Episode 38: COVID-19
Times of Stress Amplify Weaknesses and Strengths
Terry Shaw, President and CEO, AdventHealth
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In this episode of Fireside Chat, we sit down with Terry Shaw, President and CEO, AdventHealth to talk about how consolidation among provider health systems will play out over the next three years, what steps CMS should take to make care more efficient and consumer-focused, the economics of AdventHealth due to COVID-19, and what personal and professional learnings he took away from the crisis.

Please note: The number of COVID-19 cases and the situation referenced in this episode were based on reported data at the time of the interview and are subject to change.

Terry Shaw is President and CEO for AdventHealth. He leads one of the largest faith-based health care systems in the United States, comprising 50 hospitals across nine states, and a continuum of integrated care made up of more than 1,200 care sites, including urgent care centers, home health, hospice, physician practices, and skilled nursing facilities. Shaw’s career with AdventHealth spans more than 35 years. Read more and follow Terry on LinkedIn.

Transcription

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Terry Shaw 0:03
There are many times that I would want to go back and deal with the issues that I’m comfortable with when what I really needed to be doing is making sure that I was working on communications and organization and thoughtful planning for the future of our organization. There was a time period where I just told the team, I’m out of the firefight. I’m taking four people and we’re going to spend two weeks doing exactly what I said. So that’s what we did.

Gary Bisbee 0:30
That was Terry Shaw, President and CEO AdventHealth, discussing the necessity for a CEO to focus on the right things, rather than those with which they might be most comfortable. I’m Gary Bisbee, and this is Fireside Chat. Terry outlined AdventHealth’s 2030 aspirations document and spoke about how the experience with COVID accelerates the consumer plan from five to two and a half years and how they decided to harden their telehealth services into a business. Let’s listen to Terry respond to a question about whether it will become a new core competency of health systems to flex up and down in the face of a crisis.

Terry Shaw 1:07
For this crisis specifically, that means you have to have an inventory of not only people but equipment and supplies that you can move across your system. As you turn PC us into IC us and med surge into PC us as COVID ramps up. What I never want to have done in the future is a complete shutdown. We need to be able to flex up and down with the outbreak that happened across the country in the markets that we’re in and not disturb the other markets that we’re in. While we’re providing normal routine care to everybody.

Gary Bisbee 1:43
Our conversation includes Terry’s view of how consolidation among provider health systems will play out over the next three years. What steps CMS should take to make care more efficient and consumer focus, how he expects AdventHealth to lose from $400 to $600 million in 2020, what were his first thoughts when he realized that the covert crisis is going to envelop AdventHealth, and what personal and professional learnings he took away from the crisis. I’m delighted to welcome Terry Shaw to the microphone. Well, good afternoon, Terry, and welcome.

Terry Shaw 2:18
Hey, good afternoon. Thank you, Gary.

Gary Bisbee 2:20
Pleased to have you back to this microphone. You were the first guest in our very first episode, and you’re the first guest who will succumb to our interviews again. So well done.

Terry Shaw 2:30
Well, thank you. I’ve enjoyed listening to your podcast with other members. It’s been a great learning for me. So thank you.

Gary Bisbee 2:37
Well, terrific. Thank you. In your first episode, we lead with the observation that you made that CEOs make the same three mistakes. Do you remember what you said?

Terry Shaw 2:46
I do. CEOs generally don’t address HR issues quickly enough. Sometimes we allow the inertia of an organization to push back on our plan and we give up and sometimes we find ourselves focusing on what we’re comfortable with as opposed to what we really ought to be doing. I think it kind of sums those three things up.

Gary Bisbee 3:07
Yeah, that was perfect. And the follow-up question, of course, did the COVID crisis cause you to lean into these three challenges even more than you had been?

Terry Shaw 3:15
Absolutely. Without a doubt. Times of stress amplify both weaknesses and strengths. And when you’re in the middle of a three-month crisis, you have to, as a CEO, lean into that. I don’t want to go into any details. But yes, from an HR perspective, I had to modify some things in the middle of the crisis because things just weren’t getting done. There was a lot of inertia if you can imagine in 50 markets on how things ought to work. And we actually pulled a CEO from one of our facilities to run the command center, so that we were getting the voice of everybody into the process. And at that juncture, we pushed back on the inertia pretty hard and ran this as a company. And there are many times that I would want to go back and deal with the issues that I’m comfortable with when what I really needed to be doing is making sure that I was working on communications and organization and thoughtful planning for the future of our organization. There was a time period where I just told the team, I’m out of the firefight. I’m taking four people and we’re going to spend two weeks doing exactly what I said. So that’s what we did.

