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AHLA's Speaking of Health Law
C-Suite Roundtable: Health Care Financial Issues and Strategies
Rob Gerberry, Senior Vice President and General Counsel, Summa Health, explores the role Chief Financial Officers (CFOs) play in helping health care systems navigate the financial headwinds facing the industry. CFOs must work with commercial payer partners on pricing, Medicare and Medicaid on payment issues, and Boards on developing appropriate financial strategies. They must also confront issues like labor and staffing, the balance between maintaining bedside resources while keeping corporate staffing at a necessary level, and the rise of private equity.
Rob’s panel includes Robin Damschroder, Executive Vice President and Chief Financial and Business Development Officer, Henry Ford Health System, and Mike Browning, Chief Financial Officer, Ohio Health.
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Speaker 2:This episode of AHLA speaking of health law is brought to you by AHLA members and donors like you. For more information, visit american health law.org.
Speaker 3:Thank you everyone for joining our American Health Law Association podcast series. Each second we get to talk with c-suite leaders across our industry about current topics that are facing them in their roles and the strategies that they're deploying in order to face current headwinds that face our industry. Today we're lucky enough to have two talented chief financial officers, Robin Dam Schroeder from the Henry Ford Health System in Detroit, Michigan, and Mike Browning from the Ohio Health System and Columbus, Ohio. Mike and Robin, thanks very much for joining us.
Speaker 4:Thanks for having us.
Speaker 3:So, to start us off today, I'll allow Robin and Mike to give you some background so you understand more about their perspective , uh, as they share thoughts today, so Robin.
Speaker 4:Sure. Um, I'm Robin Dan Sugar . I am the Executive Vice President , uh, chief Financial and Business Development Officer at , uh, Henry Ford Health. And , um, you know, Henry Ford is in southeast Michigan , um, and Central Michigan. We have about six hospitals. We have over 250 clinics , um, and we are an integrated delivery system. So we , um, also have a health plan that represents about , uh, 30% of our revenue. And , uh, we're a big supporter of value-based care. And at the same time, we have a deep , um, deep background in , uh, academic medicine and research. Um, and we just recently launched a partnership two years ago with Michigan State University.
Speaker 3:Great. Thanks, Robin. And Mike?
Speaker 5:Uh, good afternoon. My name's Mike Browning. I'm the Chief Financial Officer of Ohio Health. Ohio Health is an 18 hospital system located throughout the state of Ohio. We just made an acquisition on the west part of the state, in east part of the state. Uh, we employ about 2000 providers, and a big part of our business is joint ventures. So we'll talk a little bit about it. Today. We have over 30 joint ventures of all different types of capacity, and so we believe it's an important part of our future as we want to be able to grow into who we wanna be in the future.
Speaker 3:Great. Wonderful. Thanks for joining us both. So, today as we look at the financial headwinds that are facing health systems, which strategies are you both deploying to tackle the challenges in front of us? I think we'd all agree they're unprecedented coming through the pandemic and wanted to learn more about your perspective as our members are trying to tackle these same challenges. So maybe Robin, we'll start with you.
Speaker 4:Sure. I don't think you can have one of these conversations without talking about labor. So, labor's been a significant piece. I think we've been fairly fortunate in Michigan recently that we've seen our, our agency rates go back to pre pandemic times . So it's more about the , the sheer numbers of people. Um, and I think when you talk about nursing , um, we're actively involved with many of the schools, but , um, more importantly, we're still pursuing our strategy , um, to , uh, have about 600 nurses from the Philippines join us, mainly in Jackson and Detroit. Um, but they will be around the health system and , uh, that is taking longer than planned because the , um, federal government has delayed the processing of the visas. So that's been a disappointment. We've been doing a lot of advocacy on that front, as you can imagine. Um, that is , uh, taking a lot of time. But we do think it's a good long-term strategy given the deficit of nursing , um, and the ability to catch up on that. So we are , um, we are in the long game for that, and we have a history of that. We brought nurses here , uh, two other times , uh, in Henry Ford's , uh, history, and it's been quite successful. Many of our nurses have stayed with us well over 20 years. Um, so they've been , uh, great team members at Henry Ford. And , um, I think the other thing, when we think about what we're doing , um, literally when you get into a lot of spaces is looking at what we can automate. Um, and Mike , uh, spoke a little bit about joint ventures and we're doing , um, a lot of the same. We're also looking at how we partner with other health systems when you , um, particularly look at things that are in , um, in the admin space, you know. Um, and so , um, but we've spent a good chunk of time this year , um, really focusing on revenue cycle , uh, and supply chain and creating automation opportunities. Um, literally one, there's not a workforce and the workforce that's there is expensive. Um, and so can we use those folks to the top of their talent and really get rid of these routine tasks ?
