In this episode of Fireside Chat, we sit down with Pete McCanna, President, Baylor Scott & White Health to discuss lessons learned through COVID including the issue of large health systems planning for flex capacity as a contingency for future crisis. We also talked about vaccine distribution and Baylor’s priorities for 2021.
As president, Peter McCanna oversees operations and finance for Baylor Scott & White Health, the largest not-for-profit health system in Texas. The integrated delivery network includes 49,000 employees, 51 hospitals, 7,500 affiliated physicians, more than 1,100 access points, Scott and White Health Plan, FirstCare Health Plans, Baylor Scott & White Research Institute and one of the nation’s largest accountable care organizations, Baylor Scott & White Quality Alliance. Previously, McCanna served as executive vice president and chief operating officer at Northwestern Memorial Healthcare based in Chicago. Read more…
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Peter McCanna 0:03
COVID has elevated the appreciation for the day-to-day operator, the person who runs things day to day. I can’t tell you how many times in my career people in the assessment of talent you hear, some leaders say, “Well, they’re not strategic enough.” Well, fine. Everybody can be strategic, but only certain people really know how to operate.
Gary Bisbee 0:27
That was Pete McCanna, President of Baylor Scott & White Health, speaking about the importance of the day-to-day operator in the COVID crisis. He observed that only certain people really know how to operate and he referred to them as field generals. We followed Pete’s lead with the title of this episode. I’m Gary Bisbee and this is Fireside Chat. Pete shared the reality that if COVID taught us anything, it is that large health systems will need to plan for excess or flex capacity as contingency for future crises. Let’s listen.
Peter McCanna 1:00
We realized during the pandemic that we need some excess capacity. If we believe we will have future pandemics, which I think most people would agree and most scientists would agree, we have woefully under capacity to handle those events. Now, it may be dormant capacity in hospitals, but we’re asking questions, “What’s our disaster preparedness capability to do that?”
Gary Bisbee 1:26
Pete brought us up to speed on the status of vaccines in Texas and how a hub distribution model has been adopted. Pete spoke about the role that Baylor is playing in vaccine distribution and administration, the concern over the ever-present pressure that employees and staff are under, Baylor’s priorities for 2021, and how Baylor is pursuing more partnerships as part of its strategy. Baylor is planning for the future by assuming more risk in both commercial and governmental business by expanding Medicare Advantage and managed Medicaid as follows.
Peter McCanna 2:07
We need to move, particularly in Medicaid and Medicare, to being at risk. And so Medicare Advantage is a great program. It’s more than 50% of new Medicare eligibles are selecting Medicare Advantage. And I think that percentage will grow. And we need to be a player in that. We are currently a player in that but we need to expand it to all the markets that we participate in. And Medicaid managed care, we need to be a player in that.
Gary Bisbee 2:30
I’m delighted to welcome Pete McCanna to the microphone. Good afternoon, Pete, and welcome.
Peter McCanna 2:41
Hi, Gary, how you doing?
Gary Bisbee 2:43
I’m well, thanks, we’re pleased to have you at this microphone for the second time, so thank you for enduring us twice.
Peter McCanna 2:49
No, happy to do it. Looking forward to talking to you.
Gary Bisbee 2:51
Well, COVID’s front of mine for everybody, Pete. I would like to just ask, first of all, what’s the circumstances in Dallas and your markets in Texas for the surge or for COVID in general?
Peter McCanna 3:06
We just went through a very major surge here in Dallas, really in all of our markets in Texas and the levels of COVID hospitalizations were over two times they were at our last surge, which was in July. It got very close in some of our markets where they would have to issue mass critical care guidelines, which is essentially rationing of care according to protocols. And fortunately, about a week ago the numbers began to drop pretty dramatically. And that’s pretty consistent with most markets in Central Texas.
Gary Bisbee 3:42
So do you have your own epidemiologists, your own models? Are you expecting another surge or can you tell?
Peter McCanna 3:49
We have our own analytics models and we’re looking at many of the others that are published here in Texas. I think what we’re worried about is, we’re worried about the variants and I think we’re expecting another surge during this pandemic despite the rollout of a vaccine. As many of your listeners know, as you know, the vaccine rollout has been somewhat slow. And we’re concerned that the variants will move faster than the vaccine administration essentially and that we’ll be faced with another surge down the road. It’s hard to tell when. We’re prepared and preparing ourselves for it, but I think that will be there at some point.
