Episode 56:
Tune Out the Static
Peter Fine, President and CEO, Banner Health
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In this episode of Fireside Chat, we sit down with Peter Fine, President and CEO, Banner Health to discuss lessons learned from the COVID crisis under the assumption that there will be other health crises in the future. We also talked about the need for a reliable PPE supply chain and the important characteristics of a leader in a crisis.

Peter Fine was appointed president and CEO of Phoenix-based Banner Health in November 2000. Banner Health is one of the nation’s largest secular, nonprofit health care organizations operating 28 hospitals and other services in six states. Banner employs about 50,000 people, has $7 billion dollars in revenue and is Arizona’s largest private employer. Read more…

Transcription

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Peter Fine 0:03
There’s a clear recognition that this isn’t going to be the last time we’re going to have a pandemic or a bug like this that’s going to disrupt our environment and we’re going to have to look at things through a different lens than the lens we were using before.

Gary Bisbee 0:19
That was Peter Fine president and CEO Banner health. Peter was commenting on Banner embedding lessons learned from the COVID crisis, under the assumption that there will be more health crises in the future. I’m Gary Bisbee and this is Fireside Chat. Peter is quite thoughtful about the need for reliable PPE supply chain and how to develop one. He outlined the role of a wise guide that Banner played with the state of Arizona to coordinate resources across the state during the crisis. He further commented on the importance of the CDC being a trusted voice during a national health crisis. Let’s listen.

Peter Fine 0:55
Regardless of the mistakes that were made or the perceived mistakes. In retrospect, I think you’ve got to count on the CDC to be that source of truth and to fund that organization in a manner that they could be out ahead of things instead of trying to catch up on everything all the time.

Gary Bisbee 1:20
Peter spoke about tuning out the static to develop future Banner strategy incorporating learnings from the crisis, but staying above the day-to-day requirements of the crisis as follows.

Peter Fine 1:31
We’ve tried to take people on our organization and have them not focus on issues of COVID but focus on issues on where the industry is going and how do we position Banner to be a success story within that industry direction.

Gary Bisbee 1:50
He explained why a coordinated relationship between the financing and delivery systems is better for the customer. Peter spoke about how the COVID crisis influenced his leadership by being better prepared for the unknown. I’m delighted to welcome Peter Fine to the microphone. Well good afternoon, Peter and welcome.

Peter Fine 2:12
Hi Gary. Thanks for having me.

Gary Bisbee 2:14
We’re pleased to have you for the second time at the microphone. You’re a brave person to go through this two times, Peter. So many thanks.

Peter Fine 2:22
Or a glutton for punishment, one or the other.

Gary Bisbee 2:25
Let’s start by learning about Banner Health, particularly what’s changed since the COVID crisis and then discuss longer term effects of COVID on large health systems in general, and then wrap up with your view of leadership in a crisis. So looking back six months ago, what’s been the major impacts from the COVID outbreak on Banner Health?