Speaker 3:Great . Mike.
Speaker 5:So Robin, we're, we're focused on the same things. You guys are , uh, labor is a big part of our business, and we've seen significant increases. So what we've tried to do is target areas where we can offset some of those increases. Uh , for Ohio Health, you'll hear us say a lot. We're a growth company, so we believe growing is important to be able to fit into our expense structure. And so from a growth side, we've seen over the last four years about 10% growth per year. And that's helped us offset some of the expenses, only adding variable cost , which has gone a long way. That being said, that's not enough. You have to do much more. Uh, labor's a big part. Uh, we know the labor costs we have today will likely stay in the system. So where we have agency, we know that's eventually gonna convert into salary increases and , uh, other, other types of compensation for our associates. But we've also looked to revenue enhancements. What can we do to better realize dollars on the revenue cycle and other things, and that's helped as well. But , uh, I think all CFOs focus on expenses. Where we tried to focus on the expense side is really go after waste. And so any health system has waste built into it. So first we tried to take those things out, then we started to look to non-value added services. What are we doing today? That was a really good idea five years ago that maybe we need to reassess, and we've been able to pull some expenses out of that. And finally, we've looked at corporate overhead. Um, corporate overhead's a big part of our business, as we all know. Uh, we've done all this through a group we call the financial sustainability team. That's a multidisciplinary team that's composed of , uh, a lot of different people in our health system, but it's run by one of our hospital presidents and one of our service line executives that's a physician. So we tried not to make this a financial initiative, but make it a system initiative. Uh, they've done really remarkable work in all these categories. Uh, to date, they've , uh, exceeded nine figures on what they've actually saved and improved, which has been a real help to us. And they still meet every week. So we started this 18 months ago. It was about February. So they're still meeting every week. They're still committed, and that's the sustainability part of it, and we're very proud of where they are today. Do they get tired? Yes. Uh, it's , it's a focus of the organization that we have to have to be able to continue to do the things we want to do, but a lot of credit to the team for the work they've done over that period of time.
Speaker 4:We have a very similar format, excuse me, at Henry Ford . Um, we've been on our journey a long time here, even pre covid . And , um, you probably saw recently we announced our large redevelopment in the city of Detroit. So , um, not only do we have to meet the pressures of , um, inflation, but we have to keep up on capital investment and, and that particular development's gonna replace , uh, over a hundred year old facility.
Speaker 5:That's great .
Speaker 3:So with the inflationary pressures that are facing health systems, have you worked with your commercial payer partners to best adjust your pricing to make sure it's in line with our current expense structures?
Speaker 4:Well, I think I, I feel like I got lucky , um, in some senses. Um, in the state of Michigan, obviously Blue Cross Blue Shield is your major payer, and , um, my contract actually, our , my contract, Henry Ford's contract came up , um, on the , uh, first of , um, uh, January 1st, 22. So we were negotiating in 21 during the heat of the battle. So I think we were one lucky to be on the forefront. Um, but as we did that , uh, we have our own payer and others in the state really sharing the data with them about the inflation and the long-term effects of it. Um, I think the other challenge also owning a health plan, so I see both sides of this , um, is utilization , um, between the ups and downs of COVI and , um, and looking at what's going on with the diabetic drugs out in the marketplace, and , uh, watching the demand as people opened in constricted capacity. Um, the data for predicting how your , um, claims expense is gonna come in and medical expense is gonna, is very, very difficult. And, and it's been choppy. So we are not back to a place where we would say that there is , um, seasonality that you could. Um, we used to all set our projections on when you have a health plan or even when you have a , um, a clinical delivery system. So when you take a look at those things , um, you know, providing all payers with challenges. So , um, uh, you know, I have an appreciation for both sides of that, but at the same time , um, you can't have wages go up and then not have the rates go up. And , uh, and what we have found to be a good , um, discussion with the payers is really doubling down on our value base and risk sharing opportunities so that if the rates go up, we're really working hard on getting an appropriateness of care.