Gary Bisbee 4:31
Let’s pursue the vaccine topic for a moment. What’s Baylor’s role in vaccine administration?
Peter McCanna 4:37
Our role varies in different parts of the state. The state of Texas has endorsed what they call a hub model for vaccine. They quickly went to larger administration sites and I think roughly 80% of the vaccine supply flows to hubs. So what we’ve done is we quickly pivoted, we quickly created hubs in some key markets and qualified as hubs. And in some cases, the county wanted to take the lead and we were happy for that and we’re in a support role with counties or other municipalities. So we’re sort of in both areas, but very much involved in vaccine administration in that way.
Gary Bisbee 5:19
How’s the supply holding up?
Peter McCanna 5:21
The supply has been bumpy or lumpy, put it that way. And it does create some challenges around the distribution of the vaccine. So we will know what our allocation is a day or so before we need to begin administering it. So you’ve got an operation that you want to be high throughput, but you’re waiting for what is the supply going to be. I think we’ve done a very nice job, but it is quite a challenge not knowing how many doses you’re going to be able to administer in the upcoming week and then you find out on a Saturday or even a Sunday, here’s what your allocation is for the week, now go do it. And rapidly schedule people, rapidly get the staff to administer it. So we’re hopeful though, with the increased supply that we’re being told would come from the federal government, that there’d be a little bit smoother supply of vaccine over time.
Gary Bisbee 6:19
What percentage of the Baylor staff and employees have you vaccinated?
Peter McCanna 6:24
We’re at about 60%. And we’d like to obviously get that much higher. We’ve created an open window and circled back to all those employees who have decided not to get the vaccine. I think they’re different groups in that. Some of those are the procrastinators, they just, until it absolutely must happen, it’s something that’s just not on their radar screen, they’re busy, they just haven’t gotten around to it. We’re making it easier for them. And then there’s a core group that are worried about the safety and the emergency use aspect of the vaccine. We’re trying to do as much as we can to communicate as much to them as we can that shows them that it is truly safe, it’s clearly effective, and encouraging them to come back and be vaccinated.
Gary Bisbee 7:14
Any sense at all, which probably you don’t, but I’ll ask it anyway, any sense at all of when the community would largely be vaccinated? I mean, is there any projection of mid-year or end of year?
Peter McCanna 7:27
Again, it’s so much a function of supply. I have no doubt that the distribution capability will ramp up to the supply available. I’ve been very impressed by health systems, counties, and the innovation to be able to administer the vaccine. It’s the supply issue. It’s very hard to tell. Interestingly, one of the super hubs here in Texas that got up and running within days is at the Texas Motor Speedway. It’s a perfect setup for vaccine administration. They’ve got 16 lanes and cars are running through and they’re making it happen. And then the observation is back in the parking lot, huge parking lot, the 15-minute observation. So we can get it done in a lot of different ways. But it’s making sure that supply line is really pumping through.
Gary Bisbee 8:18
There was an op-ed in the Wall Street Journal today, you probably haven’t seen it yet. Scott Gottlieb and Mark McClellan were saying that right now the supply and distribution is about balanced and by April there actually might be, they used the word glut, but more vaccines then we can actually distribute. If that happens, that would be pretty impressive.
Peter McCanna 8:41
That would be great, actually, right? And really push us as the vaccine administrators, us and the counties, to really even push harder. What can we do? How can we innovate? I think it gets to that point, these various levels of priority would likely go away. And basically say, a willing shoulder, poke it and move forward that way.
Gary Bisbee 9:03
The J&J vaccine should help a lot in terms of supply. But let me go back to the caregivers, if I could, Pete. Everybody indicates that these people have been under pressure for month after month. How are you viewing the caregivers and do you see that there needs to be special provisions for the people that are under this continuing stress?
