Gary Bisbee 0:00
Good afternoon, Tim and welcome to the podcast.
Tim Pehrson 0:02
Thank you. Happy to be here with you.
Gary Bisbee 0:04
We’re pleased to have you at the microphone. We’ve been talking a bit and all of us realized that the Coronavirus search is highly variable by region, what’s the status of the surge in Integris Health’s primary service areas?
Tim Pehrson 0:17
Really the surge never happened the way that we thought it would in all of Oklahoma. We obviously were pretty good at sheltering in place, or we already just sort of live a life of sheltering in place because we’re a little more spread out than some of the places where this has really taken off. We still have our eyes at the data and looking at what’s going on but so far, it hasn’t been that bad. So for context, we’re a 19 hospital campus, 2,000,000,700+ employed providers system. And we’ve had 130 COVID patients total this whole time Integris. So we just haven’t had a lot now we hit a lot of PUIs, but those PUIs eventually came out as flu or other types of things that were associated with a regular illness that was in the community.
Gary Bisbee 1:08
Clearly, some hotspots 5,6,7 hotspots around the country. But a lot of the country has not received what was predicted. So what’s your thinking about going forward? It’s likely this is going to happen again, some other kind of virus, how do we begin to differentiate between regions of the country?
Tim Pehrson 1:29
Well, I think we need to do just that. Find a way to foster creative approaches to problem-solving, whatever it is. So in these scenarios, we look at the data, we make the best judgment and then we adjust as the data suggests. I’m not critical of the country, and the world shutting down. I think that that was completely appropriate based on the data. But now we know that the case fatality rate is much lower than we thought and it is still a very contagious disease. Largely focused on a certain kind of population, mostly co-morbid and some of the elderly. So that takes you to a strategy that would be slightly different than the one that we pursued. But we didn’t know that at the time. So you can’t be critical of that but I think we should be critical of ourselves if we don’t start reshaping the messaging around this. And I think that’s happening. I mean, we’re seeing loosening restrictions, and you just have to continue to look at the data as it evolves, and make adjustments along the way. Again, we sheltered in place to preserve healthcare capacity to take care of people, if the health systems are capable of taking care of people, then there’s no reason to shut down completely the way that we’re doing. Now, obviously, Oklahoma has come out of that. And we’ll continue to make adjustments and look at the data and then make more adjustments.
Gary Bisbee 2:44
I would guess that we would spend more energy and more resources on our modeling too, and try to make that much more sophisticated so that we could tell some of the differences in regions that we ran into with COVID.
Tim Pehrson 2:57
Yeah, I think that’s actually a great point, Gary. Because I think the modeling that I was exposed to was just the same that everybody else’s really didn’t have that regional approach. And we had some of our data scientists and statisticians and epidemiologists create a local model that was actually very highly accurate and was showing that we were on the downside of the curve well before anything IHME was showing or any of the other models. So I do think we’ve got to come up with some better modeling that factors in some local uniqueness.
Gary Bisbee 3:32
We’ll come back to that later. But what about the Integris supply chain thinking now about testing? PPE? How’s that been? Have you had shortages?
Tim Pehrson 3:44
The early part of the COVID shutdown was very frustrating from a testing standpoint. We were getting tests turned a lot longer, a seven-day type of timeframe. So we have these patients in the hospital that we don’t know if they’re COVID or not. So we have to treat them as if they’re COVID. With all the PPE, we have a joint venture with Quest that’s called diagnostic laboratories of Oklahoma or DLO. And when we work with them, they’re a great partner to us. And we got more testing capacity that was initially closer to Oklahoma and then eventually right here on one of our hospitals, which gave us turnaround times within four hours or less, and that really helped a lot. That’s been much better. We still see some of the issues with some of the testing supplies that continue the same type of supply chain stuff associated with testing supplies that the rest of the countries are facing but for the most part, that hasn’t been a problem for a number of weeks. PPE continues to be a real problem, particularly N95 masks. The demand is such that it’s just really hard to get our hands on it. That is probably our rate-limiting factor in us getting more back to normal absent any of the market dynamics that occur in people’s psyche, about coming in for care
Gary Bisbee 5:05
Thinking about testing and PPE going forward. Some are predicting there’ll be another surge, in the second half of this year, perhaps even next year. How can you get yourself a position in such a way that you can not run into problems with the testing, and PPE?