Peter Fine 2:44
It has allowed us to think differently about our business. It’s forced us to think differently about our business. We were moving along quite well in the first part of the year until this hit and we really had to change and, and turn on a dime. Because as we began to recognize, through our EOC, which is our Emergency Operations Center, which we stood up the last week of January, and as we got deeper and deeper into this, we started to recognize how significant it was going to be and began to think through the things that we were going to have to do as a company to handle what we thought was coming down the pike, which it did, and a lot of the preparation and quite frankly, the way our business runs. So Banner is very much an operating company. It’s not a holding company model. And so it had allowed us, because of the model that we run, the management model, had allowed us to jump on things and address things and as we began to learn and began to understand clinically how to deal with this, we could transmit that information wide and far throughout the company, literally in a moment’s notice. And it really is an attribute of the company when it sees something that really works well, we can export it throughout the whole company in a very timely fashion. And that proved to be a real value as we got deeper into this problem and began to recognize the significance of it. And clearly, learning how to lead and run and manage assets like we have in six different states, although the majority obviously is in Arizona, it put us in a position in which we had to learn how to function. So one of the things that we did very early on, we stood up our transport center to allow us to move patients across the system. So we might have had some hospitals that are inundated and some that weren’t. And we could move the problems so nobody got overloaded. And that proved to be quite advantageous for us. And we actually worked with the state to put a plan together that allowed, as patients came in from the far reaches of the state, predominantly the rural environment or from some other places like in Flagstaff that just got inundated and overloaded because of the Indian reservation, those calls would come into a central source and the state would allocate those throughout the systems that existed where they knew we had capacity. So it really helped to prevent anybody from getting overloaded and put in a position where they couldn’t manage the business that was coming to them. So this coordination process, this coordination activity that started with ourselves but then expanded to a statewide system, the time we put it in, we believe we’re the only state in the country that had this central resource for patient referrals and then to move those patient referrals where the capacity existed. Proved to be of huge value come July, when we just got overloaded, inundated towards the end of June and then into the middle of July, I think July 10 was our high point and then it’s been decreasing ever since. But this learning of how to behave and think in a much different way and out of the norm became a tactic and quite frankly, a skill that we’re now analyzing and thinking through on how it should be retained on a go-forward basis. We had a staff meeting the other day in which, we call it COVID Retro, and we’re looking back at the last six months and trying to identify what did we do in the last six months that would be beneficial on a go-forward basis. And we struggled to stand up telemedicine for a number of years. And all of a sudden, within a few months, 80% of the patients coming into our medical groups were coming in through a telemedicine process. And it worked. And you kinda ask yourself a question, “Why did it take such an emergency to make it happen?” Well, the answer, we concluded, was focus. We did what I call a “tune out the static.” We stopped paying attention to noise that didn’t matter and only paid attention to noise that did.

Gary Bisbee 7:53
So one of the questions I had, but let’s get into it now which is this whole pace of change that you’re bringing up. Do you sense that that increased pace of change took place in other health systems? I mean, was this more or less across the country do you think?

Peter Fine 8:09
As I’ve talked to a number of my peers, they have said just that, that the pressure has caused them to do things at a pace they might not otherwise had been able to do or had been willing to do. And now we are recognizing the significance of the need to adjust more quickly in a disruptive environment. I looked at the activity, I’m on the board of Premier Inc. and as we began to get so enormously concerned about how do you access supplies, especially masks, and Premiere went down the path of we’re going to acquire a minority interest in the largest mask manufacturer in the country and we’re going to bring it onshore. Now that was Prestige Ameritech of which Premiere and fourteen or fifteen of Premier’s members bought about a 20% share of Prestige Ameritech so we can lock in onshore capacity and lock in the price as long as we were willing to lock in the volume for them. And so it was very, very beneficial for us to have done that. And we’re starting to see the value of that already as they are pushing that increased manufacturing capability out into the orders.

Gary Bisbee 9:30
In terms of the reliability of supply chain, which is what you’re really talking about now. That sounds like a great help, but is that sufficient? What should the country be doing to support a more reliable supply chain?

Peter Fine 9:44
Everybody is grilling in retrospect and everybody wants to go back and try to point a finger at who made a mistake and who did something wrong. In fact, in times like this, I’m not sure that’s the right answer. Times like this, you should be thinking on a go-forward basis, not a retrospective basis, and begin to understand what it means. And I think there is a role to play for the government because you have to recognize out in the field we’ve been beating inventories down as much as we can, just in time inventories, and trying to put ourselves in a position where we can manage Medicaid at 61% of cost and Medicare at 91% of cost. And so the pressures have been enormous on the financial side. And so nobody sat there and thought, what warehouse do we need that we can fill up and rotate the supplies in order to do that? Well, the answer was, there was a big warehouse at a federal level, except it wasn’t kept up and it had enormously outdated stuff. We got some masks from the federal supply early on, couldn’t use them. They were trashed, quite frankly. We got some vents early on that were so outdated we couldn’t use them. Is there a role for the federal government? I think there is a role. You can’t expect the federal government to be the backstop for the whole industry. It’s not logical. But you can expect the federal government to be the backstop for hotspots. And I think that’s an appropriate role for the government to play. And we in the industry have now recognized the critical nature of certain supply categories that we are either going to build our own inventories higher than we had. We’re going to find onshore makers that we can lock in or near shore makers that we can lock in. And we’re going to have to have a more secure environment for the accessibility of key critical products that before, when we were buying them at 35 or 50 cents apiece, we didn’t really think twice about what would happen if it disappeared, because it was always there. And now I think there’s a clear recognition that this isn’t going to be the last time we’re going to have a pandemic or a bug like this that’s going to disrupt our environment and we’re going to have to look at things through a different lens than the lens we were using before.

