Episode 46:
Creating Something Better than the Sum of its Parts
James Staten, SVP and CFO, University of Southern California
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In this episode of Fireside Chat, we sit down with James Staten, Senior Vice President and CFO at the University of Southern California to talk about the leadership lessons gained throughout his professional career in public accounting and his experience in the formation of NewYork-Presbyterian to the expansion of the Yale-New Haven Health System. We also discussed other learnings from his career in healthcare and how that has served him in his role in academia.

James Staten was appointed senior vice president, finance, and chief financial officer in January 2016. Reporting directly to the president, he oversees a wide range of financial operations for USC, including budget and planning, treasury services, the university comptroller, financial and business services, Keck Medicine of USC finances, capital construction and facilities management services, and information technology services. Read more

Transcription

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Jim Staten 0:03
There are things that the health system benefits on by being part of the university structure. One is fundraising. You know, USC is one of the more prolific universities in America that has done a great job in fundraising. So the health system in the medical school, the health part of USC will benefit from that infrastructure and those relationships that really come out of the university.

Gary Bisbee 0:27
That was James Staten, Senior Vice President and CFO University of Southern California. Speaking about a benefit that KeckMedicine, the USC health system, realizes by being part of the University. I’m Gary Bisbee, and this is Fireside Chat. The conversation included leadership lessons gained throughout his professional career in public accounting through the formation of New York-Presbyterian, to the expansion of the Yale-New Haven Health System, and to his current post at USC. He spoke about the characteristics of his mentors and what he learned from them, the comparisons of academia and healthcare, the difference between the Ivy League and PAC-12 sports. Let’s listen to Jim discuss how USC is thinking about creating an attractive student experience under COVID influenced in part by the use of virtual technology, state and local government requirements, the USC faculty, and the safety of the University community.

Jim Staten 1:28
Getting geared up to be online, and then to restart the operation in a way that’s very different to create a student experience that even though different in a really tough time where students want to be here in Southern California on campus, but can’t be. So, we’re more making decisions and making investments and how to create a student experience that’s unique, but different than it has been in the past.

Gary Bisbee 1:50
I’m delighted to welcome, Jim Staten to the microphone. Well, good morning, Jim. And welcome.

Jim Staten 1:58
Thank you, Gary. Good to talk to you today.

Gary Bisbee 2:01
We’re pleased to have you at the microphone. Well, let’s start right in. You’ve had a magnificent career from public accounting to large academic medical centers systems to the University of Southern California. Why public accounting, Jim?

Jim Staten 2:15
Gary, it was a place at a point in time in my life where I knew that by working for a public accounting firm, there would always be work. I had an uncle who worked in a public accounting firm in New York City. He had retired and he made reference for me, and that’s how I got into public accounting.

Gary Bisbee 2:31
You ended up at E&Y after several moves in public accounting.

Jim Staten 2:35
I worked for 10 years in Pannell Kerr to make partner at a firm called Pannel Kerr Forster, they were the 11th largest firm in the world at the time and shortly after I became partner I was recruited by Ernst and Young to run their revenue cycle practice on the east coast. And I worked for them for three years.

Gary Bisbee 2:51
Okay, the revenue cycle specifically for hospitals.

Jim Staten 2:54
For hospitals. Yes.

Gary Bisbee 2:55
So is that what got you into healthcare? Had you thought about health care before that, Jim?

Jim Staten 3:00
When I wanted to public accounting right out of college, my first job was a hospital audit. So Gary, I got into hospitals and health care right out the gate and never looked back. I just became a healthcare auditor and then a consultant.

Gary Bisbee 3:12
We’re glad to have you in healthcare. How is revenue cycle changed over the years since you first started doing it until now?

Jim Staten 3:20
That’s a great question. In that day, we were focused more on reimbursement and some government strategies to create more revenue from things that hospitals were doing. Today, the revenue cycle is more focused on the processes around collecting all the things in charging and finding the things that we can charge. There’s a bigger payer strategy now around the revenue cycle work that goes on in the healthcare space today than when I first started.

Gary Bisbee 3:46
If you could distill your learnings from your time in public accounting, what would be the one single thing that you’ve learned that’s been helpful to you through your career?