Speaker 3:Right .
Speaker 5:So Robin and the team are doing at Henry Forge remarkable because they are very focused on value having health plans, I think, helpful in that situation. Where do we have a smaller health plan, much smaller than what , uh, Henry Ford has, but our approach to value is similar as we wanna work with our payers. Um , historically I think we've often looked at our payers as adversaries, and I think in the, in the new world, we're gonna have to look to 'em as partners as we come together and work together. Our approach is that the payers many times represent our customers. So while we don't have a big health plan , uh, a lot of the , our relationship with our customers is tied to that payer. So how we can have a good relationship , uh, we believe, or at least I believe that healthcare is expensive. Uh , we have to make it as affordable as possible. Raising rates isn't always the option. So we try to balance that. So we try to get reasonable increases from our payers, but not too high that's gonna make it unaffordable to the consumer. So we try to keep our rate changes , uh, post covid with pre covid, even though the costs and expenses have gone up much more dramatically post covid, how we can balance those together and try to create a , an affordable product for the consumer , uh, in a time that healthcare are costs are rising significantly. We're also in the market with a couple strong competitors , uh, Trinity, which is a national health system, and also Ohio State University , uh, which is a state run , uh, organization. So , uh, we believe we can offer both good value, good quality, good ser service, and we do that through the good culture of our organization.
Speaker 4:You know, Rob, I think too, when you look at the payers, all markets aren't created equal , um, either, you know, so Michigan's been a state where rates have been suppressed. I think we're 35th out of 50th for rates, so we're not eating at the top of the food chain. So we like to be sure that people understand the differences in the market , um, place , um, because I do think that , uh, that has to be put in context for , um, each community to be sure we get the services where they need to be. And I , I do agree with Mike, the approach that payers and providers are gonna need to work much, much more closely , um, together. And this whole concept of payvider as we see the large , um, disruptive companies coming into healthcare and wanting to have some of both taking risk as well as , um, providing service, although nobody's signing up to buy hospitals, I noticed that I think Mike, and I'll be in that business a long time.
Speaker 3:So as we look at our biggest payer in the federal government with Medicare, the advisory board released a statistic recently that health systems have seen wages go up 26% since the beginning of the pandemic. Our pharmaceutical costs are up. As we look at some of the data from our own health plan here at Summa and from others. What's been your advocacy strategy to best help the government understand , um, the predicament that we're in, and how responsive have you seen them be both at the federal and at the state level of Medicaid?
Speaker 4:I'm happy to jump in. I, I was just in Washington, and I hate to say a lot of the discussion is , um, is, is really challenging right now. Um , we're not doing a good job as an industry telling our story together. We have a tendency to pit ourselves against one another between critical access hospitals, academic medical centers, large national systems. You've got the physicians and , um, I think pharma and others are winning the day, right? There are people questioning whether or not we even deserve our not-for-profit status. Um, and I think , um, in our own communities as well as nationally with one voice, we need to get out there and demonstrate , um, what , um, the levels of charity care, what we do for research and academic medicine, the losses that we take on Medicare and Medicaid. Um , we have tried really hard, we recently with our own advocacy efforts , um, completed an analysis about hospital outpatient payments 'cause that, you know, that's under fire along with disproportionate share and , and three 40 B discounts. And those are extremely significant for institutions like our , um, um, both that Mike and I work for, because we serve a very vulnerable population that's heavily Medicare and Medicaid. And those , um, particular special payments , um, allow us to create access that wouldn't be in the communities the way that it is today. And , um, so I think if folks don't think that the mechanisms work, I think we need to look at the ecosystem of them instead of everybody trying to , um, piece them apart and , um, create major reductions in pressure because everybody thinks that, again , um, our costs are high. And I don't think Mike and I would disagree with that. Um, but some of the proposed cuts that are out there this year are on the level of , um, the 1997 BBA , um, cuts that we had. And most of us know that it was three years after that after hospitals lost a lot of money , um, that , um, they had to reverse a lot of those. So I think people, we need to be smart. And again, that requires us coming together as an industry , um, proposing solutions , um, much the way that the banking industry did or the airline industry did , um, as a regulated industry.