Tim Pehrson 5:24
First of all, I don’t want to tell that on a podcast because nobody else did the same thing.
Gary Bisbee 5:30
No secrets here.
Tim Pehrson 5:31
Just kidding. I’m in this with everybody else. But I’ll tell you, we’re doing everything right now to get as much PPE as we possibly can for today, as well as for tomorrow. And I think the long term strategies for America in general is we can’t be so addicted to the lowest cost, just in time. I think we still need to pay attention to that. That’s an important part, but we need to have some manufacturing capabilities in other locations. So when we have these situations happen, the capabilities are there to deliver what’s needed when it’s needed. It’s easier to spin up more production if you actually have a place to produce it than it is to have to create the production line from scratch. And I think that’s where we found ourselves in the world, relying largely on parts of China to handle all of our needs? I think there’s going to be some policy changes. I’m hopeful there’ll be policy changes. And we will definitely be pushing our supply chain and our GPOs to work through getting some local sourcing, at least in the United States, sourcing for certain PPE. And I would say too, we’re part of the silica deal. And that really is a guaranteed production level. It may have been addressed at a different source, right or different problem. But the concept is similar, right? It was, hey, if we can produce a certain amount and guarantee a certain amount. We’re willing to pay a price for that, and know that we’re going to get these pharmaceuticals that have been played around by some of these manufacturers. So I think not unlike that, we’re going to have to think creatively about the supply chain and how we get more stability for such crises like what we saw.
Gary Bisbee 7:17
Regardless of what happens at the national level, you and your colleagues are totally united and making sure you address this supply chain issue going forward. Looking at your caregivers, has there been any real negativity? It sounds like there haven’t been enough cases to really cause a lot of stress on the caregivers.
Tim Pehrson 7:38
It was obviously very scary for everybody at first and there were a lot of concerns. I mean, we probably had the same types of news stories of a caregiver here or there write an email to a local press saying we weren’t giving them what they needed to be safe. There was an inconvenience with what they thought they needed to be safe versus what the CDC was saying. And of course, CDC was shifting a little bit as the supply was tightening. So we were following the CDC guidelines that created stress and concern. But as we started communicating in a more robust way to the caregivers and providing alternatives and providing creative ways to preserve PPE, that really went away and then it obviously turned to, “oh my gracious the volumes have fallen out the floor.” We don’t have any work to do. And that has become a stress for our caregivers. Because they obviously need to take care of their families. And if we can’t provide them work, it creates stress for them. So I think those are probably pretty similar to where everybody else in the country.
Gary Bisbee 8:40
How about telemedicine. Did you see an increase in the use of telemedicine visits?
Tim Pehrson 8:46
I would say that this is going to be one of the things that we look back on and are grateful for COVID as we’ve been talking for years about the need to be more consumer-focused and friendly, but it’s been a hard move. At least for here in Oklahoma and in my past life as well, it was just a slow slog. And I think largely that was just the providers having a hard time wrapping their heads around how to do it. I think there was some willingness with patience. Now you have two interested parties who want to get care and give care. And the only way to do it is to do it through a virtual setting. So 50% of our medical group’s visits were virtual and have been virtual and they continue to stay as we’ve loosened restrictions. 40% are still that way. The way we’ll be looking at it as it’s between 30% and 50% of the care particularly for some specialties will continue to be done through virtual settings and will be a great thing for our consumers and a great thing for our physicians. I think that’s going to be absolutely fabulous. We also introduced as many did a chatbot see a feature that created machine learning chatbots around self-diagnosing. COVID we saw that to be really positive for our community and an avenue for us to advance that beyond just obviously COVID when we were really worried about conserving PPE, we were looking at expanding inpatient consults to a virtual setting. And we never got to the point where we actually did that because the PPE ended up loosening a little bit. But that’s also something that we need to chase down and explore even further and experiment with. Because I think that there in some instances, it can be just as good as the in-person thing.