Jim Staten 3:55
The discipline to get things done, the work ethic, the team, you’re working on. In that space you work on small teams, groups of three, four or five, six people maybe and working as part of a team. Working hard towards an objective and getting the work done were the big takeaways I got from my time in public accounting and consulting.

Gary Bisbee 4:17
After three years at E&Y you joined New York Presbyterian, why did you join NYP, Jim??

Jim Staten 4:22
Yeah, so it was a great opportunity because New York Hospital, Cornell Medical Center was building its health system. And this was in the mid 90s. And it was time prior to the merger with Columbia Presbyterian. And in the seven, eight years that I was with New York Presbyterian, just that type of system growth, mergers and just expansion of that health system to be what it is today. It’s just an incredible learning experience accelerated by so many things, building projects, physician acquisition strategies, managed care was growing, and then the merger of two huge academic medical centers with their medical schools and universities was just a tremendous experience. So I knew going in that we were growing a health system at New York Hospital, Cornell. And what I didn’t realize was that my experience was going to take me from a Director of Financial Planning right through Vice President to Senior Vice President of the New York Presbyterian health system by the time I was finished there.

Gary Bisbee 5:20
New York Pres is still I think, the only academic medical center in the country with two medical schools. That must have been interesting.

Jim Staten 5:28
It sure was. As time went on, we realized we’re off the mark a bit with our merger strategies. So we were making the playbook up as we went along in those days.

Gary Bisbee 5:39
So I guess you were working closely with Doctor Partis, who was the founding CEO of New York Presbyterian?

Jim Staten 5:47
He was. Herb was a great leader who came from the Columbia Medical School and he became the CEO of New York Presbyterian shortly after the merger and I work directly for Herb. Herb was in a position where he was looking for a CFO I was a senior vice president of finance. A “Number 2” if you willAnd I can remember a conversation I had with Herb, where I told him I wanted to be his CFO of New York Presbyterian. And because I had been there for some time, on the Cornell side, Herb was focused on bringing in somebody from the outside, but Herb was a great mentor back then, and I still see him today. Because in his retirement years, he’s still very active in health care at NYP and other places, but also here in California, the Keck Foundation has Herb as their consultant who makes twice a year visits to our academic medical center, our Keck Medical Center, to report on the status of the hospital and the medical school for the Keck Foundation, which gave a large gift and had the hospital system named after them here at USC.

Gary Bisbee 6:48
Well, I’m sure when you and Herb get together, there’s some very interesting war stories.

Jim Staten 6:54
Oh, my goodness, he’s great. I talked to him just a few weeks ago, and one of the things he often says is Jim, you’re the one guy that I let get away in my career, and I joke with him I said, Herb that’s not the way I remember it. Then we give each other a big hug. So wonderful health care person and just one of my great mentors in my career.

Gary Bisbee 7:11
Yeah, he is a terrific individual. So then onto Yale New Haven from NYP. That must have been interesting.

Jim Staten 7:19
Yeah, Yale New Haven Hospital at the time and the health system had under a million dollars of top line revenue at the time. And it also was in a growth mode. So as my first role there as CFO in healthcare, I was there for 15 years, responsible for IT and managed care and all the finance functions. Were able to grow the system to about a $5 billion system by the time I had moved on, but just an incredible place to learn and grow with a really good team of professionals working there and Marna Borgstrom, another one of my mentors in the 15 years that I worked with her at Yale-New Haven.

Gary Bisbee 7:56
Are there any lessons you picked up at NYP that you particularly used during your time at Yale?

Jim Staten 8:02
Yeah listen, I grew up at Yale-New Haven health system. And I learned a couple of really good leadership lessons. And they were around things that might be surprising to some of the finance leaders out there, but maybe not so much these days. But it really taught me the importance of collaborating and working with the operating team at the health system. It taught me how to work hand in hand with growing health systems in different marketplaces and leadership and governance structures that were running different pieces of the yellow haven health system from our 800 member physician foundation to our Greenwich Hospital to our Bridgeport Hospital, to St. Raphael’s Hospital, a Catholic hospital that merged in in my time there, but the skill sets around learning around listening, working as a team and collaborating. I think were the biggest things over that period of time that I really took from my time there, Gary.