Speaker 5:Well , Robin, we're showing our age because I know what the BBDA act was, so , uh, I lived it just like you did. And I think we don't want to replicate that. What's , let's learn from the past and not come back to it. You know, it's been interesting. The healthcare industry was in heavy favor during Covid, and we slipped out of it really quickly. And I think it, it takes everyone to get back and let people understand what we're going through and , and why we need their support. We have a really great government relations team. I'm very blessed to have Karen Morrison and her team who help us throughout. And my role in it really is probably a, a lot like Robins . Uh, they bring me into it to educate 'em on what's going on, what the issues are, and bring me to the table, whether it's Washington, we happen to be in Columbus, which is the state capital , and talking with a lot of our state legislature and going through things. So I, I involve myself, but I do it based upon when they need me to let us know, because they've had a lot of success within the state , uh, helping all hospitals. And I agree with Robin, it's better not to divide. We all have to be in this together. Some will win, be bigger than others, but as an industry, we've gotta make sure that we're sustainable long term . And government, as you said, Rob is the biggest payer we have. So trying to find a way to protect what we've got and make sure that we can continue to enhance it going forward is really key. And I, from my perspective , um, fortunate, I have a really good team that helps us with that .
Speaker 4:Yeah , I think Mike and I are blessed to both be in Ohio and Michigan, which, you know , um, you know, collectively our health systems are all pretty collegial. Um, and so I think that that's , um, that's a great feeling. We've been doing a lot of work here on Medicaid where our Lansing legislator has legislation. Um, both , um, both houses have been extremely supportive in finding ways to really solve , um, chronic issues. And so I think that that's been great. But this national level discussion on who makes what money , um, really needs to have a light shine on, you know, like what does it cost to do administration? Why can't we be like , um, the banks and the Federal Reserve and have our claims adjudicated at the end of each day under one mechanism, under one file. Not the multiple things that Mike and I have to have our teams go through to, to get a bill out the door. Um, so I think that there's real opportunities that people wanna solve real problems and , um, not just be around the politics of it, because I think as long as we stay around the politics, we're just gonna, we're not gonna be fixing the problem, we're just gonna be moving the money around.
Speaker 3:Yeah. There was the Mike's point that period of time during the pandemic where healthcare was celebrating, now we're seeing jury verdicts go up three to four times where healthcare, there's a , there's the man grid healthcare from things that occurred during the pandemic that we're seeing address. We're also seeing people have a misperception that somehow health systems got rich on covid, that we were given these extra payments, which, you know, we've been working to educate around as well.
Speaker 4:Yeah, those extra payments, I, I just read another article and it's like such a misnomer. It's like, oh, look at their cash balances. And nobody then writes the next sentence that said we had to pay all those accelerated payments back. Right? That's what really drove up the cash balances, right? So all that money has gone back. We did get the, the, the provider relief payments , um, in the very first year that we did earn and get to keep for lost revenue and for expenses incurred. And again, everybody looks at the revenue we recorded in 2020, but no one's looking at the two years of losses that followed. And we truly have looked at our operations and our operating margin over a four year period, which seems like a really strange thing to do. But in the aftermath of all of that, you know, we're lucky to make zero to a half percent and nobody's looking left or right to say how much the drug companies made or how much the device companies are making or how much, you know, x, y, Z. So the, the operating margins of the, the health systems and the physician groups are , is very small in the grand scheme of all the, all the folks making money off of healthcare.
Speaker 5:Robin , it's an interesting point because I go back to 2019 fiscal year to compare against <laugh> , you know, before covid, because 20 was a different year, 21 was different, 22. And so each year has its own challenges that you go through. So I go back to 19 a lot to say, how did we do back then? And what's changed? So we look at it pretty similarly and we're actually looking month to month to see how things are changing. So it is interesting how this new world has changed how we operate.
Speaker 3:So during these challenging times, how have you worked with your board, your finance committees to educate them around the issues, maybe to get their patients as we put these back to budget plans together and develop strategies to address some of the systemic challenges , uh, that we're all facing for people that maybe don't live in our industry?