Gary Bisbee 12:39
All of the approaches you spoke about, I mean, investing in domestic companies seems like it’s just a terrific idea, thinking about stockpiles, each health system perhaps having its own to some degree, but all of that is going to cost more.

Peter Fine 12:55
Right.

Gary Bisbee 12:56
So are the payers, the governments, employers, consumers are they will willing to pay more, do you think?

Peter Fine 13:01
Well, you know, I mean think about why all this was moved to China so significantly. It was purely price. It wasn’t a quality issue, it was a price issue. And as we kept getting beat down on the cost of health care, then the industry had to look for different price levels that could be supported by the reimbursement levels we were getting either from the federal government or from insurance carriers. The question of if we now have to change our tune and increase our costs, where does that come from? I don’t think Medicare or Medicaid is gonna pay us more. And the insurers don’t want to pay us more, although we’ll try to cost shift our increased costs to them and they’ll have to decide whether they want to contract with somebody or not contract with somebody. But you have to find a revenue stream to support that increased costs or find some other way to cut your costs if you’re going to increase them on the PPE side.

Gary Bisbee 14:04
You travel a lot with government officials. Have you found them to be understanding of this whole supply chain situation and willing to be supportive of initiatives that Banner and other large health systems will want to take?

Peter Fine 14:21
There’s a growing level of knowledge about critical and necessary supplies. You’d have to have put your head in the ground for the last six months not to have learned some things from it. But I think the government doesn’t understand yet what role they should really be playing to backstop the industry in a time of significant distress. I think they need to think that one through and they just can’t do what Trump said early on, “Well out in the field states just got to go find what they can find.” That’s not very helpful, quite frankly, and pit everybody against each other and that’s why these middlemen were able to take a 50 cent mask and charge $5 for it. And so came huge, huge problems because of that. But I think there is a role for government, but I don’t think it’s quite understood from the people that I talk to what that role should be, what role should they play, the backstop and industry in a time of significant distress.

Gary Bisbee 15:35
Clearly, there’s a role with the stockpiles, as you mentioned. It may be to selectively support areas where there’s a greater surge. But let’s move to data availability and particularly resources at an agency like the CDC, which seems clear if you look at the funding and the CDC over the last 20 years, it’s on a relative scale gone down steadily. Isn’t that another area that the federal government needs to think about? Do we really want to be penny pinching with the CDC?

Peter Fine 16:07
Whether it’s the CDC, the FDA, WHO pick your favorite salad of letters, you have to think through who is the trusted resource. Now in our market we’ve been trying to position ourselves as the wise guide, helping people think through the issues and how to respond to those issues. To a certain extent, I think you have to see that also, from a government perspective, they need to be a wise guide and one of those resources so the government can be an informed wise guide is something like the CDC. There’s no doubt that everything will start coming out as it is about monies that have been reduced from that critical organization. But let’s be fair to ourselves here, whether it’s the CDC, the FDA, WHO none of those organizations have shined in the last six months because they may not have been organized well enough to respond to it. Or they did, and nobody would listen. I think we have to have a central resource that this country can count on to be one, well funded, to be two, forward-thinking, thinking about where pandemics go, and then providing under that wise guide statement, providing knowledge and information to the legislature, to the executive branch, and to the field itself on what they see, what they know, and what they’re going to do about it. Somebody has to be the source of truth. I think it’s got to be the CDC. But understand, early on with the mishaps of getting a test out into the market in the three weeks or so that we lost with no testing, was significant. That put a lot of people behind the eight ball. But, regardless of the mistakes that were made or the perceived mistakes in retrospect, I think you’ve got to count on the CDC to be that source of truth and to fund that organization in a manner that they can be out ahead of things instead of trying to catch up on everything all the time.