Gary Bisbee 8:55
You mentioned Marna and Dr. Partis as mentors. What did you learn from your mentors? Could you single out one or two things that sticks out in your mind as learning from your mentors?

Jim Staten 9:07
Both of them incredibly hard-working and caring people. I think it’s the dedication to put the time in. In both of those cases, the caring nature, about people that work in the organizations, the patients that are cared for by the work that we do their focus on the mission and the health and well being and the nurturing and the healing of not only the patients, but also of the team. Those are the things that went beyond sort of doing the CFO job that really stuck with me on both of those outstanding people.

Gary Bisbee 9:44
Well, let’s move on to a rather interesting move, I would say from 25 years in academic medicine to becoming the SVP of Finance and CFO at the University of Southern California. What was your first thought when USC came knocking, Jim?

Jim Staten 10:01
My first thought was, Why are they knocking? This is a university and one of the biggest private universities in the country on the West Coast nonetheless, and they were coming knocking because of my healthcare background at USC, over half of the top-line revenue is generated from healthcare operations, both at the health system, the medical school, and some of the other health operations that they have. I was curious as to why and I had no reservations except I wanted to get out to California. Something I had dreamed about working in and living and I was at a part my life Gary, and my professional career, my personal life where it was sort of the right knock at the right time.

Gary Bisbee 10:42
What was the biggest issue that you had to grapple with? You’ve always wanted to go to Southern California, obviously, USC is a terrific school. But was there one issue that you said, “Gosh, I have to think my way through this before I really agreed to join SC?”

Jim Staten 10:57
I actually once I got to understand what the challenges were and what the vision was, and what the support mechanisms were from governance and leadership at SC, it wasn’t as hard as you might have thought. It opened up a brand new world of opportunity to see healthcare from a different perspective, from the university and the academic perspective. It allowed me to use my experience that I had to come and articulate what was going on in the healthcare side of the business to the leadership at the university and to people on the board (who didn’t understand the language). And I could understand it, and assure them that the healthcare team was doing what it needed to do. And I also could infuse some new energy and some new ideas from my experience into what was a turnaround when I came, the health system was losing $50 million. That was a little bit of maybe a pause for me, making sure that I felt that there was a way that that could turn around in a big LA market with some pretty big and good competitor health systems out here and the likes of Cedars and Providence at UCLA and Kaiser is out here in a big way. So I came here and I really wrapped my arms around it. I can remember going to dinner with CEOs of some of these systems here in California and asking them their opinion of the tech operation. So I think I delved a little bit into the show myself that I believe that we could make a go at creating something good at the health system for the university.

Gary Bisbee 12:24
Well, have you found a difference in emphasis on sports at a PAC 10 School versus the Ivy League?

Jim Staten 12:31
Yeah, so we’re a PAC 12. So yesterday, the Ivy League called it. They made an announcement just yesterday that they’re calling off their sports season for this academic year. Pac 12 hasn’t done that yet. So we’re still trying to decide whether we’re going to be actually playing the Alabama game in August, which is our first game. But different mindset in sports are just a bigger part of the culture at the university and the health system is very involved too because a lot of the health system PR and marketing. The health side caring for the athletes during practice and game. Time is a bigger piece for sure than it was in the Ivy League where I grew up on the east coast.

Gary Bisbee 13:11
Let’s dig into your major responsibilities, Jim. What’s the biggest change do you think and leading budgeting planning facilities, etc, at the university level versus a medical center?