Gary Bisbee 4:29
We’ll cover COVID more in a moment. But why don’t we review AdventHealth? Could you do that for us now?

Terry Shaw 4:35
Sure. In brief, AdventHealth had a great year last year with $12 billion in revenue. We have two-thirds of our operations in Florida. We’re in eight other states. We have multiple partnerships with large progressive organizations for which were most thankful. The first two months of 2020 had been exceptionally normal, middle of March was exceptionally normal, and then like everybody else, all hell broke loose. So we’re coming out of that, and we’re trying to go back into normal, we’ve all got to manage COVID like it’s a product line, and not let the engine stop the next time around. We have a spike.

Gary Bisbee 5:10
You put together your 2030 aspirations document, which was very substantial. Could you describe that for us, Terry?

Terry Shaw 5:17
We spent a year working on our 2030 aspirations and taking a good hard look at our organization. We had the thought of the consumer, the thought of our board members, the thinking from our physicians. And then last but not least, I had 10 industry experts come in and give us their thoughts on what AdventHealth may be missing in our thinking. And Gary, we were just about to roll that out for our company when COVID hit and what that’s done is allowed me to go back and take a look at that and actually nudge some things along differently than we originally thought. I’ll give you an example. Virtual care is something we’ve played with but not hardened and turned into a business. Risk care capability is something we’re playing with. And when you think about those three coming together, in order to have AdventHealth be anywhere we want to put it. We’re calling it AdventHealth everywhere. Those three business lines are items we’re bringing up and getting very serious about here in the next 18 to 24 months. We’ve accelerated our consumer work we’ve had a rich two and a half years of leaning into consumerism, but our five-year consumer plan and our 2030 aspirations have been shortened to three years and we’re working on multiple four-month sprints and a command center like focus to get done much quicker than we thought we were going to get done what we needed to do. Last but not least in this process. I gotta tell you the way we think about distribution and supply chain is been turned on, it’s ears and we don’t have a lot of final things on that, But I can tell you a year from now, Advent Health will think a lot differently about where they play in the supply chain and distribution process for needed product to take care of its employees, our team members, and our communities.

Gary Bisbee 7:15
On that point, the supply chain point, I think we all agree it needs to be more reliable. There’s also the thought that certain of these PPE really should be produced domestically, or at least much have been produced domestically. How do you think about that, Terry?

Terry Shaw 7:31
We don’t let other countries build our fighter jets, nor do we let them build our battleships. I think in healthcare, we’re going to have to go to a methodology of thinking about what are the things that we really need to have for our country for the 330 million people that live here? And are we really going to let other people manufacture and control that process? Or a we kind of come to the conclusion as a country that just like we do for other things, that’s just something we’re going to do in the states to protect the people that we have to protect.

Gary Bisbee 8:07
Makes good sense. I know that you and other health systems have taken steps to make that happen right away. So well done there. On the virtual care issue. I’m sure that telemedicine telehealth kinds of visits exploded at Advent health like they did in most of the other health systems. Can you describe that a bit for us, Terry?

Terry Shaw 8:29
Telehealth was about 2% of our business before COVID. And through COVID, for our physician practices, it went to over 70% of our business, and we had to harden our business quickly. And it’s only been there in the past as a benefit to our employees. And as an offering, we can put in an article for a doctor to reach the patient. And as we’ve watched the business grow and as we’ve watched our capabilities in the business grow With it, we’re clear we can turn that into an actual business and make it available to our Docs. But then also run a business so that we can actually reach people anywhere.

Gary Bisbee 9:11
To follow up on the hospital at home thought. That seems to be one of those thoughts that hey, it’s easy to think about that. But when you actually do it sounds like it’s very complicated a number of ways. Am I right on that? Or am I missing that point?

Terry Shaw 9:27
No, it is. And when you think about it as a standalone issue, it doesn’t make a lot of sense. But if you’re gonna turn virtual care into a business, and you’re gonna have physicians and nurses, let’s say they’re distributed or in a bunker, and you add to that specific risk-based clinics that need outside office hour care that you could also run out of that bunker. And then you add to that, the ability to do hospital care at home for a certain set of diagnoses all sudden all of them the synergies across them make enormous sense. It is a way to get into markets that you’re not in today and do it from a capital-light perspective.

Gary Bisbee 10:10
Okay, in our discussion six months ago, talking now about your executive team, you indicated you’re going to add four executives, Chief Digital Officer, Chief Consumer Officer, Chief Brand Officer, Chief Risk Officer. Have you been able to do that? Or did COVID get in the way of hiring those people?