Gary Bisbee 10:44
Well, now with receiving more or less equal reimbursement for a physical visit or a virtual visit seems like there will be more incentive for providers to do the future-oriented work you’re talking about. Would you agree?
Tim Pehrson 11:00
That’s a game-changer and it has to stay. It really does. I know payers and Medicare have been worried that there’s going to be gaming and so forth. I think this is what the consumers want. And I think if you can get access to a provider early on and take care of these issues, you’re going to save a lot of downstream costs through not needing additional work because it wasn’t convenient to go in. I’m really hopeful that CMS will keep it and I’m hopeful that the commercial payers will put it in place and keep it there and not try to game it with some sort of discount factor because it’s telehealth because it does cost money to put that infrastructure in place. We found still, that there was a reasonable amount of cost and just setting up the rooms now we might get better over time, in terms of how we have the other caregivers wrapped around for that virtual visit, that it might get more efficient, but still, I think there’s still going to be costs associated with doing that. So I’m very hopeful that they don’t try to monkey around with that because that would be a shame. And I think it might drive us back to doing some of the other things that we were doing that really aren’t consumer-focused and friendly.
Gary Bisbee 12:08
I totally agree with that. Let’s move to elective surgeries. You’re in an interesting position, Tim. I think you’ve been coming back to elective surgeries now for maybe two weeks, much of the country is just now beginning. So you’re a bit of a test lab. Can you share with us how you found the last two weeks and moving back to elective surgeries
Tim Pehrson 12:29
Before our governor put a hold on elective surgeries in March. And because of the PPE burn, we decided to just stop doing them because we didn’t think we’re going to have enough for this surge that was going to come. And so when the governor said, “Hey, I’m lifting the restrictions on elective surgeries on the 24th of April,” we had physicians just ready to go and a lot of the community gone six weeks or so without those elective procedures. So we still have the PPE concerns so we’ve created an algorithm that our physician leaders created to help protect the PPE. We’re working down the elective heart, surgical procedures, and so forth on more urgent nature procedures. And we haven’t yet turned on elective hip surgery, for example. But those are coming. I mean, today, probably 120% of normal on those surgeries. The first week, we were at 90%. Again, we could have been probably 140% that first week, if we would have just had enough PPE to handle it. Now that backlog gets work. I don’t know what the demand will be if it’ll just go back to normal or if it’ll go back to this new normal that we think is which is normal minus a certain factor. It’s hard to tell. We think it will definitely go back to normal plus a payer mix change to the negative. At any rate, it’s been pretty encouraging that the volumes have come back. Now, emergency rooms are still pretty empty. And the revenue for my system is still 30% behind. And so we spent a lot that’s not opening even though we’ve opened or functioning normally, just because people are nervous to come in and leave, send a message to stay home. And now we need them to start getting back. But people are dying from strokes and dying from heart attacks because they’re afraid to get COVID and they’re at eight times greater risk of dying from heart disease, then COVID. So we need you to come in and get the heart procedures that you need done.
Gary Bisbee 14:41
There’s been a general concern that patients would be reluctant to come back for elective surgery because of their concern about COVID. Doesn’t sound like you’ve found that actually?
Tim Pehrson 14:52
So far we haven’t and we’ve been changing our messaging over the last probably a week before we knew we were going to start reopening. We started sending out messaging and it was actually part of our medical group plan to get people into the clinics, or at least in the telehealth of saying, “Hey, you can safely come in.” We’ve got these different avenues we created, for example, in all of our check-in points that we don’t have waiting rooms, we just get people right in, we have people waiting in their cars, and we’ll text them when it’s time to come in. We try to create a just in time experience for the patients so that they don’t have to sit in areas and then we’ve tried to communicate that that’s the way we’re keeping them safe. And so far, that’s worked. But again, we’re working off of six, seven weeks of backlog. So there’s a lot of anxious people. We’ll see how well that sticks as we start getting that backlog worked out where people’s minds are coming out of this COVID crisis psyche.
Gary Bisbee 15:50
Right. So, Tim, you mentioned the revenues down by 30%. What will be the effect on the 2020 Integris financials?