Speaker 4:You know, we're pretty blessed with a great board and a very wide perspective of capabilities and competencies. Um, they have been very willing to understand the issues and obviously, you know, you in some arenas, like, you know, people wanna run out of patients in some areas and, and we spend a lot of time sharing the real stories around patients and the real stories around our team members and how hard they're working. Um, and then obviously they're all running their own businesses or their own organizations and they have a sense , uh, with their own challenges with the labor market and everything that's changed after Covid , um, uh, about what some of those are. And clearly there's lots of folks when you're coming out of Detroit involved in the supply chain. So understanding in the early days in , in into 21 and 22 , what's been the challenge there? Um, it wasn't, wasn't as nearly as difficult for people to understand. Um, so we've been very blessed with a board , um, that's understood , um, willing to be educated and then most , uh, mostly trying to be flexible and understanding when we set a target, can we get all the way or there or not understanding that we're operating within a range. Um, I think as Mike talked about, what's changed in finance and healthcare and , and I've worked , um, for a large academic medical center in Michigan as well as a large national and , um, everybody used to be fixated on the budgets and it's much more around the forecast and the range of where you're gonna be , uh, because everything still is shifting pretty quickly .
Speaker 5:Robin , that's a great point because I think, you know, someday we will go away from budgets and focus solely on forecasting, but one muscle we've worked really well is forecasting and our finance committees helped us with that is we've gone forward because a lot of the people in the for-profit world, that's what they depend on. So many of our committee members have kind of helped us along with that. We're getting pretty good at forecasting revenue and expenses and you know, we do a, a , a annual forecast for the rest of the fiscal year, every single month to see where we are. And I would say each month, each quarter we get a little bit better. But as Robin mentioned about her board, our board and committee members are very intelligent, smart people, but they don't know healthcare as well as we do. So we have a responsibility to educate them. So we take at least part of each meeting to bring them up to speed on what's going in and get their feedback. And it's really interesting dialogue 'cause we know it from a healthcare perspective, they know it from a consumer employer perspective. So it's really good interaction we have with the committee members and they're looking to see what we're doing in our industry and what they're doing in their industry. So it's probably some of the best discussions we have is related to that education. Some of the things we talked about at regulatory environment, you know, the rating agencies just came out with their new metrics and so we updated them there and they ask a lot of questions about what's changing and why. And so they just don't take the education and and digest it. They give us feedback on it. So that interaction back and forth has been really helpful. We've also educated our board on mergers and acquisitions. You know, I said before we just purchased a hospital on the east side of the state and the west side of the state, you know, they kind of scratch their head and say, you know, we used to acquire hospitals that would refer business into us. And that's not always the case anymore, is we want to grow and do different things. And that education has been really important to having the board approved some of these transactions that maybe they wouldn't have understood before. So it , we continue to do it on a, on a , a meeting basis to where we're educating and they're asking for some of this , uh, we're gonna do a board retreat in December, so we try to do one a year and you know, m and a's a big part of that discussion again of what we'll have with the group 'cause it's ever changing in what we're doing. So a lot of things happening in the industry, we try to keep 'em updated and I really appreciate it when I get emails from board members or committee members asking me about something that's in the packet. I had one , uh, board member apologize to me because he hit me with like three questions and I said, I love it. I , I love the fact you're reading the packets, you're going through it, you're asking questions. And he is a , a member who's committed, who does uh , bring a lot to the tables. We have discussion. So that interaction with the board is really key, not only to help us govern, but to make us better leaders.
Speaker 3:So as we look at tightening our belts to face some of these challenges, how are your organizations, have you been , been able to preserve bedside resources, which are first and foremost to all of us, well at least keeping the corporate staffing at a level necessary to run an enterprise of the size and scale that you both operate. Have you been able to strike that balance?
