It was a difficult decision to leave PAMF after such as short time, but I don't regret it for a second in terms of what I was able to learn at Stanford over the last 4 years or so.
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Q: I understand, James, you're a big evangelist for Lean management techniques in health care. You have spoken in the past about our current, broken system that expects physicians to be 'heroic' and make a 'non-system' work—instead of just eliminating all the rampant inefficiencies.
Say more about that. Hereford : Your characterization is spot on. We've got a health care system right now that requires people to do heroic things to accomplish relatively straightforward things—we've overburdened providers with activities that have nothing to do with care delivery. That's where Lean comes in, because this dysfunction as health care evolves into larger, more complex systems comes down to how we operate our systems and processes.
That ability to really understand and manage your processes well is not what we do well in health care, despite the fact that we have a vast number of reports on how unsafe, low quality, and unreliable the care processes are. Q: When you've spoken about Lean in the past, you've mentioned Autoliv—a Swedish airbag manufacturer in Ogden, Utah—that you'd like to take a delegation from Fairview to visit.
What stuck with me was when you ask any Autoliv employee what they do, the answer is—. They believe it. Get your staff rowing in the right direction. And yes, I'd like to take the board and senior management to visit Autoliv just so we have a sense of what great looks like. Between the time they started in the late s and about , Autoliv had a fold increase in productivity simply by getting a little bit better constantly. They are nowhere close to a port, nowhere near Detroit, nowhere near an auto manufacturer of any sort—but they are a tier-one supplier for every car manufacturer in the world.
Now, making airbags is different than health care delivery systems. But that attention to detail and the engagement of the staff—it's all driven by that ingrained belief in each employee that he or she is saving lives. What they do is straight forward, very machine and human-based, but incredibly disciplined, incredibly consistent, and the entire workforce is engaged in the pursuing excellence, and the results show in everything they do. Q: Let's pivot to Fairview. Before you assumed the CEO position, it was arguably the most scrutinized CEO vacancy in the nation, just because of how protracted the search was.
Hereford: Yes that is very true. A complicated and definitely extended process. When I was approached with the role, I didn't know much about Fairview.
I had heard a little bit here and there, but they weren't in the conversations that I was having around the best care delivery organizations in the country: the Intermountains, the Kaisers, etc. Ensure seamless leadership transitions.
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But the more I read, the more intrigued I became. It felt like this organization was an incredibly undervalued asset, and that its primary problem was a lack of integration. I felt—and the board agreed—that the organization needed to move from a holding company to an operating company. Now, if I think of anything that has been consistent across the places I've been, it has been this idea of, "How do we integrate more effectively?
I met with the selection committee, and I told them early on, "I'm not interested unless your aspiration is truly to be one of the best care delivery systems in the country. You have every potential, every attribute that you would want to have—it's just a matter of putting it together. But I said, "Well, look, it's like being told you have a Ferrari. And you go out, you open up the garage door, and sure enough there is a Ferrari there. It's just strewn in pieces across the floor—but if you put it together, you're going to have a heck of a car.
Q: You mention these pedigreed institutions—Intermountain, Kaiser, etc. Just speculating, but I would think that one of the main advantages of Fairview is that after this period of transition you and your team can be instrumental in defining that identity anew. Hereford: Yes, I agree with your thinking here. Fairview's in the position where it doesn't have to pull the kind of legacy structure with it like many other integrated care organizations. We've been good, but not yet great, and that means there's no success story we've got to overcome to enact change. It's the sigmoid curve. You accelerate at some point and then at some point it starts to level off.
And the challenge of organizations is figuring out how to jump from one sigmoid curve to the next one. For those other organizations, it's hard to be the interrupter of your own success, to really make that jump from one curve to another. So there's an opportunity for Fairview, if we're willing to seize it, to really think about our future, and what it's going to take to be an incredibly strong, capable care delivery system providing unique value to our community and to the state.
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Q: There's a lot going on for Fairview these days. You've engineered the HealthEast merger adding 3 hospitals and 14 clinics , you've incorporated the PreferredOne health plan into the health system, and you continue to iterate on the alignment structure with the University of Minnesota Physicians.
How are you thinking about navigating these strategic issues, both a mixture of new and already 'in-flight' priorities? Hereford : There's definitely no shortage of things to do. There was a lot of, "Well, let's wait for the new CEO," and so there is a certain amount of pent-up inventory. The dam burst a little bit when I started in December, but with that comes the opportunity to fundamentally think, and rethink, who we are and where we're going.
During those first few months, we took the senior team through a strategic refresh and just talked about who we are, what we're good at, and where we need to go. That was very helpful in getting a level of focus that I think is one of the most important attributes for any organization—we're not trying to chase all the shiny stars; we're focusing on the three or four things that you feel, "We've got to do this well.
Q: Let's dive more deeply into just one of these—prior to your arrival, Fairview exercised the option to purchase the additional 50 percent equity position in PreferredOne. That's about , lives altogether, of which about 50, or so are under full capitation. How are you thinking about a provider-sponsored health plan as a strategic asset in the context of some of the clinical and delivery system innovations you are implementing?
Hereford: Our health plan is never going to be a mega health plan. That is not our path or destiny. So within the state, I think we'll always be a contributor—but we're never going to be the answer. But I am happy that we have a health plan for a few reasons. One, we get an opportunity to be innovative about bringing together both sides of the care continuum: the health plan and a care delivery system.
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Second, I think it's important to have some diversification in your revenue streams. We have a large ASO business, and a network rental business, and I think that's very helpful, because developing good direct-to-employer relationships is part of what Fairview's challenge is, especially with medium and large employers. PreferredOne really gives us a more complete portfolio in terms of value-added possibilities—such as wellness programs or health analyses—for those medium and large employers. And I think that's important, because if you don't have that kind of a relationship you're simply a member of a network.
Q; The CEOs of some of the more tenured provider-sponsored health plans—Geisinger, Intermountain, Presbyterian—talk about creating a culture of a singular system with the delivery side and insurance side fully integrated. But what I heard you just describe, James, is different. It sounds as if you are intending to employ the health plan as an 'incubator' for delivery system innovation. Fair characterization? Hereford: Yes, absolutely. I don't need to tell you how brutal the insurance game can be, certainly from an actuarial perspective.
I think health plans are great at managing actuarial risk—that's what they do really well—but they're not great at managing care delivery risk. That is where care delivery systems have to be able to step up, and I'm not sure that care delivery systems, universally, have stepped up. There are certainly great examples: Group Health, Kaiser, Intermountain. But I think the opportunity for Fairview is really to be able to think about, "What do we have to do from a care delivery system at both ends of the complexity spectrum?
That ability for a care delivery system to manage care risk is critical.
Q: Let's turn to another key strategic priority for Fairview—your academic partnership and affiliation with the University of Minnesota. As I understand it, there are two different agreements? Hereford : Yes. There's the year affiliation agreement that was conceived of in and runs through , and then we have the five-year MHealth agreement that was made in We're coming up on the opportunity to rethink that MHealth agreement, but we still have the long-term affiliation agreement.
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