Tim Pehrson 15:59
End of June we finished our FY 20, and it’s devastated. I mean, all of our metrics were tracking perfectly in our finances. We’re where we had planned them to be. And that’s been shot in two months, really a month and a half. And so we anticipate the rest of this year that it will have quite a deleterious impact. We took some pretty early actions as a leadership team. So there were several pieces obviously we volume adjusted everywhere leaning and we’re all the direct patient caregivers are. That’s something that we did even more purposefully. So for example, I have a big medical campus that has two campuses, one across the street from the other. They used to be two separate hospitals. They’re now licensed as one. One of the hospitals had 10 or 15 patients in it. And so we said, well, we’ll keep the emergency room but we’re going to move patients over to our Northwest Campus because we can optimally staff that way. So we’ve been pretty aggressive in trying to look for direct patient caregiver volume adjusting, but then we also did a real furlough for our non-direct patient caregiver, people. And that’s never been done as long as I’ve only been here for 18 months, but from what I’ve been told, my COO has been here for 30 plus years, and it’s never been done. So that’s been an interesting shock. And we’ve been able to flex down our work hours about anywhere from 20% to 30%, of what we were running before. So that’s going to be helpful, but not enough. Obviously, executives took a 20% temporary pay cut, we stopped the match for the 401k. And 403 B’s this year. Something we don’t want to keep in place forever, but it’s something we’ve got to do. And we’re just looking at new ways to try and survive and I think we’re gonna have to do even more. Because the impact for a financial perspective is really great advice coming from a balance sheet. That’s pretty strong. We have to react. And if we don’t, then we’re going to be hurting even worse. So 2020 is going to be a disaster. It’s going to impact our fy 21, which starts in July. And we’ve got lots of different scenarios that nobody knows what’s going to happen. I mean, this is the trick right now. Meeting with my board talking about next year. Normally, we’re bringing in our capital and operating budgets. And our capital budget, obviously, is pretty easy to slow down a lot. But the operating budget is literally a guess. I mean, nobody knows where it’s going to go. And how this is going to come out. We’re trying to tell the board to listen, we’re a forever organization. Let’s look out two years, we’re going to take the best stab at what we think will happen here. And we need to not look at it as a budget, we need to look at it as a weekly monthly rolling forecast that we just keep adjusting to throughout the next 18 months and then we will get to a point where it’ll stabilize. So we can predict a little bit better. And at that point, we can firm these up more in terms of budgets and forecasts. But right now, it’s pretty murky. I think it’s pretty murky for everybody.
Gary Bisbee 19:10
I think that’s right. Thinking about Integris health. Would you just give us an update on Integra itself? For those of us that aren’t that familiar with Tim?
Tim Pehrson 19:18
Yeah, sure. We’re Oklahoma’s largest health system, to $2 billion 19, hospital campus, and 153 clinics 700 and employ providers, about 1500 physicians that are clinically integrated. We’ve been in a community for more than 100 years. So it’s a great organization. It’s got a history of being the leader in the community. Medical first starts here, we end up taking care of a lot of the very, very high-end stuff, even though we’re not an academic medical center, we do have teaching going on and the kinds of stuff that we do here. You would think It was a teaching facility based on the difficulties, the cases that we take care of at our flagship hospital. But we’re also out in the community in community hospitals and some rural areas. And we have clinics everywhere. We’re an important Oklahoma asset that is a thought leader in the community.
Gary Bisbee 20:21
How would you describe the culture of Integris? You kind of referred to that, but how would you describe the culture?
Tim Pehrson 20:28
I think it’s kind of what I was saying there. I mean, it really has been built on being the leader and the leader in the community, the leader in the region, and doing hard things in the community. The culture is great. It’s a wonderful family feel. People are really open to concepts around continuous improvement. You know, I came here, having been the leader of that at my prior life and another organization, and people have embraced that culture of continuous improvement and driving best practices. So it’s been fabulous. It’s a great culture.
Gary Bisbee 21:02
Back to COVID for a second. Did you implement a remote working policy for any of the Integris?
