A Discussion with James Hereford, President & CEO of Fairview Health Services on COVID-19

April 2020

Hi, I'm Dave Morlock, Managing Director in Cain Brothers’ Health Systems M&A practice. Joining me today for our interview series is James Hereford, President and CEO of Fairview Health Services, one of the nation’s leading health systems, based in Minneapolis.

What level of demand for COVID-19 testing and care are you seeing at Fairview, and what's been your ability to meet that demand?

It's been difficult to meet the demand for testing. Ideally, we would have been as a country, as a state, and as a healthcare system, doing much more broad-based testing, so that we understand the prevalence of the disease. It would have changed the way that we could have done contact tracing and follow up to limit the spread of the disease. We have struggled, in large part, because of a supply side issues in terms of reagents, but also a testing medium, and even swabs to test.

It's limited our ability to only perform the necessary testing for those with the most acute needs, but it’s nowhere close to what we'd like to do. Hopefully that situation will improve over time, but the opportunity for early surveillance testing methods has passed. It also impacts our ability to keep our healthcare workers working and understanding our ability to test quickly with both the polymerase chain reaction (PCR) tests, and serum level tests, which will be critical for our ability to maintain the workforce we need for the surge in front of us.

Are you seeing a material increase in the medical staff and other care providers contracting COVID-19? Everything is material, but we haven't seen a huge percentage of cases yet. We have taken as many steps as we can to protect our staff, including universal masking. It is especially crucial now to try to maintain their health while we're still on the flat side of the epidemiological curve. How about the actual delivery of care for COVID-19 being on the flat side of the epidemiological curve?

It's been a gift to have the prep time, and I couldn't be prouder of my team. Our Chief Nursing Executive and Chief Operating Officer Laura Reed, Chief Medical Officer Mark Welton, and University of Minnesota Chief of General Surgery Greg Beilman, run all our acute side settings. This team has done a wonderful job of preparing and creating surge capacity. We converted a long-term acute care hospital (LTACH) into a COVID-19 hospital in about seven days. It has been gratifying to see the entire system come together to accomplish things that I don't think we would have thought possible prior to the presence of a pandemic. We continue to work diligently, but most of the big lift is behind us, and now we are in that strange waiting period as we see the ramp up of cases.

What are the pressure points in the supply chain and with staffing that you're seeing through all of this?

There's several. Obviously, with respect to the supply chain - ventilators are difficult to get right now. As we continue to expand our surge capacity, access to ventilators is quite likely to be one of our rate limiters. All types of PPE, whether it's face shields, or N-95 masks, or regular surgical masks, or protective surgical gowns. All are in a shorter supply than would make anybody comfortable. That is that one of the disadvantages of being a little late to the game for Minnesota and the Twin Cities. A lot of that stock is going to the places that are truly the hotspots right now, which are Seattle, California, and New York.

My hope is that a lot of that's going to catch up to us as we start to get into the peak of this pandemic. We're also developing nontraditional suppliers, and it's always difficult to separate what's real versus what's a misrepresentation.

But we're advantaged here, because of our medical alley consortium, of really having the capability to vet overseas suppliers, whether they're in China, or elsewhere, to make sure that what we're getting is going to meet the quality needs of the organization.

How about capacity in the ICU? How are you planning for those issues over time?

We’re trying to create as much surge capacity as we can, which is why the entire state has shut down elective cases about a week and a half, two weeks ago. Obviously, there is a financial impact to that decision, but it has allowed us to free up a lot of existing ICU capacity. We have not consumed a lot of the PPE at the same rate that we would have, but the bigger piece is going to be the surge capacity. The conversion of an LTACH into a COVID-19 hospital allowed us to create another 35 ICU beds.

As part of our surge planning, we believe we can leverage a lot of our existing space at the Academic Center at the University of Minnesota. Some of that space can be converted into a surgical suite, as well as a recovery suite. Some of it depends on where we have negative pressure, and inventive use, but we believe we're going to be able to expand that ICU capacity significantly. The challenge is when we look at the models, it is still not enough.

Collectively, across the Metro area, all the health systems are doing this, but it still won't be enough to meet the level of surge predicted by the models.

What are the additional resources that, you're trying to secure, whether they're financial, supply related, personnel related in order to address that expected surge that will be coming in the next few weeks?

We’ve been very actively working closely with the state, and I think our state government has done a good job of implementing their incident command structure, looking to source supplies, and providing significant assistance, but we're still looking to see how the stimulus will be enacted administratively. Our state has taken steps to create financial support, and they have appropriated money from the state legislature. So, there are a number of things underway. The challenge is that none of that, from a revenue perspective, is enough to cover the opportunity costs in forgoing higher end surgical cases. It’s a problem that all healthcare providers have, and it will inevitably create a bit of a shakeup in our industry as we get to the other side of this.

With things like social distancing and stay at home orders, there's a unique dynamic in place now, in terms of communicating. How are you approaching your communications and the leadership of your staff and team during this time?

We're somewhat advantaged because we had some mechanisms in place, in the work that we've done around lean management. The fact that we have a tiered management approach and daily huddles enacted as part of our incident command structure have helped significantly in terms of the overall ability of the organization to communicate. What is also clarified for us, though, is some of our shortcomings that you wouldn't necessarily notice in normal times. For example, email is really a poor communication channel to staff. When things are changing and evolving as we continue to learn through this pandemic, email just doesn't keep pace.

