and helping them to understand the new business model. We have recently created the Integrated Solutions Health Network board, and while it has taken time, I think we’ve finally gotten there. We have three members from our Mountain States board that are on the new board because we want them to learn this new business model so that they can take it back to the system board and help the whole board better understand it.

We also added two people from the outside with health insurance backgrounds: Bruce Hamory, an executive vice president of Geisinger, and another individual from the insurance industry named Doug Smith. They both have been very helpful within the Integrated Solutions Health Network board and for the MSHA board members who are there to learn and then spread that understanding to the rest of the MSHA board.

I think that over time, there will be a better understanding of this by the entire board. For so many years, we’ve been hospital-centric, and to think of something like insurance versus bricks and mortar is an extremely hard transition.

CCC: A totally different business model.


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DV: Strategy Three is also very important. We’ve got to take out costs. Even though we have a lot of comparable metrics and benchmarks that show that we operate in the top decile with respect to our costs, that isn’t going to be good enough. The curve that Oliver Wyman presented to us showed that if we don’t implement these strategies over the next few years, our EBITDA will suffer tremendously. In implementing these three strategies, EBIDTA will go downward, but it’s not going to be this precipitous drop that we would see if we just waited.

LEAN HEALTHCARE—COST TAKEOUT DV: The third strategy is taking costs out, and the way we’ve approached that is through Lean. We’ve contracted with Simpler, an international organization focused on Lean. They’ve worked with the federal government, the military, non-healthcare industries, and the healthcare industry for more than 20 years.

Their consultants are a part of our teams here. We’ve been in the process just one year so far. I think 1,200 of our team members now have been involved in rapid improvement events, and we’ve taken around $6 million out of the organization just in terms of waste and by redesigning the processes. That’s where our future is in terms of taking cost out—taking out the waste, which the literature says accounts for 30% to 40% of costs.

If we can redesign processes to take out even half that amount, we’ll be going a long way toward reducing our costs. Hopefully we will stay ahead of the reduction of revenues that we’re going to be seeing in the future due to reduced inpatient volumes and pressure from the payers.

Along the way, we received a lot of the recognition. Our work in applying the Baldrige model has enabled us to twice win the Excellence Award in Tennessee, the highest level in the state. There are only three organizations that have received it twice, and we are going for a third time this year. If we get it, we will be the first to get it three times. Last year, we applied in Virginia as we have the Virginia hospitals, and we got the highest level in Virginia. It was the first time they gave that award in three years. We won the National Quality Forum’s National Quality Healthcare Award this past year, the only one in United States.


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We also received that elusive Baldrige site visit last year. We were one of only five healthcare organizations to get it. We didn’t get the award, but the site visit is the next step in the process. We feel like we’re making good progress, which is for the benefit our patients, but we are proud of the recognition we have received along the way on our quality journey.

CONSISTENT & PERSISTENT COMMITMENT IN LEADERSHIP

DV: One thing that has been a tremendous asset to this organization is that we had consistency in leadership for a very long time—24 years at the end of my tenure. Compare that to the average tenure for a health system CEO of about five to six years. Fewer than 5% stay longer than 20 years.

Having one CEO at the helm for 24 years and the consistency in the other senior leadership have enabled our culture to develop and not change every few years with a change in leadership. As a result, it has allowed for the creation of a strong Mountain States culture. It has also allowed for the development of a good strategic planning process that has guided us extremely well for many years. This would not have happened without the stability of our leadership.

CCC: There are a lot of other organizations that have had long leadership tenure and have been successful in transforming their organization. But there have also been organizations that had long leadership tenure that have stayed where they were. The difference is having leadership that has a vision, stays committed to that vision, and, in your words, is persistent in driving toward that vision over the course of the time.

Thank you, very much.


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About Dennis Vonderfecht President and CEO of Mountain States Health Alliance

Dennis Vonderfecht is President and CEO of Mountain States Health Alliance (MSHA), the largest healthcare system serving Northeast Tennessee, Southwest Virginia, Southeast Kentucky and Northwest North Carolina. He came to the region in 1990 as President and CEO of Johnson City Medical Center (JCMC). In 1998, Vonderfecht’s strategic vision led JCMC to purchase six hospitals from Columbia HCA, forming Mountain States Health Alliance with JCMC as its flagship.

Vonderfecht’s leadership was instrumental in developing the mission, vision, and values for MSHA, along with the system’s 10 principles of patient-centered care. These ideals, coupled with a rigorous strategic planning process, have allowed the healthcare system to grow rapidly over the past 15 years while maintaining a culture centered on the patient’s needs. Today, MSHA operates a family of 13 hospitals, along with retail pharmacies, home health and hospice services, and the region’s only provider-owned health insurance company. MSHA’s 13,500 team members, associated physicians and volunteers are committed to the system’s mission of bringing loving care to health care.

Vonderfecht earned his Master of Science in Public Health and Master of Business Administration degrees at the University of Missouri, and his Bachelor of Science in Business Administration at the University of Nebraska.

About Mountain States Health AllianceMountain States Health Alliance is the region’s largest healthcare system with 13 hospitals, in Tennessee, Virginia, Kentucky and North Carolina. MSHA’s integrated healthcare delivery system includes primary/preventive care centers and numerous outpatient care sites. Mountain States Health Alliance is committed to “Bringing Loving Care to Health Care.”

Mountain States Health Alliance400 North State of Franklin RoadJohnson City, TN 37604-6094(423) 431-6111


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About Cary D. Gutbezahl, MD President and CEO of Compass Clinical Consulting

Dr. Cary Gutbezahl understands what it takes to make better American hospitals. In addition to being a seasoned consultant, he has worked as interim hospital CMO in three different organizations, as well as served as medical director for two multi-specialty medical groups and several HMOs. He has a solid history of leading medical staff through improvements in utilization management, changes in peer review practices and corrective-action procedures. As Chief Executive Officer of Compass Clinical Consulting, he is armed with a diverse background in hospital, medical-group and managed-care settings and has immersed himself in developing the strong knowledge base and extraordinary skill set needed to successfully improve today’s hospitals.

While Dr. Gutbezahl served on active duty in the U.S. Navy, he was Head of the Quality Assurance Department of the Navy Medical Command, National Capital Region, in Bethesda, Maryland. He board-certified and completed a laboratory medicine residency and an immunohematology fellowship at Washington University in St. Louis. In addition to his numerous national speaking engagements, Dr Gutbezahl has authored a number of publications including “Hospital Service Recovery” in the Journal of Hospital Marketing and Public Relations. He also has been published in Hospital & Health Networks Magazine, Trustee Magazine, SmartBusiness Magazine, and The CEO Refresher.

About Compass Clinical ConsultingCompass Clinical Consulting has helped hospitals and health systems improve performance and overcome obstacles to providing safe, quality patient care since 1979. Compass is clinically focused, driving change toward a goal of creating better American health systems through three services lines: clinical operations performance improvement, accreditation and regulatory compliance, and interim executive leadership.

We bring decades of experience to every engagement with an understanding that change must fit the organization, or it’s the wrong approach. Working in close collaboration with us, our clients have achieved remarkable results.

building tomorrow’s healthcare system: persistence pays off · 2017. 11. 13. · persistence pays...

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