Gary Bisbee 18:41
The question is for you and other leaders among the health systems. If you talk to the people in Washington, DC these days, the doctors nurses, leaders such as yourself have a very high standing, people trust you all, they want to hear your opinions and are we as an industry doing enough to work the point that you just mentioned, that we need to increase resources to certain federal agencies?

Peter Fine 19:10
I would say in the past, we haven’t. There have been selective programs that organizations wanted to individually lobby for or just the whole general sense of Medicare and Medicaid and trying to get to a point where cost could be covered and we weren’t in the business of cost shifting. The reimbursement system has been a huge problem in this country, continues to be a huge problem and it needs to be changed, because we know it doesn’t work. But I think we are now seeing the significant importance of a central source of truth, of a wise guide, of an organization we can go to because they have the scientific prowess and scientific knowledge that can be put out into the field to provide us the kind of guidance that we need to work a problem. Somebody has to be that coordinating function and I think it’s the CDC.

Gary Bisbee 20:24
I agree with that. Banner has facilities in six states. And I’m sure that each state or each region within the state varied regarding the surge. Does Banner have or have you developed or will you develop modeling capabilities to try to predict surges in your various markets? Or is that something that you would rely on someplace like the CDC?

Peter Fine 20:49
We’d prefer to rely on a central source of truth. But in lieu of a central source of truth being out there, we’ve had to resort to our own capabilities. So our own data scientists have been doing modeling, and especially right now, as our high point on July 10 to now, we’ve probably seen something around an 80% reduction in COVID diagnosed cases in the hospital. But we are now predicting that by this second week or third week of January, we’re going to reach a peak bigger than the one we’ve just reached in July 10. And so we’re modeling that out, and we’re also preparing for that outcome. And we have a few months leeway here, so we’re beefing up our supplies, we’re locking in our contracts to bring staff in from out of state, we’re creating our own projections on what we think this next wave is going to look like and when we think that next wave is going to come. Are our projections pure science? Probably not. But it’s using the best information we have to guide the organization’s ability to deal with what we think is this inevitable second wave. But we believe a second wave that will be way more significant than what we saw in July.

Gary Bisbee 22:19
Not good news. Peter, have the strategic priorities for Banner changed, let’s say over the next three years because of COVID?

Peter Fine 22:27
I would say it like this. We’ve tried to take people on our organization and have them not focus on issues of COVID, but focus on issues on where the industry is going and how do we position Banner to be a success story within that industry direction. And so we’re looking at growth models right now of significance and we’re actually investing some pretty significant capital into future growth opportunities. We just purchased the hospital that actually started before COVID in Casper, Wyoming. They are our fourth hospital there. It’s the biggest hospital I believe in the state and we’ll be a significant player because of the four facilities in a small state. But we’re looking at other opportunities right now because we believe consolidation is going to become significant. We believe the pressures are going to become significant. And we think there’s opportunities out there to position ourselves to be much more relevant than we are today. And so, while a huge part of our company is dealing with the problems of today, which is fighting and adapting to this COVID environment and now all of the surgery that’s been coming back and backing up and having to deal with catch up on that, but then we’ve got another piece of the organization that’s saying, “Well, how should our strategic viewpoint be adjusted out three and five years and even ten years? How do we see Banner? And then what steps are we going to take in the next few years to be able to beat that picture?”

Gary Bisbee 24:14
You made reference to this before, but let me ask the question directly. Where does scale matter, Peter?