Tim Pehrson 21:09
Yeah, actually, for a period of time, even our whole executive team was remote. But we moved them off-site, everything that could possibly move into a remote setting. We made those changes. And some of those are still in place. And I think that will stay in place forever. We’re actually in the process. We’ve got a couple of buildings that are coming up for lease. And we’ve been thinking we created a new corporate office somewhere in the question, I think we’ll still do that. But the question is, how much space do we really need? Because we think that a lot of this can be done remotely. And obviously, we don’t know what the long term furlough effects are going to be. And so we’ve got to just be smart about that. But yes, I think remote working has been great when I in my past life, before coming to Integris LED that process for innovation. And then driving a lot of the remote working thinking. And because the region that I was responsible for was separated by a two and a half-hour drive, so it was very nice to be able to organize that way. And I’ve just found it to be so effective to work in that environment. Obviously, I’d love to be meeting with people in person all the time. But if you can’t do that, the next best is some sort of a virtual camera experience where you can see people and, and get better at it.
Gary Bisbee 22:28
Do you think on the M&A front that COVID situation will increase M&A, or decrease M&A among our health systems?
Tim Pehrson 22:36
I think it’s gonna increase it. I think that the strong are gonna take the opportunity to do things strategically, and the weak will need to have help. It’ll be interesting to see if the strong are super aggressive. Or if they’re really more, what’s the right strategic move as opposed to just getting bigger for bigger sake.
Gary Bisbee 23:01
Where does scale matter?
Tim Pehrson 23:03
I think scale matters all the time. But I think particularly like in the supply chain revenue cycle, your digital going out the markets, the financing piece of it. Clearly, there are benefits from being bigger. However, I will say that the economy that we had was such that there was so much capital deployed into healthcare innovations, particularly in those areas that I was just describing, that you could almost acquire the expertise that someone else would have if they had an essential who has this big, broad national footprint. You can almost acquire that at a pretty good price and get much of the technical capabilities that you otherwise wouldn’t be able to access to this in the case of Integris as a $2 billion health system. I still think that local relevance is really important. For the obvious reasons, but I think for the less obvious reasons of influence in the community thought leadership, let’s just take, for example, one of the core, the number one strategy to Integris is driving evidence-based medicine into the organization. You can’t do that as a small player. And you can’t influence public policy to move in that direction. As a small player, so locally, you need to be relevant. If you’re small, locally, but big nationally, you don’t have any ability to do what I just described on the local level. I think there are two elements to scale, a local relative size and then a national presence. And I think the national presence, there is some leveling of the playing field based on opportunist capitalists who are out there trying to monetize some of these expertise that are out there.
Gary Bisbee 24:55
Right, let’s turn to your 18 months at Integris. As you mentioned, when you join Integris, how did you go about setting your priorities?
Tim Pehrson 25:04
Oh, boy, it seems like that was just yesterday, I talked to a lot of executive friends from around the country and asked him that very question. How do you transition into one of these roles and the thing I think that was most helpful was just to read a couple of books. The First 90 days by Michael Watkins is a must-read for every transitioning executive. But also just the advice to just listen, you’re going to want to get in there and do stuff. I tried to take a first hundred days, I was very clear: hey, I’m here to get smart. Help me understand the leaders, the environment, the strategy, the key physicians and community players and just meet with as many people as I possibly could. Once I did that, it was actually just right enough time for me to then really assess number one, what was my leadership situation, what changes if any I needed to make there I made these changes fairly quickly after that, and then simultaneously, what were our strategies? And then how were we going to execute on those strategies, which was developing this Integris leadership operating system that I had developed at another place and personalizing that to this community. And the rest was history. It was just starting down the efforts of working on those key strategies and building the relationships with the board and building trust with the physicians and the caregivers and seeing some positive results from those activities.
Gary Bisbee 26:35
You’ve got a very strong board there at Integris. Are you doing anything differently because of COVID?
