Fairview CEO James Hereford talks medicine, merger with HealthEast

March 17-- Mar. 17--As health care costs continue to rise, hospitals are looking at new ways to cut costs. James Hereford, president and CEO of Minneapolis-based Fairview Health Services, wants to use artificial intelligence, automation and telemedicine to bring more services to patients without burdening them with more expense. This is a top goal of the new partnership between Fairview and the University of Minnesota.

Minneapolis-based Fairview merged with St. Paul-based HealthEast in 2017. A year later, Fairview simplified its contract with the University of Minnesota and the University of Minnesota Physicians. Now, as M Health Fairview, the organization runs 10 community hospitals, one long-term care hospital, 56 primary clinics, 55 specialty clinics, 70 senior housing locations and the PreferredOne health plan.

East metro patients may have noticed the organization's expansion into Ramsey County with additions at the Maplewood specialty center; a new maternal-fetal medicine center in Maplewood; expanded heart care services in Woodbury with plans for clinics servicing cardiac devices, orthotics and prosthetics; a new primary care clinic in Vadnais Heights; and the Edge Radiosurgery Suite at St. John's Hospital.

In addition, several hundred employees have been added at the University Park location on University Avenue, the former Midway Hospital campus.

Hereford joined Fairview in 2016 and has been guiding the consolidation of the four groups.

The Pioneer Press sat down with him March 7 to talk about how the integration is going.

Q. When you look at the history between Fairview and the University of Minnesota, it reads like a married couple going through counseling. The two parties have considered merging, splitting, partnering, splitting again and even this new agreement expires in eight years. Do you see yourself as the marriage counselor in this scenario, and why has the relationship been so difficult?

A. I think it's like anything -- if you don't have a shared vision for what you want to be, then it's easy to not necessarily come into alignment around what it's going to take. The two organizations didn't have a shared sense of why they were good together. Hopefully that's changed. The two organizations believe that and have leaders that are committed to realizing that.

Q. What's happened between Fairview and the university is being called a partnership, not a merger. Can you explain the difference?

A. We didn't comingle our assets. We still have a contractual relationship. What we've done is vastly simplified that contractual relationship. We literally had over a thousand different agreements that dictated our relationship and that just made everybody crazy, so now we've simplified that to a handful that really are crafted ... to make sure when one party succeeds, both parties succeed.

Q. What does the University of Minnesota bring to the partnership?

A. Scientific horsepower. (So we can) leverage an incredible expansion of clinical knowledge and transfer it effectively into the care setting. That is a huge advantage.

Q. Fairview committed to providing $40 million or more per year to the university in clinical revenue to support research. Besides money, is there anything else the university is getting?

A. If you're going to be effective in experiments and clinical trials, etc., you need to have a large body of patients to work from. You can't simply do it as the stand-alone ivory tower on the hill, which is where many academics were.

Q. How has the integration been going between HealthEast and Fairview? You've said one of the first big hurdles was combining the technologies of the two.

A. The good news is the two cultures were so aligned. We both had a faith-based heritage, very committed to the community, very committed to our patients. The hard part is always the technology. That's going to take us through most of 2020 to complete that.

Q. M Health Fairview is the new name. How long before we start seeing that brand?

A. As you can imagine, we've got a lot of buildings, a lot of signs, a lot of badges, a lot of documents, web pages and what have you. So that process will take through the year and may spill into 2020 as well.

Q. For an east metro patient who has been receiving care from either the U or Fairview or both, will he notice anything different ?

A. The basic "Where's my hospital? Where's my clinic? Who's my doctor?" -- none of that will be disrupted in any meaningful way. They'll have access to more capabilities, more services, especially for patients who have more complex health issues. More and more that will be delivered through more than just physical means -- telemedicine, virtual consults, more care delivered in your own home.

Q. You're a proponent of the Lean management philosophy, which seeks to eliminate any waste of time, effort or money by identifying each step in a business process and then revising or cutting out steps that do not create value. How are you defining value from the standpoint of the customer?

