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'We prefer to be at the table': How Advocate Aurora's sole CEO is making the $12B organization an industry leader

December 6, 2019

    Welcome to the "Lessons from the C-suite" series, featuring Advisory Board President Eric Larsen's conversations with the most influential leaders in health care.

    In this edition, Advocate Aurora Health President and CEO Jim Skogsbergh talks about why parting ways with former co-CEO Nick Turkal wasn't as "salacious" as people speculated, the "irreverence" that makes the organization's current partnerships so successful, and how the $12 billion organization is making sure it's "at the table"—not "on the table"—in a changing industry.

    Jim Skogsbergh
    Jim Skogsbergh, president and CEO of Advocate Aurora Health

    Question: Jim, when we last spoke 18 months ago, you and Nick Turkal jointly helmed Advocate Aurora as co-CEOs. But this summer, that plan changed and you were selected as Advocate Aurora's sole CEO. I'd like to quickly touch on the transition because of the "non-story" that it turned out to be. Folks were looking for something sensationalistic or controversial about it, but they were disappointed—nothing of the kind.

    Jim Skogsbergh: That's right. And you know, the co-CEO arrangement lasted such a short a time that people have speculated its dissolution was maybe intentional, but that was not the case at all. We had planned for a real, genuine partnership, which we thought was going to last for quite some time. However, about a year into this, Nick and I acknowledged that while this partnership model was necessary to do the deal, it probably wasn't necessary going forward. And the same spirit that brought us together—pursuing what's in the best interest of the organization—led us to conclude that it was better for the organization to have one leader rather than two. So together we went to the board and expressed our shared opinion. Frankly, it caught some of our board members by surprise. But to their credit, they recovered quickly and launched the selection process.

    So yeah, it lacks the energy or excitement of a big breakup, because that was not at all the case. And while I'm delighted to have been selected, Nick is a tremendous leader, and his fingerprints will be on this organization forever. We wouldn't be here today if not for the work he did, not just in the last 18 months but really for the dozen years or so that he was CEO at Aurora.

    Q: Beyond the co-CEO shift, how would you characterize the first 18 months post-merger? Certainly, by most external metrics and measurements, it's been a success—an orderly selection process of the leadership cabinet, 4.5% operating margin, several new partnerships announced, etc.   

    Skogsbergh: Eric, I'd use the same word: success. We feel very good about how far we've come. But we celebrate for about 10 seconds and then we think about what's ahead. That's just our organization's culture.

    So we're doing fine in terms of finances, and we're proud of our safety record and health outcomes, but we raise the bar on all those measures every day, and we've always got to do better next year. But the thing I love about this organization—and this was true of Advocate and Aurora independently, and now the combined organization—is that we're up for that challenge. Everybody is interested in doing better tomorrow even when we do pretty darn good today.

    Q: And on the flip side, what are some of the challenges you're facing right now?

    Skogsbergh: You know, we've lost some talented folks, because we went from two to one in some cases. That's difficult and painful. And certainly, we're messing around with people's sandboxes because we're trying to figure out a standardized approach. And I laugh about this a bit because when I'm in Illinois, I get questions about, "Why do we have to do it the Aurora way all the time?" And in Wisconsin, I hear, "Why do we have to do it the Advocate way all the time?" I have the same response every time: "That's the wrong question. The right question is, 'Are we doing it the best way? And if we do it the best way, who cares where it came from?'" And I think that spirit is catching on.

    We've had success in every realm, but we're not fooling ourselves for one second about the challenges we face. That's the reason for coming together, this idea that we're going to be able to navigate the coming storms a little bit better together than separately.

    Q: One of the original attractions of Advocate and Aurora coming together was this idea of complementary "gifts" between both organizations. On the one hand, Advocate has arguably the preeminent ACO in the country, ranked number one in terms of shared savings, and you've built a strong working relationship with the dominant Blue here. And complementing that, Aurora brought this exceptional rigor around clinical standardization—in just a couple years, Aurora went from the highest-cost academic medical center (AMC) in Milwaukee to the lowest. How has the reality of coming together matched the theory? Are you making progress in translating these skill sets across the two legacy organizations?

    Skogsbergh: You're right, Eric. I mean, it's cliché to say we're taking the best of both worlds, but you do these things because you believe you can—and we have. So we're applying some our ACO-population health risk experience up in Wisconsin, which doesn't have that full cap experience with risk, and we think that will help lead to our continued success. And to your point about Aurora's capabilities, we're really beginning to emulate and embrace that medical group service line approach and standardization in Illinois.

    In fact, I'd go so far as to say that the poster children of this new collaboration are the leaders of our respective medical groups, Dr. Jeff Barr and Dr. Vince Bufalino. These groups are still separate, but they're joined at the hip and basically saying, "What can we learn from each other? What can we beg, borrow, and steal to improve both groups?" Jeff and Vince have been superb, modeling the behaviors that we want everyone to have, which is that we're all in this together, that we've taken off the old jerseys and put on the Advocate Aurora Health jersey and wear it proudly.

    Now, some would say, "Are we making as much progress as quickly as we otherwise could?" And that's a fair question. My modus operandi is more of an evolution rather than a revolution. In my experience, I've found that if you go a little bit slower, get more people involved, and make these decisions collectively, it takes longer, but it sticks better. So the way we've approached this is if it touches the patient, like the clinical realm, we're going to go slowly and carefully. But in the non-clinical realm, there's no reason we can't go hard and fast.

    Q: You mentioned in our last conversation that the provisional goal (at the time) in terms of estimated cost synergies was about $350 million over the next few years, and that's you'd already deployed 24 teams across predominately non-clinical areas to go after those savings. 