We're working to implement some new tech space, and with more dynamic and easier to use communication tools so we can ensure that our staff of 35,000 people is aware of what's going on. Because there's so much of the unknown and misinformation out there, it is critical that we have a much tighter loop of communication and feedback with our staff. That's really been highlighted as a gap, and a credit to our IT teams who have probably accomplished two years’ worth of work in the last month and a half. They have provided capabilities that heretofore, we just didn't have.

Across all these dimensions, what would you describe as your early learnings in this crisis, given that we're now three to four weeks into it?

We kind of knew this already, but healthcare loves a crisis. We probably are at our best when things are really at a critical point.

You go into an organization, you start talking to them about their organization, and then you ask them to talk about a time they were extremely proud. Inevitably, it comes down to some emergent situation, a strike or some other situation. When I was at Stanford, there was an airplane tragedy at San Francisco Airport with a mass casualty event.

It's often around those crises when healthcare organizations are at their best. We get a lot more focused around, "Okay, so what do we need to do to care for our patients?" And so, I think that's the thing that is most salient in terms of reinforcing that learning.

It’s also highlighted just how person-dependent we are in so many ways that we don't necessarily have the level of infrastructure, or we've resisted the level of infrastructure to do the kind of teleconferencing that now is the norm. We're on it all day long, and we find it works completely effectively, as opposed to ‘let's schedule the normal meeting and not get much done.’ I think in many ways it's really going to change our work patterns, and it's certainly changing our practice patterns.

When I was in Seattle working in a prepaid health system, I was leading the care delivery system. More than half of our primary care visits were virtual, but that was the product of a lot of work. In the past month, 80 percent of our primary care visits have become virtual. And our physicians and our teams are really rising to the occasion, meeting our patient's needs in unique ways. But I think we're learning that those changes aren't so scary. We can adapt to them quite capably, and they're effective. I think there's several things that are going to be fundamental changes to how we think about our healthcare system as we go forward.

It will be interesting to see if the state and the federal regulators, on the other side of this crisis, are as adaptable to those changes as I think our people have proven that they can be.

That is a really good point, because I think a lot of people have been asking, "Will the care delivery system resist the changes that the payers or the risk takers want?" One of the things that this has precipitated is that the care delivery systems have really embraced and initiated those changes. I think it'll be an interesting conversation on the other side of this, about now, how do we start to think about reimbursement differently as we're informed about our experience here?

So how do you tackle the broad conundrum from a public health, economic and leadership perspective of balancing the desire to reopen the economy with the desire to get control over the spread of the virus? How do you wrestle with that conundrum?

The science and the math should guide us. Clearly, you're talking to a guy who spent too much time in math classes. But I think that is crucial, because there is a temptation and I understand that fully. This is a huge economic blow, and it's a disproportionate blow to people who don't make as much money. The challenge is, if we try to open things up more quickly, what we're going to end up doing is have a negative effect in terms of the spread of the disease, and the reoccurrence of the disease. It’s going to have an even bigger impact economically over the long-term.

There've been a lot of analogies drawn to World War II. You're going to have to do what it takes, and take the economic hit, make this as short as humanly possible in terms of its impact and trust the science. We’re early on in this. We're going to see significant improvements in the treatment, and I believe we're going to see significant breakthroughs on the prevention side, but we're just going to have to take our licks here for the next month or two, hunker down, get through this, get that R naught below one, so this disease dies off, for at least this period of time, and trust the science to continue to progress, so that we are in a better position when there's a reoccurrence.

Join James Hereford, President & CEO of Fairview Health Services and Dave Morlock, Managing Director at Cain Brothers, in a discussion of the COVID-19 pandemic, its impact on the healthcare sector and how Fairview Health Services is responding.

James HerefordJames Hereford is president and CEO of Fairview Health Services. Based in Minneapolis, Fairview is $5.4 billion non-profit, integrated health system affiliated with the University of Minnesota. Fairview’s 34,000+ employees and 5,000+ system providers provide exceptional clinical care, from prevention of illness and injury to caring for the most complex medical conditions. Fairview has proudly served its communities for more than 100 years.

James provides strategic direction and ensures operational effectiveness for Fairview’s entire continuum of services, which is unmatched in the region. Joined by HealthEast in June 2017, Fairview is one of the most comprehensive and geographically accessible systems in the state, with 11 hospitals—including an academic medical center and long-term care hospital—serving the greater Twin Cities metro area and north-central Minnesota. Its broad continuum also includes 56 primary care clinics, specialty clinics, senior living communities, retail and specialty pharmacies, pharmacy benefit management services, rehabilitation centers, counseling and home health care services, medical transportation, an integrated provider network and health insurer PreferredOne. Fairview also is a founding member of specialty pharmacy network Excelera and many other unique partnerships that advance our vision of driving a healthier future.

Prior to joining Fairview, James served as chief operations officer at Stanford Health Care. Previous roles included chief operations officer at the Palo Alto Medical Foundation and a series of leadership roles with the Group Health Cooperative in Seattle.

James holds bachelor's and master's degrees in mathematics from Montana State University. He has taught courses with Stanford University’s Graduate School of Business, University of Washington’s Master of Health Administration program and The Ohio State University’s Masters of Business Operations Excellence program. He is a frequent writer and presenter on the topic of lean management systems and transformation.

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