Peter Fine 24:21
Well, I think scale matters in a couple of ways. One, certainly regional scale allowed us to coordinate the movement of patients so as not to overload any one part of the organization. Two, it allowed us to send employees to a hotspot. So we sent employees up to Greeley, Colorado. That was a huge hotspot in April and early May. And they did the same thing when we became a hotspot in the middle of July. So the ability to have broad enough scale where you can adjust your resources became a huge advantage in this as well. Certainly scale from the perspective of being able to acquire product and having our own warehouse. So we have our own warehouse and distribution center. So we could go right from a manufacturer right into our warehouse. We didn’t have to go through a third party for a lot of things. And that can only be done if you’re big enough to be able to pull that off. And all of our assets in Arizona are served from our own distribution capability, with the exception of some physician offices, which are served by a third party because they’re in small numbers. But even now, we’re now recognizing we may have to serve even our smaller facilities, whether they be imaging facilities, doctor’s offices, physical therapy sites, because they weren’t easily well served by some of the big players around the country. So having scale that allows you to build that capability became pretty important for us during the crisis.

Gary Bisbee 26:09
You mentioned the exponential increase in telehealth earlier and the compressed time of implementation. An interesting question is, will that change how personal care will become? Will that increase personalization of care do you think?

Peter Fine 26:25
Early on in March, April, and May, once we shut things down, certainly in Arizona, our primary care physicians were seeing 80%. I know my primary care physician saw 80% of his business go to a telehealth model or video conference model. 20% he still had to bring in just because of the nature of the issue and the problem. Of the 80%, another 20% of that, after having a visit through a virtual situation had to be brought into the office anyhow. And now, as we have opened up offices, we’re finding, there’s a core group of people that really liked it. But there’s another core group of people that were uncomfortable with it. They didn’t feel like they were getting a full office visit. So I think to a certain extent, it depends upon the individual. Some are gonna like it, but some aren’t gonna like it. And in certain cases, you’ve got to have hands-on to be able to do the diagnostic part of it correctly. I know in my own situation over the last number of years, I had a couple of health issues, but if that doctor hadn’t had hands-on, he never would have spotted the problem and one was cancer. I think you’re going to see it continue to grow. How quickly I’m not sure. Will it sustain itself? Probably, because there’s probably a lot of things that can be done that way. The problem is going to be reimbursement. There’s already clamoring about, well, why should we pay a virtual visit the same way as we pay an office visit? The issue is, his office expense hasn’t gone away. He’s still got as nurses, he’s still got registration people. He still has to have people to renew pharmaceuticals. And you’re paying for time. It’s no different than a lawyer. You’re paying for their time, whether you’re in front of them, or you’re not in front of them and to professionals like this, you’re paying for their time and the expense of their business. And if you’re paying for time, whether they are half an hour on the phone or video conference or a half an hour in the office, you’re still paying for their time. So I’m concerned that people are going to look at virtual visits as a way to suggest that the professional isn’t working as hard. And that’s just not right.

Gary Bisbee 29:04
Will it be possible that telehealth might be a new business model for Banner or for any of our health systems?

Peter Fine 29:11
Well, certainly for us, we’re promoting it like crazy to our patients. I mean, you go into My Banner for the people that are already patients, we’re pushing in big time, because we have a lot of clinicians that like it, and quite frankly, there’s a lot of things that can be managed like that. Whether it’s a business model that we sell, I don’t think we’re going to do that. But it will be a product line for us that will be easily available and one that I think will be attractive to people that get up close and personal with us.

Gary Bisbee 29:45
Will telehealth open a door to more competition for our health systems?

Peter Fine 29:49
Well, it certainly will open the door to new competition. You know, everybody wants to find their piece of the healthcare pie and slice it off. So there’s going to be people that have new business models, and that they believe is something that can sell and something that somebody wants to buy. And the concern becomes, for me, as everybody wants to apply that new business model, predominantly to the commercially insured patient. Well, what happens to the Medicaid, Medicaid patient? Do we create this two-tier system because of that? It’s very likely that that could easily happen. If you don’t have players like Banner, for example, that have to take care of everybody and need to take care of everybody because that’s the population that exists. So there’s a risk that new businesses will come about through a virtual environment, but I have a concern on how that new business model works and if it is just geared to the cash paying commercially insured patient, then it’s a problem.

Gary Bisbee 31:08
Let’s turn to integrating health care delivery and financing. There’s a variety of models where health systems are forming partnerships with insurance companies, for example, Banner and Aetna is one example of that. Will the COVID crisis cause impetus to grow those kind of partnerships or even mergers at some point?