Terry Shaw 10:28
Believe it or not, we did that all before COVID hit and we were very thankful to have each one of those during this time period especially. We stood up a 1-800 virus HQ call center process very quickly. We’ve reached people all over the globe. It’s amazing digitally how people can find you. Our Chief Digital Officer in this space has been invaluable. And then our Chief Brand Officer and Chief Risk Officer were obviously involved in this. Our Chief Risk Officer is just getting going to be honest with you about what our plans are. But we have it’s called Project silver, and how we’re going to bring up risk-based clinics across our current network and other networks that I believe will drive the same operating income that the rest of our organization drive to our enterprise at this juncture.

Gary Bisbee 11:24
I know you’re looking into building a unique Medicare Advantage product, is that in the purview of the Chief Risk Officer?

Terry Shaw 11:32
It is. Yep, sure is.

Gary Bisbee 11:34
Moving on to COVID. One thing that’s been interesting to me is that we’ve seen acceleration and discovery such as vaccines and medicines. And I’m wondering if that will flow through to accelerating on the delivery cycles. Do you have any thoughts, Terry about that?

Terry Shaw 11:51
It’s interesting. I was on a G100 call and the CEO of Johnson and Johnson was talking and he was talking about the vaccines that are being worked on. Whether it’s going to be one vaccine or a series of vaccines, he paused and he goes to list to really talk through this, making the vaccine viable is one thing, producing the vaccines another distributing a vaccine to 7 billion people. And either one doses or two doses is yet a third. And I believe there’s going to be an amazing amount of energy that is going to have to be deployed not only in America but across the globe to get the vaccine to people once it’s available. And I think it is a huge distribution problem. Yeah, for sure.

Gary Bisbee 12:35
Thinking about health system decision making. I think all of you executives of health systems really stepped up in the last several months through COVID. Do you think that that’s a trend? Will decision making increase or the pace of decision making increase on the part of the health system executives now?

Terry Shaw 12:56
I sure hope so. We actually sat down and did a post mortem on why it was. So many things were able to develop so quickly during the last three months, and a couple of takeaways. One, we didn’t put things on agendas to get to in two months or two weeks, we had rapid touchpoints every day. Number two, we put a person in a swim lane. And as opposed to helping them swim, we let them swim. And those two things coming together, has really taught me a lot about our own company, about how to use design thinking and command center structures to push things forward in a way that may take you an enormous amount of time to do that you ought to be able to get done quickly. Thus, for us trying to take our five-year consumer journey down into two and a half to three years. How do you compress, organize, distribute, and make things happen in a way that you didn’t think we’re possible before you went through this?

Gary Bisbee 13:58
Yeah, that’s a great example. Just moving to capacity, it seems like there’s an agreement that health systems are going to need to develop the competency to quickly scale up and quickly scaled down in a case of something like this COVID crisis. How do you think about that, Terry?

Terry Shaw 14:16
I agree. So for this crisis specifically, that means you have to have an inventory of not only people, but equipment and supplies that you can move across your system. As you turn, PC use and ICU and med surge into PC use as COVID ramps up. What I never want to have done in the future is a complete shut down. We need to be able to flex up and down with the outbreaks that happen across the country in the markets that we’re in and not disturb the other markets that we’re in while we’re providing normal routine care to everybody. So this concept of having healthcare shut down. We’ve just got to not do that.

Gary Bisbee 14:58
Yeah, that didn’t work. But building a capacity question comes to consolidation. And the question there is, do you think that the COVID crisis will cause further consolidation among health systems?

Terry Shaw 15:12
I think it’s very possible when I look at the last crisis, which was really a financial crisis in ’08-’09. If you look at 2011 and 2012, coming out of that there was an enormous amount of m&a activity that took place. My guess is, is when the dust settles in the middle of ’21 into ’22 and ’23. There will be another round of consolidation in the healthcare structure in the country seems likely for sure.

Gary Bisbee 15:42
You’ve been very articulate about new provider models involving physicians, as I recall, you maybe even had five different levels. How’s that going? Is the COVID crisis changed? Your thinking there at all?

Terry Shaw 15:54
No only thing that COVID crisis has done for me is make me realize that the path we were On to have consumers be able to access physicians the way they want to access them. It’s even more important now than it’s ever been before. And if anything, it’s just accelerated our thinking of providing those opportunities and choices for people, and then figuring out a way to help them access data so they’re not left on their own to understand how to get it to it. We’re complicated enough as it is, we need to make it simple and then have people understand how to get access to it.

Gary Bisbee 16:30
Thinking about facility planning, social distancing, ambulatory care, waiting rooms and so on. Seems like there’s gonna have to be a rethinking of your facilities. How are you thinking about that?