Speaker 4:Well, I'm a big believer in benchmarks. I know a lot of people don't like 'em and this whole covid period has messed with them a little bit. Um, and like Mike said, we spent a lot of time just comparing ourselves back to 2019 as the first benchmark , uh, comparing to yourself internally 'cause you're on the same cost structure. Um, and with those benchmarks, that doesn't just apply to clinical operations, it applies to the health plan, it applies to our retail and our pharmacy. We have a large , um, specialty and outpatient pharmacy division. Um, it applies , uh, it applies to the corporate services and what I call the shared services, the big four, you know, revenue cycle, supply chain, it, and human resources. Those are the four largest services that, you know, drive the chassis. And , um, we take a lot of pride in being in top quartile in those, and that's a challenge. Um, when you talk about, again, as much as the labor market's been hit , uh, on the clinical side , um, the expense inside of revenue cycle and supply chain and it have had some similar effects. Um, so again, we talked about automation earlier. We have really been digging in in those arenas , um, largely because again, the workforce isn't always there. Um, either they're not always jobs that everybody wants. Um, so we've been leaning into that quite heavily. But I'm a huge fan of benchmarking. Those have known me throughout my career. Um, I don't think it's the , where you set the target, I think it's how you find the opportunity. Um, I find it leads , uh, when you benchmark, particularly with 10 to 12 different systems, that you have a tendency to find out who's out ahead of you . Like , you know, who, who took the leap and the risk to try something new. Um, and that allows you to learn. So , um, I'm a big fan of , uh, lean and , uh, incremental improvement can be interesting, but we're in a time where it's gotta be , um, almost, it not almost, it has to be transformational. Um, you know, you've gotta make a leap not just , uh, a bounce.
Speaker 5:Well, it seems like we went to the same business school because I agree with you a hundred percent on benchmarking. Benchmarking is a good guideline for us to identify where there's opportunity. All health systems have inefficiency. And Rob, when you ask a question about clinical side, so when I think clinical, I'm thinking bedside, I'm thinking the clinical providers, but there's a lot of clinical overhead as well. And so as we look at overhead, we're looking at both clinical overhead as well as non-clinical overhead or support. So we've really targeted , uh, the , the support part of what we do in looking at it. So when covid hit, even before Covid hit, we said we've gotta get our corporate cost in line. So a couple stats, it'd be hard for me to do this discussion without talking numbers, but , uh, in 2019 our corporate overhead is a percentage of revenue is 16%. We've gotten that number down to 11% now. And so it was done a couple different ways. It was done through growing the business, enhancing the revenue as I talked about before, but also trying to keep expenses flat. So we tried not to raise them. And so we went to all our corporate departments, especially during covid and said, try to eliminate your inflation. So what we meant by that was if you , if you expect you're gonna get 3% inflation increase, try to eliminate that the best you can. You can't do that in every department. And uh, I would , I would aspire to be at 25th percentile robin . So I think congratulations you guys to be there. Uh, we set our target at 40th percentile at least out of the gate to try to get people where they need to be understanding. There will be departments that need to be higher, there may be departments that we need to focus on equality or compliance or whatever the initiative may be that may need to be set at a higher level. But that guideline of benchmarking helps us better understand where we are and where we need to be. We even tie it to what we have a balanced scorecard and part of the balance scorecard, the balance scorecard's, quality service, culture and finance. And in the finance section, half the finance goal is tied to benchmarking and getting our departments where they need to be overall. So it is initiative throughout the organization and the organization has it , I wouldn't say embraced it, but they understand it is one of those tools we look at as we go through. But , uh, trying to get as much of the overhead out as you can so you don't have to go at , at the bedside or go after the clinical side. But we have cut some clinical services and we did that intentionally , uh, because it wasn't, these weren't financial decisions, they were quality decisions. You know, when you're delivering babies at a hospital that's small and you're delivering less than a hundred babies, that's not the best quality. So some of the things we've gone after to trim , uh, to improve quality overall has also enhanced financials. But that was not the intent. But we've looked at everything across the board to try and find what we can to make sure that we're a successful health system in the long run.
Speaker 4:Yeah, I think we've all had to face some of those big decisions. And, and I would agree with you, Mike, when you're making decisions about services, we start with quality, safety, experience, and team engagement and really access too . Um, and behavioral health has been a key service for us. And again, capital gets tight and we formed a great partnership with Acadia who's helping us build and expand a new behavioral hospital. Um , and that took two very old age units. It's gonna put 'em together. Um, and we , um, we actually started part of that journey before we move into the new facility , um, as they'll take over management. Um, just because they bring a level of expertise , um, that they're doing nationally , um, that , um, you know, it's that the model has shown has , um, just brought a greater attraction of talent. Um , the ability to, to have the units fully staffed and then again create this greater access. And on top of it, you know, they have, you know, they have the better cost structure. So I think when Mike talked about joint ventures in the past, we as health systems has to think about we can't do everything and we don't always necessarily do it well. And there are sometimes you're gonna choose and say, yeah, I'm in the top quartile and I would like to say, Mike, I wish I was in the top quartile in every single thing <laugh> , but you know how that goes. It's a range , but if I am not and if we're not , um, how, how do we make decisions that maybe it's a bias service versus make a service?