Peter McCanna 9:26
Well, it’s a real huge concern of ours of the accumulated stress that these caregivers have been under. I mean, first, there’s the stress of the job, obviously. And early in the pandemic, it was highly stressful because of some of the uncertainty around the virus, as well as the shortage of PPE. Now, it’s a lot is the accumulated impact, the constant working shifts over and over in these environments and how that builds and how burnout builds over time as well as the stress of their home environments. And we know everyone who is working in this pandemic, they have some unique challenge relative to their family. They may have a family member with COVID, they may be living in a home that has some at-risk individuals in it and they’re worried about bringing it home to those individuals. So all that creates enormous stress. In a healthcare entity, there are a lot of young parents with children and they’re juggling the virtual schooling at the same time where they’ve got to come into work and care for their patients. So all those things come together. We’re trying really hard to address it, obviously, through outlets in terms of mental health capacity, but also when we’re not in a surge situation, really working hard to get these folks to take some time off, which is crucially important. But there’s a lot there. I think the duration of the pandemic is really taking its toll on our frontline healthcare workers.
Gary Bisbee 11:00
Well, everybody’s reporting that it is a major problem. Well, Pete, for those of us that are familiar with Baylor, but there’s some that are not, could you just describe Baylor for us and bring us up to speed?
Peter McCanna 11:15
Baylor Scott & White is a large regional health system, integrated health system. We provide care as well as insurance products in the state of Texas exclusively, predominantly in three markets – Dallas/Fort Worth, the Austin market, and then what we call the Central Texas market which encapsulates College Station, as well as Temple which is the site of the original Scott & White Clinic, Waco is in that category, so Central Texas. And we’re about 11 billion in revenue. We have about 1000 sites. And we have every part of the care continuum as part of the health system, plus a health plan, and the state’s largest Accountable Care Organization, ACO.
Gary Bisbee 12:03
What would you say your top three priorities are, by you, I mean, Baylor Scott & White, what are Baylor Scott & White’s top three priorities for 2021?
Peter McCanna 12:13
They are a continuation of what happened in 2020 and they fall into three categories. Job number one is response to the pandemic, that we are doing everything possible really to care for the most patients we can care for, both COVID positive and others who need our care. That is all those aspects of capacity management, PPE, all those things, testing, that fall into, essentially disaster response. That’s priority one. Priority two is to continue to execute on our operational goals. And those operational goals, it really falls into the areas of safety, the patient experience, health, as well as our costs and our financial performance. So really, the nuts and bolts of our achieving our goals. We’re saying, “Listen, yes, we’re in a pandemic, but we are going to take steps to continue to execute on those things.” And then the third area of priority is what we call our strategic initiatives, which really are building capabilities for the future. And they’re based on our beliefs of what the future of healthcare will be several years out. I think a lot of our work in digitization, both relative to the consumer but also within our organization, would be an example of some of the strategic initiatives that we execute on. And we really believe that, again, we as a healthcare system, we’ve got to aggressively execute on those three work streams at the same time. And that’s what we’re doing.
Gary Bisbee 13:51
Thinking about scale, Baylor Scott & White at 11 billion is one of the top 10 not-for-profit health systems in the country, a thousand different locations. How his scale mattered during this COVID crisis, Pete?
Peter McCanna 14:07
It’s really been advantageous. And I would say, you really need to combine scale with an operating model or an operating company. I don’t think scale matters a whole lot if you’re a holding company, but it does if you’re an operating company, and we’ve been able to leverage that. I think it’s helped a lot in PPE acquisition. I could talk about that at length. It’s really helped a lot on capacity management. The way the pandemic has rolled out, particularly during surges, there may be a couple of facilities that are really stretched thin while you may have others in a market or region that aren’t. And we’re able to move resources around and smooth that out either moving patients to other facilities to smooth that out or moving staff from one facility to another. And being able to lean on the size and scope of the system to do that has been really very helpful. And I think the knowledge base of a large system, we’re able to identify what works in one part of the system and then apply that knowledge to other parts of the system, which has been helpful as well.
Gary Bisbee 15:20
So Pete, do you see that the regional health network model is likely to grow around the country over the next 5 or 10 years?
Peter McCanna 15:29
Yeah, I think so. I mean, I think that is a belief that we have that it will grow. There are economic advantages of that growth, there are capability advantages, particularly around digital. So I think that’s going to happen. I think the key finding for us, or conclusion we’ve reached from it, is not that we’re going to chase that, but that we need to be prepared to scale to that growth. So if you look over a period of 5 years, what is the probability that we will be larger, and what is the probability that there may be a merger or acquisition even though one isn’t on the radar screen, and the probability is pretty high. And in that recognition, we need to create capabilities that allow us to quickly scale when we’re called to do so.