Jim Staten 13:22
So at the university level, I have responsibility for Information Technology Services and all of the construction that goes on. We have $2 billion of construction at any point in time. And all the maintenance, the plant maintenance that go on across both the university and the health system. The biggest challenge is that a lot of these functions because in a big ecosystem of the university, you have a lot of siloed type of thinking. It’s actually encouraged to be innovative and creative, to be thinking if you’re a business school or a medical school, and my biggest challenge was taking some great stuff that I was responsible for where my leaders cross my span of control, responsible areas, we’re bringing leaders together and having them create something better than the sum of the parts, by working together, sharing some of their challenges and successes and creating goals that were system-wide finance calls where we could all move together in support of what the mission of the university is. What do you think the major adjustments have been just in your approach between the university and an academic medical center? For me, it’s a much more of a strategic job than when I was part of being a CFO of a hospital, or of a health system. We’re responsible day for day for making and executing on all of the things that you need to in order to serve the purpose of patient care. Now, I think about education more than I did, I think about research a lot more than I did. And when it comes to patient care, it’s much more of a bigger picture strategic type of responsibility that I have in working hand in hand with our CEO, our strategy people and some of our board members in order to keep in mind how we’re going to grow, how we’re going to be more patient-centered with patient experience, how we’re going to deal with COVID. And how do we bring the university strength and things that the university can help the health system with into the picture and leave the health system alone where it needs to be left alone because it’s different than a university.

Gary Bisbee 15:19
I can remember you sharing a story with me about your first encounter with Steven Spielberg. Can you share that with us now?

Jim Staten 15:26
Oh, my goodness. Yeah. So I was at USC, maybe two weeks if that. And I was asked by the president to present the financial report to the full board USC. I was still looking to figure out where the bathrooms were and how to get around, but I’m good in front of boards and I went in and got prepped and went in to give the quarterly financial report to the full board and when I walked up to the front of the room, there in the first row was Steven Spielberg, who was a trustee at the time at USC. And I’m standing there kind of pinching myself saying I’m going to give a financial report to Steven Spielberg sitting there like five feet from me. So I put my first PowerPoint up on the thing. And literally at the first PowerPoint Steven Spielberg’s hand went up and he’s gonna ask me a question. I came home that night, Gary and My wife said, “How did it go?” and I said “I have no idea. All I know is, Steven Spielberg asked me a question.” She said, “Well, what did he ask?” And I said, “I have no idea what he asked”. The board is an amazing board here, very supportive of the leadership team. And having that type of expertise. Stephen is just one of many that have become friends and mentors along the way. For me here in the last four and a half years, it’s been just wonderful.

Gary Bisbee 16:42
Well, that’s a great story. And that’s one of those Welcome to USC moments, isn’t it? Can you share your role in planning for the 2028 Los Angeles Olympics?

Jim Staten 16:54
Yeah, so operationally, I’m on the outside of USC’s team that’s planning this thing. We’re working closely with UCLA with the city of LA, of course. A lot of the planning and the financial planning around the ’28 Olympics is what type of things we oughta be doing now that are going to be in support of those Olympics. One of the big things with the LA Coliseum. I know you know, Gary, because you’ve been in it after the renovation, it was a major renovation a little less than a year ago, where we put together now Los Angeles Memorial Coliseum that has the look and feel of a Coliseum that you would want to host an Olympic or part of the Olympic events at and so we did spend a lot of time and money in putting that together, and then just trying to create the logistics around how do we vacate a campus during a time when you’re usually bringing back students to start an academic year? And how are we going to coordinate that so a lot of fun work different work than I would have ever imagined I’d be involved in in planning for the ’28 Olympics.

Gary Bisbee 17:59
Building on your comments about Keck Medicine, how much time do you think over the course of a year you would spend on Keck Medicine?

Jim Staten 18:05
I spent probably more than 50% of my time on Keck medicine and Healthcare Matters at USC. And it’s probably proportionate to the level of business. I mean, we have, as I mentioned over half of our top-line revenue, and it will be three-quarters of our revenue 75% of our revenue stream I’m imagining in a couple of years. So spending more time on the health side, not less time, even though higher ed is become more complicated with COVID and other challenges that business sector is facing.

Gary Bisbee 18:43
Yeah, we’ll get into that in a minute if we could. But could you describe Keck Medicine for our listeners?

Jim Staten 18:48
Sure, sir. Keck medicine encompasses our health system. It encompasses our Verdugo Hills hospital, encompasses when we talk about Keck Medicine, it has about $2 billion of top-line revenue. It is a US News and World Report top 20 rank hospital. Our academic at the tertiary quaternary place with a very high case mix. Our medical school is a large medical school, provides services in LA County, and to the LA County hospitals and to the CHLA, the California Children’s Hospital, all the pediatricians and most of the physicians at the LA County Hospital, are faculty and physicians from our medical school. So we have sort of contracted revenue that flows into the medical school from providing medical services that two very separate hospitals, CHLA, and county. We have our two main hospitals, our academic medical center, Keck and Verdugo Hills that roll up under the university banner, Gary.