Terry Shaw 16:42
What a great question. So everything that we generally do has had to change. We’ve got nice big round stickers on the floor that say stand here and then there’s one six feet in front of it. Masks are going on everybody that walked in the door, we’ve had to change small waiting areas to no waiting areas. From a digital footprint, we tap people through a text that say, okay, you can come in now. For your appointment, please wait in your car. We’re going through an enormous change in how people wait visit and access services so that they feel safe and so that we’re providing the right kind of care for them, while at the same time making sure that the underlying diseases in your community to still have a chance to be cared for what was crazy. In the last three months, we’ve had an enormous number of people in this country, not get the appropriate heart care, etc. Because they were afraid to get the care. We just can’t let that happen. Again, we have got to create a digital and a waiting room environment for people to plan their lives so that we can still care for them, which means we as providers have got to do a better job organizing our own care processes around that

Gary Bisbee 17:59
Right. Thinking about reimbursement. The government’s role as a payer. You’re, of course, former CFO and Adventist and so you’ve got a good command of this. But there are signals that CMS will pay for televisits, which would be a good thing. What other changes in payment? would you suggest for Medicare and Medicaid coming out of the COVID crisis?

Terry Shaw 18:21
There’s been several waivers that have come through and the whole care delivery process so telehealth is one, the waiver of licensures another. So coming out of this in one person’s opinion, we did take a big picture, look at health care, telehealth needs to work, and get paid for it. Number one. Number two, licensure has got to start moving across state lines, not only for doctors but for nurses etc. Number three, we’ve got to land the plan on where we’re going to start. It’s gotten a lot of noise, but still no action. And number four, I think risk-based models are gone. To have to continue to be implemented thought through and brought up in the industry. Or we’re never going to move to a situation where we’ve got the majority of governmental payers in an environment where you’re incentivized to take care of them no matter what’s going on.

Gary Bisbee 19:19
I mean, those are all really good points. I worry that sometimes our health system executives aren’t active enough in Washington or the state capitals, in urging our educators to learn more about this. How do you think about that?

Terry Shaw 19:35
I don’t disagree with you. Although I will tell you the healthcare industry is such you know how it is, um, you have how many members that the CEO council 5075 and what I’ve learned is, is you can spend quite a bit of your own shoe leather or you can move into spaces and be a part of something bigger than yourself and it works really well. The Health Leadership Council In Washington that Mary Greeley runs, is a multi Industry Council, the HMA, your organization has done some really good work pulling things together. The American Hospital Association lately especially has done some really good things that I appreciate. And I think we all need to be a little more active and thoughtful. And we all need to lend a little bit of political support to helping some larger organizations have the right voice. So they’re representing a broader swath, as opposed to just representing a small organization like admin health.

Gary Bisbee 20:41
Yeah, here here. That’s well said. Moving to something that’s not such a pretty picture is the economics of all of our health systems. How did the COVID-19 crisis affect Advent Health’s finances for ’20?

Terry Shaw 20:54
So, January and February were great. We were ahead of budget and April, May, and June we’re 400 million behind budget. So I’ll just put that in perspective. Our January to June budget for Ebidta is 800 million. And we’re going to be about 400 million behind through the end of June. Now look, I know it’s not the end of June right now, but I’m looking at our volumes, we’re back up running 95% of where we were before COVID. And every week that goes by it continues to go up. Logically, when you take a step back from this, from a hospital perspective, unless we’ve cured some underlying disease, we got to go back to the census we had plus COVID. So on an $800 million budget for the first six months of the year, we’re going to make 400 million will be 400 million off-budget. we’re forecasting right now what July through December looks like it’s another $800 million budget. So on a $1.6 billion budget is not gonna surprise me Gary, if we’re not Four to 600 million off of that budget by the end of the year.

Gary Bisbee 22:03
So as that kind of effect tap backs, not only this year, but next year.

Terry Shaw 22:07
It does. So we spent 75 cents of every dollar on capital. So in this budget by 500 million, there’s 75% of that we’re not going to spend on capital.

Gary Bisbee 22:19
$400 million. It’s gonna be tough to make that up, at least. What are you thinking about? ’21? There’s really no way to know, we don’t know if COVID is coming back or not. But right now, how do you think about that?