Gary Bisbee 16:22
In terms of your health plans, how has that actually helped Baylor Scott & White during this COVID crisis?
Peter McCanna 16:30
It’s actually helped us a lot. So we have really two value-based platforms. One is, we have a health plan, our Scott & White Health Plan, which is about a billion and a half in revenue. And then we have, as I mentioned, the state’s largest ACO, where it takes not fully capitated risk, but it may participate in shared savings or other incentive programs for patients that are enrolled in that. And it’s an important diversifier from a business perspective. So during the shelter in place during the pandemic, our health plan actually did fairly well while the hospitals and clinics really had very large losses. I also think it provides a platform to orchestrate care which has been really important in the pandemic. So we’re finding the intersection of our provider network in its capabilities with the value-based platforms becomes crucially important. So for example, when a patient is discharged from the hospital after having COVID, what is our platform for follow-up care? How do we make sure that they’re not just simply given a discharge summary and sent home, but they’re still part of our system and part of our care umbrella? And I think we’ve learned some things and done some things that have been very helpful for our patients in that regard.
Gary Bisbee 17:53
Moving to partnerships, I think it’s fair to say that Baylor has been an industry leader in forming partnerships with other than hospital-related companies. How has that worked out, Pete? And do you see more of that in the future?
Peter McCanna 18:09
I definitely see more of it in the future. And it’s worked out very well for Baylor over the years and more recently for us. Our partnerships right now fall in several categories. We actually have the original joint venture partnership for what is now USPI, which is part of Tenet. So we have a large partnership, predominantly in the DFW area around ambulatory surgery and short-stay hospitals with USPI. Another partnership we have is with US Radiology in our Touchstone outpatient imaging centers. And then we have a large partnership with Select Rehab for inpatient and outpatient rehab. And what we’ve found is these focus models, let’s just take USPI and our partnership with USPI, they become very good at operating that model. And they become very good at growing that model better than we could do on our own. Number two, it’s a lower-cost setting, so as care moves out of the hospital setting into ambulatory surgery centers, we actually are lowering the cost of care by doing that, and yet we’re participating in it, and it’s still Baylor Scott & White quality, we’re increasingly integrating the care with those joint ventures. So the goal, eventually, is where our patients don’t even notice that they are outside of Baylor Scott & White. The only difference is that there is some sort of ownership difference and I think we’re very close to achieving that.
Gary Bisbee 19:41
Thinking about COVID, I apologize for continuing to hammer the point, but it really is all-encompassing. When thinking about it, what changes in 2021, this year, what changes have come about because of COVID would you say, Pete?
Peter McCanna 19:57
There are a lot, and a lot have been mentioned in podcasts like yours and others around telemedicine. I think we were already on that track because that is what the consumers demanded, but during COVID the consumer is demanding it in a big way. And I think it gave health systems the permission to experiment, the permission to expand it without it being perfect, and really move that forward and probably moved it forward 5 years in 5 months, one could argue if you look at the growth rates of telemedicine. I think it’s really expanded our lens on what we need to do in the home. And I’m not just talking about telemedicine, but it’s really expanding and saying, “How can you maximize the home environment for healthcare?” Can we bring a physical therapist to you? Why do you have to go into a physical therapy clinic to have that done? Why don’t we bring one to you. All those very simple, but yet have been very difficult to achieve. And it really requires a health system, requires us to really change our mindset and be persistent about asking questions, “What does the consumer want?” Not, “What do we believe they need? What do they want?” Constantly asking that question leads us to solutions that we probably wouldn’t have come to if we hadn’t been asking that question. And it’s telemedicine, expanding the home. I think also COVID has elevated the appreciation for the day-to-day operator, the person who runs things day to day. I can’t tell you how many times in my career people in the assessment of talent, you hear some leaders say, “Well, they’re not strategic enough.” Well, fine. Everybody can be strategic, but only certain people really know how to operate. So an appreciation for the field generals who can make it happen, because COVID’s really required that – people on the ground, making decisions within a framework, pivoting, working off the best evidence, and having to make decisions daily that are a matter of life and death and doing it well. A real appreciation for those types of leaders has come out at COVID.