Gary Bisbee 19:45
University trustees are looking at Keck Medicine, more than 50% of the university’s revenue and clearly going to increase. How are they thinking about transformation in healthcare and the increasing enterprise risk of a major academic medical center.

Jim Staten 20:01
It’s interesting when I got here, these trustees at USC felt that Keck Medicine was presenting more risk than the university. And I think today as they sit here, I can say that our trustees as a group, are feeling that the university has more risk than the health system. And part of that reason, it’s been the great success of Keck Medicine, but also because the trustees here from a governance standpoint, created a separate board about a year ago to oversee the Keck medicine part of business for USC, and a number of the trustees from the university board who have healthcare backgrounds and know that business had been very involved. Joined that board with me and the President and the Provost and a couple of independent trustees so that we could create a more nimble or flexible ability for our healthcare operation to make decisions without having to go through structures at the university with large boards that are dealing with other schools and other academic and research issues. So I think it’s worked really well in the early stages, and it’s because I think of the trustees who are on the board of the health system. are also key trustees on the executive committee of the overall USC board. So when things get done and decided at the health system, they have some solid ground to be speaking to the rest of the structure when we need to approve things at the University Board relative to health care.

Gary Bisbee 21:20
You alluded to this earlier Jim, but you’re in an ideal position to comment on the comparisons between higher ed and healthcare. What do they have in common? Do you think or how are they completely different?

Jim Staten 21:31
This is a great question because there are things that the health system benefits on by being part of the university structure. One is fundraising. You know, USC is one of the more prolific universities in America that has done a great job in fundraising. So the health system in the medical school, the health part of USC will benefit from that infrastructure and those relationships that really come out of the university. on a day to day basis, there are many differences about the way hospitals run and what’s unique about my role as I understand those enough and can create the bridges that need to be created to convince people in the university or at the board level for that matter, that the hospital really needs to be doing a different thing as it relates to how they hire and recruit people, what kind of benefit structures might exist. So we have looked at all of the services, if you will, overhead services and made the decisions on do people that are in the facilities area for the university, is it better just to have people that are healthcare facility, people who know the healthcare business much more than being embedded inside of a university structure. So we’re separating out over the last year, those specialties and so I think those are two good examples of one where you would benefit and one where you might not benefit in having a very specialized structure for the hospital. Makes more sense.

Gary Bisbee 22:56
Well, let’s move to the COVID-19. Obviously, it’s impacted both healthcare and academia. How would you say the COVID crisis-affected USC?

Jim Staten 23:04
Gary the university took a bigger hit than our hospital. Our hospital doesn’t have an emergency room, the emergency room sits at the county. It’s a high end tertiary quaternary place, we did continue to get transfers from the market. When people got really sick, they were still coming to hospitals. So although we did have to create space for surge and decant our ICUs, the numbers didn’t come the way California thought they were going to come. And so our hospital with the CARES act money that has flowed has brought back almost to pre COVID levels, the type of business both inpatient and outpatient that we had going into the crisis and without the flow into the emergency room, we didn’t see the type of hits that a lot of hospitals saw. So our hospital came out better than most, at least up to this point. The university on the other hand, got hit really hard. We’re still deciding or just have recently decided about having classes going online only with about 80% of our classes and about 20% of them will be in some form of in-person or online right now that’s sort of where we are. And that’s been announced publicly. But the economics for the university as we had to send students home in mid-semester, we had to deal with refunding money from housing and all of the auxiliary revenue from sports and some of our venues in hospitality down and have not up to this point taken hits in our philanthropy. It’s been pretty steady. But we do expect as we look back in ‘08-’09 that what’s going on in the economy is going to impact giving and the philanthropy part of USC. Which relies our endowment took a hit, like many endowments, and we do rely on spending right out of the endowment. So we’re estimating here university wide that as we look at 2021, we’re looking at about a $300 to $500 million COVID gap just at the university, and that doesn’t include any FEMA money or CARES act money that might come in later on.