Speaker 5:Yeah. And Robin, that's a great point about joint venturing services. We've done a few of those and we want be partners in it. We don't want to sell services. So we want to be just like you guys are doing, make sure we have a seat at the table as we go , uh, provide to provide that service with the best partner possible so they can, they can enhance quality service, culture and finance , uh, if you choose the right partner. So the partner selection's really important, but I, I see more and more systems doing that, whether they're looking at post-acute, whether looking at labs or, or different services that are out there to find the right partner to be able to help them , uh, go forward as well as monetizing some assets.
Speaker 4:Rob, you must have interviewed Mike and I beforehand 'cause I like , uh, there's a phrase you just used . I think that's really important for any operational clinical leader or financial leader in healthcare. You know, if you lead with quality, safety and experience, the financials will follow because just because someone's financially underperforming, there's usually something else involved in that. And if you just try to fix the financials and not fix the rest , you actually probably do more harm . Um, so it really , uh, takes an effort on that balance scorecard in making , um, the portfolio reviews as well as the tactical financial reviews. Um, but looking at finance and isolation loan , um, you can make some mistakes and um, you know, I think probably Mike and I spend a good part of our time cautioning people around those as we're asking them to do hard things , um, to go about and do it the right way.
Speaker 3:So building on the comments on your joint venture strategies, how do you both look at your portfolios now and what the advent of more , uh, private equity backed companies with more for-profit companies coming into our space? How do you look at competing, partnering , uh, to make sure that you're best able to use your financial resources in the best way ?
Speaker 5:So I'll start. Uh, the answer is yes. You know, we private equity's here to stay. Uh, those who ignore it will be left behind. So our approach to it is partner as well as compete. So each, each , uh, initiative is a little different as we go through it. We partnered with some private equity backed companies and we do believe it's an important part of the future, as Robin mentioned before, because it can help make us better. There are things they can do that are better and you know, they're only targeting those profitable parts of our business. So from our perspective, Columbus is a very attractive market for private equity. So we get a lot of disruptors that come into our market. So we've chosen to partner with some, we've chosen to compete with others and some of 'em have chosen to go to our competitor, which is their choice to make if, if that's what they wanna do. The other part with private equity, which is interesting is , uh, we actually invest a lot in private equity. So what we find at times is we're investing in companies , uh, through our investment portfolio of companies we're partnering with as well. So it's an interesting twist to private equity as we go forward. They have nice returns, there is risk attached to that, but private equity will be something that we'll be dealing with for a long period of time. And they do bring a lot to the table. Uh , we've been fortunate, we've had a few come to us to kind of help up them develop things and so we're still , um, trying to mature in that part of the business, but it's kind of neat when you have them come to you and ask for help, understand they've got great resources they can provide, but , um, from our perspective, private equity's here forever and we'll , we'll try to work with them the best we can.