Gary Bisbee 22:21
Do you think, based on telemedicine, home visits, do you think that there will be less need for hospital beds or even hospitals 10 years from now?
Peter McCanna 22:32
There are a lot of opinions on that question. It’s an excellent question. I honestly don’t think so, personally. I think if you look at all the factors involved, I think we still have a strong need for that hospital capacity. I’ll give you two examples. So yes, you’re right. In isolation, the move to the home and telemedicine and the reduction in emergency department visits we’ve seen, which we think is potentially permanent, about 20%, all move care away from the hospital. But the things that cause us to rely even more on the hospital are, number one, demographics, just the growth of the over 65 population. And if you look at the data, hospitalization rates, you just do the math, are going to go up. They’re going to go up because of the ageing of the population and the higher proportion of people over the age of 65. That’s number one. Number two, is, I think we realized during the pandemic, that we need some excess capacity. If we believe we will have future pandemics, which I think most people would agree and most scientists would agree, we have woefully under capacity to handle those events. Now, it may be dormant capacity in hospitals, but we’re asking questions, “What’s our disaster preparedness capability to do that?” So I do think there’s some factors working in the other direction that cause us to pause before we’re ready to conclude of the demise of the hospital.
Gary Bisbee 24:08
Well, let’s turn to public health infrastructure for a moment. Everybody agrees that public health infrastructure certainly was never designed to handle something like COVID. And yet 100 years ago, we had something like COVID. So you do wonder. How has Baylor worked with the public health agencies, the counties in Texas, probably more than some other states, but the state agencies? How has Baylor worked with your public health agencies?
Peter McCanna 24:39
Right now, our work with public health agencies is really around vaccination. And I mentioned this, we’re sometimes in a lead role in running some of the large hubs in the state of Texas for vaccination. And in those cases where we have a strong local public health agency, we’re in a support role and I think that’s helped a lot. We do also, early in the pandemic, we’ve relied on public health agencies to provide some of the guidance needed. I remember very early when we would have a patient test positive, really turning to that local public health agency and say, “Okay, how do you want us to handle this? What is the best way if they get discharged from the hospital and sent home? What do we need to indicate there?” So I think those are really important. But we did observe, which is not much of a surprise to many of us, is the underfunding of public health agencies. And much like the hospital comment I made to you about preparation for another pandemic, we as a country are going to need to assess our public health infrastructure. We serve as a backstop to that, but we’re not public health people. We’re generally wellness people and acute care response capable. And public health is a different discipline. And we’ll have to learn more to be able to help in that regard.
Gary Bisbee 26:03
Can I follow up on the demographic issue we were talking about with hospitals where we were saying that the number of people 65 and over is going to grow, almost double, actually, in the next 15 years or so. But the question is, most of the health systems today are 50% of their revenue comes from governments, much of that from the federal government. Some places are much more than that. But it seems that no matter what your percentage now, it’s going up. So how is that going to affect Baylor if the percentage of revenue is coming from, let’s say the federal government, goes up by a factor of 30/40% over the next 10 years?
Peter McCanna 26:46
And if you worked based upon current reimbursement rates and just look at that in isolation, the economic consequences could be catastrophic for certain systems, right? So I think a couple of things that we’ve concluded from that trend is number one, among other factors driving it, we have got to be rigorous and absolutely persistent about finding ways to become more efficient and get our cost structure down. And looking at every opportunity to do that so that we have a lighter model that if we’re in a severely constricted reimbursement environment, we can still fund the things we need to fund out of earnings. Number two is our belief that we need to move, particularly in Medicaid and Medicare, to being at risk. And so Medicare Advantage is a great program. It’s more than 50% of new Medicare eligibles are selecting Medicare Advantage, and I think that percentage will grow. And we need to be a player in that. We are currently a player in that, but we need to expand it to all the markets that we participate in. And Medicaid managed care, we need to be a player in that. So we see growth opportunities. We think it’s better for the patients to be in those models. And we think the economics get better over time as we get better at delivering care under those models.
Gary Bisbee 28:19
Many people would say there’s been a shift of risk from employers and payers to the providers and the consumers. High Deductible Health Plans is an example of that, but there are plenty other examples. What say you about that and two, if you see that coming even more, what can be done about it?