Gary Bisbee 25:04
So you’re saying that in the Fall 80% of the action will be online and 20% will be in person? Is that what you said?

Jim Staten 25:12
That’s what we’re saying. So now we’re waiting to see whether we could actually pull that off with LA County Health Department making some key decisions. Students will now have to make decisions on whether they want to continue in that mode or defer. We call it “the Melt”. People who have accepted students who have accepted classes made even deposits to come. We’re starting in August. August 17 is our start date we are going to start and we’re going to end our semester, early Thanksgiving time to get the students off of campus and faculty off campus in anticipation with the flu and cold it around it would be better to have less people on campus. You know, faculty have been an issue. Faculty have had a say into when they want to teach and where they want to teach on how they want to teach. So getting geared up to be online, and then to restart the operation in a way that’s very different to create a student experience that even though different, in really tough time where students want to be here in Southern California on campus but can’t be, we’re making decisions and making investments on how to create a student experience that’s unique, but different than it has been in the past.

Gary Bisbee 26:21
So any decision about Fall sports?

Jim Staten 26:24
It’s a great question as some of the other conferences have made decisions. Stanford yesterday made a decision to eliminate 11 Sports at their university going forward. We have not made a decision. We’re working closely with the PAC 12. We’re working closely with the County of LA. We are bringing athletes back on campus, you know, and we are with safety first in mind for all of our students starting to get them ready for their full seasons, but I can’t call this one that there’s going to be in the next two weeks we’ll probably be some decisions about whether we have shortened seasons orr no season or a different looking season. The way that football in particularly might go.

Gary Bisbee 27:07
So is that a conference decision or an NCAA decision or school decision or all three?

Jim Staten 27:14
It’s all three. It really will be a conference, school, and the county or state that you’re in, and what’s allowed. We’re prepared and my modeling financially is modeling that we are going to play a season. But we’re going to be playing games with no fans in the Coliseum, no revenue from ticket sales at the gate or revenue from all the things that go on around football games here at USC.

Gary Bisbee 27:36
Well, that’s a shame that as you say, the Coliseum is such a terrific venue since it’s been remodeled, that’d just be ashamed not to have events there. This has been a great interview, Jim, very interesting, very engaging. Let me ask one final question if I can, which is, what’s the one characteristic of yours that has contributed to most of your success?

Jim Staten 28:00
I work hard and I work long hours, and I think the thing that really has kept me motivated and energized, is the commitment and the interest in the people that I work with. Watching people evolve not only in their careers, but in their personal lives, realizing that maybe part of our purpose here on this planet is to not only run our organizations and do our jobs well but to help people become more aware of who they are and how they can contribute here in our communities in our country and on this planet, has become part of my leadership style. I start all of my meetings, since being at SC with who wants to tell a story about a Trojan core value. And I don’t know many CFOs in the country in any business that start every business meeting with their teams, asking them to tell stories about something that matters. So for me, that says a lot about my style and what’s important to me.

Gary Bisbee 28:55
It does say a lot about your style, having known you for a lot of years and you’re a terrific leader, Jim. Hey, thanks so much for being with us. Great interview.

Jim Staten 29:04
Thank you, Gary. It’s always great to talk to you and it’s wonderful to do this with you today.

Gary Bisbee 29:09
This episode of Fireside Chat is produced by Strafire. Please subscribe to Fireside Chat on Apple Podcasts or wherever you’re listening right now. Be sure to rate and review Fireside Chat so we can continue to explore key issues with innovative and dynamic healthcare leaders. In addition to subscribing and rating, we have found that podcasts are known through word of mouth. We appreciate your spreading the word to friends or those who might be interested. Fireside Chat is brought to you from our nation’s capital in Washington DC, where we explore the intersection of healthcare politics, financing, and delivery. For additional perspectives on health policy and leadership. Read my weekly blog Bisbee’s Brief. For questions and suggestions about Fireside Chat, contact me through our website, firesidechatpodcast.com, or gary@hmacademy.com. Thanks for listening.