Speaker 4:Yeah, I I feel the same , uh, as Mike does. We, we here at Henry Ford have the whole spectrum of partnership and I think that there's great things that go on. I can, you know, you can pick certain aspects of it and you say, wow, they're gonna really , um, like mid cycle revenue cycle. There is so much going on there and people are moving far faster and automating things that if we were doing that on our own, we would be moving at a snail's pace and, and we would make it and then not necessarily keep up with it. So there are , um, there are avenues that I think that are gonna take us leaps and bounds forward faster. Um, and there's opportunities to partner with them to help them build that. And that comes, you know, sometimes with equity, sometimes it , it just comes , um, with getting a discount 'cause you were first , um, there's lots of ways to do that. I think when you get into the clinical aspects of it, I think it's gonna be an interesting , um, I think it's gonna be an interesting next five years as the , uh, PE companies have been into the physician practices. They've sort of rung the, the , uh, profitability , uh, has gone up in those and they've rung the costs out of 'em. Uh, it will be interesting , uh, about what the next evolution of that looks like as they take on risk. Um, and we've been down the risk train a couple times before and , um, again, I think , um, physicians are gonna have different places to choose depending on what types of environment they wanna work in. And I, that's probably gonna be okay and all of those things will make us , um, a better healthcare system in total. Um, I think the other end of it is some of the services I I do have a little worry when you talk about clinics and home care and , um, things that become more retail. And , uh, the reason I say that is you take a look , uh, we have a partnership with Contessa. Uh, they have now had three owners. So when you start these joint ventures, one person is your partner and then you have to be prepared that other people may be your partner. Um, and now we're looking at someone who's a major competitor like Optum, probably owning them and um, I'm not sure that was our intention when they got in, right? And currently it doesn't affect anything in the market. We're doing what we need to do, but if you roll that forward 15 or 20 years, I think , uh, we have to ask ourselves what that means. Um, and I don't think we know the answer to that yet. Um, so that's gonna play out a little bit. So I do think that there are some cautionary tales probably coming to us in some of these big roll-ups that are going on.
Speaker 5:Robin , that's a great point because you're right, as you partner with today may be different in the future. And , uh, building certain safeguards in agreements, we've tried to do that. Uh, we had one transaction that , uh, we've had to go to multiple times because of the change in ownership during the negotiation. So it is a great point and you have to protect yourself the best you can based on what you know today. You can't protect yourself forever, but , uh, just try to do the best we can with the current environment.
Speaker 3:So Mike, I think that's a great segue to our last question, which is , uh, you talked to our membership today. What do you look for in your internal and your external legal team as they seek to guide your business?
Speaker 5:I'll start and let Robin finish up. The , uh, I look at finance and legal being similar. Our role is to support operations and how we go about it. You know, sometimes we are thought of as decision makers and we really shouldn't be. We should really take difficult situations and try to figure out how to make it work if it makes sense. And I think finance and legal are typically are aligned in that situation. Um, sometimes, you know, I'll pick on finance a little and we like to think that it's our decision, but often it's not. And I think that's where legal and finance can be aligned. I'm very fortunate to have a great legal team here. Uh, Terry Meldrum and the team do a very nice job of what they do and help us find good solutions to what we need to be doing as a health system, but also are good business people. They ask good business questions from a legal perspective to make sure we're thinking of it. So I think , uh, having a good legal team that is multifaceted and not just focused on the legal side's really important. And when you have that, you kind of using 'em to their full capabilities.
Speaker 4:Yeah, I think we think about it the same way. Um , my legal colleagues, we, we are arm in arm every day. We are their advisors , um, for operations, you know, you know, they have the vision of where they want to be clinically and where we need to go and we're here to support helping make that a reality. Um , but we also bring reality, right? So it's our job to think about the issues and the concerns and the what ifs and you know , the 1% of things that might happen to us . Um, and , um, but, and do it in a way that, you know, you put the guardrails in place, you get it in agreement the way it needs to be. You know, as Mike referenced, you've gotta put some controls around some of these things that you can't control and you can't know the answer to. Um, and I think that's what good legal partners particularly are for. I mean, when you'd wanna talk reps and warranties any day, you know, my husband's an m and a attorney and I've, I've sat and listened to him my whole life here. Um, but it's , uh, you know, they're exceptional at that and it's a skill. Um, and there's lots of people just like they wanna be finance people think they can be attorneys and , um, I would caution people against that. Um, I do think they're, they're great partners. They offer great advice , um, to both the clinical and operation team as well as the finance team.
Speaker 3:Great. Well, Rob, Mike , after listening to you both today, I could tell your organizations are very fortunate and blessed to have you both, not only for your financial stewardship, but also in the way that you execute your strategies , uh, with mission being at the forefront of your work. So thank you for all that you're both doing for your communities. Thank you for sharing your , uh, time and talents today with our membership. And we look forward to future sessions of these c-Suite podcasts. Thank you.
Speaker 2:Thank you for listening. If you enjoyed this episode, be sure to subscribe to AHLA speaking of health law wherever you get your podcasts. To learn more about AHLA and the educational resources available to the health law community, visit American Health Law .