A. Part of what we're looking at is, how do you make health care more transparent? You would think that would be simple, right? You go into any store, you can usually find the price tag. In health care it's much harder.

The sense of what is value and what the patient wants to pay for is especially critical now, simply because the economics of health care are increasingly falling onto the backs of the consumer.

Basically half the care we provide in primary care doesn't need or require a physical visit. So how do we provide care that allows you to pick up the phone, to do a video chat, to be able to do a secure message back and forth to get your needs met?

Q. What steps in the business process have you identified and eliminated that do not create value? Would the 65 workers Fairview laid off in January 2018 be an example?

A. There were some redundancies. I'd put that in the context of our employing 34,000 people, so that's a very small fraction.

We're working very aggressively to look at artificial intelligence, machine learning, automative process capabilities, not so much at the replacement of people. Our physicians spend more than half their time doing administrative activities. We're looking at technologies where we can take that burden away from them.

Q. Talk about the new operations center that is designed to relieve caregivers of some of the paperwork burden.

A. As a system that's grown over time, we have created a bit of confusion about how you even contact us. Our vision of the Health Transformation Center in part is that we need to own that complexity -- have one place to go, one number to call, one website, one contact to be made and then we take on that responsibility in helping you get your needs met.

If you're in a big hospital and you're working in the emergency department ... you don't know what's going on up on the floors. The point of the operations center is to be able to give us visibility across our system.

Q. Your biggest competitor, Allina Health System, a merger of HealthSpan and Medica in 1994, has been working on a similar operations hub with mixed results. How would you do things differently?

A. Part of the danger of becoming a very large system is you lose touch with the communities that you serve. We're doing a lot to be partners with our communities to be sure that we're thinking about their processes and their clinical needs. How do we build this in a way that you get the best out of being in a larger system, but you're not taking away the autonomy at that point of value?

Q. The fourth principle of Lean management is to repeat the first three steps until you eliminate all waste. How far along is M Health Fairview?

A. We have a lot of opportunity to continue to improve. There's always new knowledge being developed. That's what makes what we do so exhilarating. I don't know that the challenge is ever over.

Q. Let's talk about cost. Will consolidation create less competition and drive up the cost for patients?

A. No, in large part. I think what's happening is the economics in health care fundamentally changed. We've been balancing economic inflation on the backs of patients, and they simply can't afford it any more. Who's going to absorb that medical inflation? The government can not. They don't have the means nor the will, frankly. Employers can't. Health care is now usually one of the biggest cost items for employers. They're frustrated and feel like they're spending enough. Patients can't. What that means is more and more care delivery systems and integrated systems are going to have to absorb medical inflation. We can't simply just pass that cost along.

In our market we have a lot of competition. We're the largest market share, but only by a little. Allina's second. We have a very active marketplace in the Twin Cities. I think that helps protect against that.

Q. Do you have any thoughts on how the Affordable Care Act and MNsure are working, the so-called "Medicare-for-all" idea and the various ways that would or could work -- or not? Are there models the medical provider community would prefer as best ways to pay for medical care?

A. I actually think that ACA was a step in the right direction. It had its flaws. In many ways it was patterned after models that were employed in Minnesota. But it is a problem that these deductibles have gone up. Even if you have coverage, you don't feel like you're covered.

The problem isn't that there isn't enough money in the system, there is. But the problem is the way we allocate those funds and the uses of those funds. I think that's going to take a more systemic solution than simply saying we're going to let people buy into MNsure.

It's not just getting access to the coverage, you have to have some ability to pay for that coverage. Either the state's got to step up, which means we're going to have to think about a different tax structure, or the individual is going to have to step up, or we're going to have to think about a different way of funding that.

"Medicare for all" is a nice slogan, but I don't think it's a well-thought-out policy yet. It may evolve. The reinsurance program that Minnesota put in place last year I think was very smart. Now they are going to have to figure out how to fund that if they want it to continue.

There's probably a role for government in helping to set the market conditions so it's not laissez faire competition. But let organizations like ours in our marketplace continue to innovate and let the market reward us for our innovations. The role of the government would be to help form that marketplace and then allow that marketplace to work.

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