Peter Fine 31:30
I don’t think the COVID crisis will cause that. I think there’s a natural evolution that’s going on that’s causing that. And it’s this move towards risk assumption. Now these can work well or they can work awful, depending upon how they’re structured. And Banner has had awful and has worked well in a number of these ventures. And so there’s a lot of learning that has come from that. But there’s no question in my mind that a fully integrated product is a much better product for the customer. People in the past have tried to beat up the Kaiser model but quite frankly, you’d be hard pressed to say it’s awful care. I don’t think anybody says that anymore. They used to say that decades ago. And I think an integrated product, if you could get people into the ecosystem of your own medical record and you’re closely aligned and closely affiliated clinicians, you have a better capability to move information, to share information, and to coordinate care in a manner that I think is much more satisfactory and beneficial from an outcome perspective for the patient. But you give something up for that. You give up some options, some choices, but I think you’ll get a much better product. Whether the big players are willing to go that far to become integrated like in Pennsylvania, in the Pittsburgh area remains to be seen. I think that’s why you see a growing interest for some to create their own insurance product to allow people to come into that ecosystem that is highly coordinated and highly relevant to the person that they’re serving.

Gary Bisbee 33:19
Peter, this has been a terrific interview. I’d like to ask a couple of leadership questions to wrap up here and we’re talking now about leadership in a crisis. So what are the most important characteristics of a leader during a crisis?

Peter Fine 33:33
I believe one of the most important and depends upon the crisis and how you do it, is a statement that I use quite often. “Visibility breeds credibility, credibility breeds trust. If you want to be trusted, you had better be visible.” Now, this ability comes in all different shapes and forms. You can go roam around a hospital. You can put videos out like I’ve been doing first, every other week, and now every month. My last video to our own employees 36,000 employees opened it and viewed it and then another 7,000 viewed it a second time. So communication is the key. And it almost doesn’t matter if you’re walking through an ICU or you’re communicating like I’ve been communicating, it’s about massive amounts of communication in a manner that is trustworthy. Second, you have to have, in a crisis, a passion for complexity and a high tolerance for ambiguity. You’ve got to have those two traits if you’re going to manage a crisis well. Know in our organization, we see healthcare just generally complicated and ambiguous to begin with. And so if you’ve built a culture in your organization where your leadership has a passion for complex decision making and is comfortable with ambiguity, then as you roll into a crisis you’ve already got some of those basic tenants that are important for managing your way through a crisis. So how you’ve built that culture really determines on how you work your way through a crisis that may exist and may be put upon you.

Gary Bisbee 35:20
Final question. How has the COVID crisis changed you as a leader and a family member?

Peter Fine 35:25
Well, as a leader, I’m not sure it has really changed me other than a recognition that we have to be better prepared for the unknown. I don’t think we’ve spent enough time, in our organization, talking about the unknown and how would we organize ourselves and respond to it? Now we responded pretty good to this unknown and that’s probably because of how we have been organized. But I think we’re gonna get smarter about how to create the ability to timely respond to the unknown. As to me, it’s very difficult to manage when you’re not in front of people other than on a Zoom call or a Microsoft Teams call. It’s a hard way to lead. You miss nuances and you miss out on that human interaction that causes you to be creative, quite frankly. And so it’s a pretty hard process that I think all of us want to get over. And I know, for me, hanging around the house all the time has not been the most fun thing to do.

Gary Bisbee 36:36
Nor for Rebecca, I take it.

Peter Fine 36:38
Or for Rebecca. Now my dog loves it, loves being around all the time. And she gets mad if I’m not there now. She’s gonna need a dog psychologist once this all settles down and I’m back in the office every day.

Gary Bisbee 36:53
I love our interviews, Peter, thanks so much. We need to land here but keep up the great work at Banner. You’re a terrific leader. Thanks again.

Peter Fine 37:00
Okay, Gary. Happy to do it.

Gary Bisbee 37:03
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 health care 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.