Tim Pehrson 26:41
I stay in contact with my board regularly. I think it’s just the best practice to communicate, we meet on a quarterly basis. So my communications in between the meetings are just as important as the board meetings. So normal times, I’m writing a quick email once a week, maybe every other week, very high level. But pointed on a couple of things I want to express when COVID hit. I was emailing them a couple times a week. And then I just said, I can’t do the second, I actually got to get these folks on the phone, I just made them aware of what’s going on. There were so many moving parts, and it was moving so fast. So we started doing a board call initially, once a week, and then that turned into a video call once a week on Microsoft Teams. And we really got into a rhythm. And then as things started to normalize, I talked to my board chair and I said, I don’t think we need to do this every week. Let’s style this back. And so we just dialed it back a little bit. And I continue to do my emails and I continue to occasionally do a board call that has been very nimble, they’re not doing anything else in a place that calendars are pretty wide open. So that’s been really great. The Virtual PC has not been as bad as I thought it would be. I still would prefer to be in person for sure. But my board, I’ve got some national board members to travel in. And the ability to make this happen if something comes up is I think, going to be something we’ll try and leverage in the future.
Gary Bisbee 28:11
Tim, this has been a terrific interview. Thanks for your time today. Let me wrap it up if I could with one question. And you’ve made reference to it a couple of times today, and that’s this thought about the new normal. What do you think is going to change as a result of COVID?
Tim Pehrson 28:27
I think the payer mix is going to change permanently. I think we’re going to see more government payer mix. I think there’s going to be greater competition amongst the providers for the remaining commercial insurance. I’m hopeful, as I talked about earlier that there will be a continued trend to telehealth and virtual services. So those are going to definitely change. I think the other piece is our cost structures clearly need to be lower. We’ve known that for a long time. But I think that what this has really underscored is that our cost structures need to be more flexible, we tend to be very fixed, as I said earlier in the history of Integris. They don’t remember a time when you were following in a volume adjusted type of way than non-direct patient caregivers. And I think we just got to say, all costs are variable in the long run. And so we probably ought to start treating them like that. So I think that’s gonna be really important. I’ll tell you one thing that has really opened up for me, the importance of communication is always there, right, but you’re part of a statewide health system. And the ability to communicate in real-time is so difficult to try and get out to all those places. It’s obviously great if you can be there and in the olden days, shake hands with people. But we’ve been leveraging virtual technologies, and we’ve been experimenting with a lot of different solutions, virtual town halls, and these have been great I mean, our caregivers, our physicians, our hospital boards that have responsibility for safety and quality in the local markets, the ability to get out to them quickly and rapidly and share methods and shape what we’re doing and build confidence has just been magnified by these virtual Town Hall. So we’re going to keep using those forever. And I bet that’s the way it is across the country because there’s just so much going on. And we become such a visual culture through YouTube and Instagram, and Marco Polo, whatever else we do, it’s all video-driven. And so this is a great way for people to do it. You can probably get better questions out of these virtual questions that they can ask on the side of the video piece and answer those as they’re asking questions than you can in a big room of people because people are less afraid to ask the hard questions. So I think that’s going to change obviously, the financials. I think that we’re going to, this is going to leave a lasting mark on it. But I will say, I am still very optimistic that good will come of this. It’s hard to go back and look and remember what it was like before 9/11. And all these security checks now we just sort of part of life, right? I think that we will return to normal. I really do. I think that it’s easy to get in a funk to say that will mean it will feel normal, it won’t necessarily be the same normal that we have. But it will feel normal, right? It feels normal to stand on the security line going through a checkpoint at an airport. But that wouldn’t have felt normal before 9/11. And so I think that there’s going to be some things like that where we’ll have to adapt and adjust. won’t feel comfortable at first, but we’ll figure it out and it will feel normal and hopefully, it’s for the better I think it’s going to be for the better in the long run, even though I think it’s It’d be more challenging from a financial perspective to continue our missions and, and visions. But I think it’s possible. I’m hopeful that it is. I’m optimistic that it is. And we’re looking for every way to reimagine ourselves in this time. I mean, what a great time to rethink everything. You have all the reasons in the world to do it. And everybody sees the reasons why you need to at least think about it. They’re expecting you to think differently, right? So that’s what we’ve got to do as leaders and that’s what we’re doing.
Gary Bisbee 32:28
Tim, great interview Integris is lucky to have you, and we’ll look forward to seeing you in the future.
Tim Pehrson 32:34
Thank you. I appreciate it. You’d be safe and we’ll chat soon. Hopefully, it’ll be in person sooner than later.
Gary Bisbee 32:39