Peter McCanna 28:42
I think clearly the shifting of risk to us as providers will continue both in the employer-based coverage areas as well as the governmental areas. So I think that’s a certainty. I think smart ways to shift to the consumer should help because then now the consumer, in terms of purchasing healthcare will be much more cost-conscious, which has always been a problem within healthcare, and many have suspected has contributed to the high inflation over the years in healthcare. But it does cause us to really focus on our value-based care platforms, which I mentioned about our health plan and our ACO. I think the ACO is interesting in that it allows us to do some more creative things, not just take on full risk. But we could do direct to employer relationships where the employer wants to customize and that shift that you identified and we can get involved as both an organizer financing arm as well as the provider to help the employer get to where they need to get to. But I think what we’ve said is, let’s build out our strength in those capabilities and those value-based platforms so that as different trends occur, we’re there ready to go and grow those over time. Because we’re in this in-between, as you know, still fee for service in many markets, but then also move into value-based. And that shift is not going to happen overnight. It’s gonna be an evolution over time.
Gary Bisbee 30:21
Pete, this has been a terrific interview. I’d like to ask a couple of questions on leadership if I could to wrap up. The first is, what do you think are the characteristics of a leader particularly in a crisis?
Peter McCanna 30:34
The core characteristics, in my opinion, fall into three categories, and then within a crisis, maybe some others really get heightened. At the core, a leader needs to be trusted. And that’s a key aspect. And there are a lot of things that lead to trust, as we all know – transparency, delivering on your commitments, those types of things. So trust at the core. Number two, I would say, is care. That the leader is demonstrating genuine care for the people that he or she are leading. And there are all types of ways to do that. If it’s a leader of a small team, it’s really being mindful of how people are doing and giving them what they need. If it’s a larger organization, what are the programs and approaches that demonstrate true care for those that are on the frontlines. So that’s really crucially important. And the third is a broad category, but people follow people who are competent. You need to demonstrate competence. And that takes me to the pandemic. The competence of leaders becomes crucially important. So competence comes from being knowledgeable, so spending the time to get up to speed, what’s the latest evidence? What do we know? What are the best practices, and really, using that platform to really help other leaders in the organization be competent. Another is a propensity for action. You don’t have the time in a crisis to wait for the most perfect answer. You’ve got to move. I’m a big follower of Teddy Roosevelt and one of his quotes was, “I have a second rate brain, but I have a first-rate capacity for action.” A leader needs that. They need to not just be about intelligence, but they’ve got to really move and try to make the best decision with the facts that they have on the ground. Those are real important. Communication constantly, and that also ties into trust, but communication becomes crucially important. But those are just some things that come to mind. I’m sure there are more, but those are crucially important.
Gary Bisbee 32:43
Those are all great. I did ask Warner Thomas from Ochsner the same question not too long ago and his reply was, “Nobody likes to follow a pessimist.”
Peter McCanna 32:54
Absolutely. People need to know that there’s optimism and hope in this. And there is.
Gary Bisbee 32:58
Final question, Pete. How has the COVID crisis changed you as a leader and a family member?
Peter McCanna 33:05
That’s a good question, Gary. I touched on some of these things. For me, as COVID has really changed me in terms of my appreciation for what people are doing on the frontlines every day. It sounds cliche, but it’s just so genuine. As you work in healthcare as long as I have, you sometimes take for granted that that just happens. And it doesn’t. And the commitment to the individuals on the front line, they got into this real calling and vocation because of their care for patients and that genuine drive to help them. And the pandemic has really brought that out. And just that admiration and gratefulness to them for what they do every day really has come out of the pandemic and really has affected me. And it’s really re-energized my love for the work that I do and my sense of obligation and my sense of commitment to be the best that I can be, because I want to do that for them and for the patients that they serve. So that’s number one. You asked about with my family, the silver lining of the pandemic I think has been, it’s allowed us more time together and more time to connect, whereas before there were more distractions. And I think that is one of the good things that’s come out of the pandemic for me.
Gary Bisbee 34:23
Pete, well said. We really appreciate your time today. Excellent interview and you’re just doing a terrific job at Baylor, so keep up the good work.
Peter McCanna 34:32
All right. Thanks, Gary.
Gary Bisbee 34:35
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