Terry Shaw 22:32
I personally don’t believe COVID will be cured in ’21. I think testing will get better from both in terms of how the test is done, and the quantities of tests that we have available to us in the market. I think our supply chain will get better. I think the ventilator supply will go up. I think people will learn to flex. And I think by 21 there will be outbreaks in cities and areas that people have to deal with. From a healthcare perspective, but healthcare will stay open. And we’ll be back to treating what we use to treat plus COVID. And so I’m at this juncture other than this, we’re running 17% unemployment. And unless that gets fixed, there’s no way the industry is going to have the same payer mix in 21, then we have today. So as we think through that calculus, I don’t think we’ll produce a much as much profit in 21, as we’re used to producing but I think the payer mix issue, not a demand issue.

Gary Bisbee 23:32
I agree with that as well. One other thought, then let’s turn to leadership in a crisis, but it seems evident to public health as part of the national security now in a way that we didn’t think about it that way before. What steps should we be taking as a nation, Terry to deal with that issue?

Terry Shaw 23:52
You know, Gary, it’s just different than it used to be. When I was a kid. Public health was very active. I remember school you start the year and then line up and some lady dressed in a white uniform would get the whole class a shot. It’s like I hated those days. But anyway, today we’re the healthcare system that we’ve got is the public health care system. And if we’re going to keep it that way, the facts are I’m fine with that. But I’d go back to my earlier conversation, we need to be less dependent on countries outside of the United States. We need to move back to domestic manufacturing of the critical things that we think we need to protect the American people, even if that means they’re going to cost a little bit more to produce. And somebody smarter than me can sit down and figure out what that is and how we’re going to approach it. But you can’t let one province in China be disrupted and not allow yourself to take care of your people without going to brokers for supplies. It’s just a crazy world and we need to solve it.

Gary Bisbee 24:58
Yeah, we’ve got to be smarter. There’s no question about that. That actually is a nice lead into leadership when you first became aware of the COVID crisis. What was your first thought?

Terry Shaw 25:11
I hate to say this, but I went back to being the chief financial officer. And in February, I call Paul after watching the news one night and said, borrow a billion two. He goes, like, he goes, what are we doing that for? And I said, trust me, if COVID comes in, it’s a mess. We’re not going to be able to borrow money this summer, borrow it now. So we borrowed money. The second decision we made was to ramp up our sourcing for personal protective equipment and ventilators in a way that I didn’t dream was possible, and it got done. And then the last thing we will likely have done is we’ve studied best practices in China and in Italy and in New York. So that when our COVID case was started building here, in our ICUs. We had the best thinking that we knew to find at that juncture to help people live through the process. So those are the three tracks I’d tell you, we went on as a company.

Gary Bisbee 26:12
What are the most important characteristics of a leader during a crisis of this magnitude? Terry, just generally speaking?

Terry Shaw 26:19
It’s a good question and put it in this order, staying calm. If you’re calm, everybody else will be calm to being determined. The ability to communicate I’d say is on that list, putting the right people in the right swim lanes and then letting them lead. And then I tell you this concept of daily input and processing for fast decision making whatever that is in your company, figuring that out on the front end and then following it.

Gary Bisbee 26:49
Did the COVID experience change you as a leader at all or as a family member, community member?

Terry Shaw 27:01
It did. I gotta tell you, I think everybody’s grown a lot in the last three months, me included. We did things that I didn’t know we could do. And we were responsible for things that I was clear, we wouldn’t know exactly how it’s gonna work out. It tested everybody and I got to learn a lot about myself and my team. some good, some not so good. And we all have learnings from this that we need to apply to not only our personal lives, but our professional lives that I think will benefit us on a go-forward basis. Personally, let me go back to personally, we’re also busy so my kids are in medical school in California. My wife used to be going somewhere and every week, and we’ve lived this cool life and now all of a sudden, I’m at home all the time. And so, I don’t know what it’s done for everybody else, but it’s made my wife and I go back to really figuring out why we got together in the first place, enjoying our time together and you is been a really interesting three months of discovery on a personal side.

Gary Bisbee 27:56
Thanks for sharing that with us. By the way. This has been another terrific interview. Let me ask one final question if I could, Terry, and that is there’s general agreement that we’re moving toward a new normal. you’ve outlined Advent health plans in that regard. What changes and financing and delivery Would you like to see as part of the new normal going forward?

Terry Shaw 28:28
I’d like AdventHealth to be a lot less dependent on it surgical department and its emergency department for its economic welfare. So people ask me, does that mean you’re not going to buy or build new hospitals? And the answer’s no, I didn’t say that at all. We plan on growing as an organization in that regard, that having so much revenue, that is profitable run through those two mechanisms is something that over the next several years, we’ve got to move away from and we’ll be doing that,

Gary Bisbee 28:57
Terry, this has been a great conversation with you I appreciate your willingness to tee it up again here many Thanks.

Terry Shaw 29:03
No problem Gary.

Gary Bisbee 29:05
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