    Skogsbergh: You went back and read your stuff, didn't you? It was 24 teams exactly. And actually, we're ahead of our projection—I believe we got about $195 million or $200 million in the first year, we're currently at about $240 million, and we think we'll get to more than $300 million or even $400 million in the next couple years. So we exceeded our goals, and then it looks pretty good for us going forward.

    But again, there is no silver bullet. We're pulling a lot of levers to get there. We've got a variety of efforts and nothing's off-limits—we're examining everything. That said, when it gets in the clinical realm—and I do think the standardization thing is where there's a fair amount of gold—we're careful. We're going to let our physicians, our nurses, our caregivers drive this, as opposed to, you know, "We'll figure it out up here in this office." So it will take a little bit longer, but it's going to bear fruit for us.

    Q: You know, Jim, when I think about legacy Advocate and legacy Aurora, both had very identifiable characteristics and almost a signature "personality" to each. Is it too early to ask what the character of Advocate Aurora is?

    Skogsbergh: Well, one of the things we've adopted at Advocate Aurora is this notion that we're first and foremost a safe clinical enterprise. So for us, it's all about the care that we give to our patients and families in the communities; we're zeroing in on that as our true north. While you have to be focused on a lot of things, at the end of the day, it's really about the safe and effective care that we render—that's what defines us.

    The other thing about the character of the combined organization—that is very much the same as it was in the original organizations—is this commitment to the overall wellbeing of our communities, to being a good citizen locally and globally. So I don't care what you do at Advocate Aurora. You could be on our medical staff or in our support services, but it's all about advancing the health and wellbeing of the communities we serve. That'll get you up in the morning and bring you to work with some energy and excitement and commitment. Because we all have good days and bad days, but if you always know that we're heading in this direction, then you might have to hike uphill or slog through the swamp sometimes, but it's okay, because this is an appropriate destination. And if we get 70,000 team members willing to take that hike, it's exciting to think what we can do.

    A unique approach toward partnership

    Q: Another characteristic of Advocate Aurora I've observed is this openness to a broad array of partnerships. You've announced collaborations over the past few months with One Medical, Oak Street, Walgreens, and CVS, among others. I imagine part of the motivation here is while you're big by our industry standards—one of the 10 largest nonprofit health systems in the country—that isn't all that big when you start thinking about the non-traditional entrants and competitors in our space (private equity, FinTech, etc.). And if we can't build all these capabilities on our own—and fast enough—we might as well think about lining up with others.

    Skogsbergh: Eric, let me back up and start with this notion of us as one of the 10 largest nonprofit systems, because I'm like, "Okay, great, but tomorrow we can be at 35th." So yeah, the industry is scaling up—and we do, without a doubt, believe in the value of scale—but we never have approached this as getting big for the sake of getting big. For us, scale is a means to an end, and that end is delivering better health outcomes at a lower cost.  

    And undergirding that approach is a fundamental belief that the challenges we face are so significant that I don't think we're going to figure them out by ourselves. We don't have the corner on intelligence and creativity. There are a lot of smart, admirable organizations inside and outside our industry that can complement and, in some cases, even replace our own capabilities. So we're very open to partnerships and collaborations, as you pointed out, because at the end of the day, we're just trying to serve the patient. And we know we're not going to get it right every time, but even when we swing and miss, we can learn from it, regroup, and try again. And all of this is exciting; it's fun, it's new, and it's fresh, so there's no problem getting people excited about this.

    But Advocate Aurora Health has embarked upon a dual transformation, and there's a contrast between that part and transforming the core business. I think transforming the core business is harder because we've done it this way for decades and because this is how the health care industry designed it. And to be honest, I'm struggling with the notion that those of us who built it can actually transform it. We've got a lot of really smart people in this industry, but it's hard to challenge the status quo, or even to see a different way of doing things, if you've created this way and this way has worked for you. And until we are willing to examine that which we hold most dear—the visceral, intensely personal stuff—I don't know that we'll fundamentally and significantly transform the business the way it needs to be.

    Q: You're describing both the benefit and the curse of incumbency, and that challenge of self-disruption: Are the leaders who built the current system the same ones who can revolutionize it?  Hence, I'm hearing you say, Jim, the need for unconventional partnerships to spur this kind of change.

    Looking at some of the specific partners you've chosen, they are disruptive in their own categories, especially in ambulatory space. Let's talk about two of your partners in particular—Oak Street Health, which is a leader in caring for the polychronic, clinically complex Medicare Advantage (MA) population; and One Medical, which has taken an alternate approach in creating a membership-based primary care model stressing best-in-class access and service. Talk a little bit about what each is bringing to the relationship that Advocate Aurora couldn't have innovated on its own, or couldn't have done fast enough.

    Skogsbergh: Speed is one thing, Eric. The other thing is—and maybe it's one in the same—that they're outside of the confines of the normal delivery system, so they aren't as encumbered. They have the freedom to move and to move fast.

    And we really admire how both of these organizations you mentioned—and a number of others out there—aren't the least bit daunted about the fact that they're getting in somebody else's space. Their approach is simply: "There's a need here and nobody is filling it." They are taking different approaches, like you said, but they share a certain irreverence that we think is healthy. You know, they aren't going to roll over for Advocate Aurora or anyone else because they know the need is out there and they're seizing on that. And we're thinking, "We can learn from this." So for all those reasons, we think the partnerships will bear fruit.

    Another great partnership we're involved in is Civica Rx, a nonprofit drug company formed by health systems all across the country and a few major philanthropic organizations. The mission is to stabilize the supply of generic medications that often have chronic shortages and ensure that they're accessible and affordable. This is critically important work and progressing quickly. The first medication, an antibiotic, has been produced, packaged, delivered, and is now available to patients.

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    Q: Let's turn from these more emerging, non-traditional partnerships to some of your more established ones. Legacy Aurora sponsored a health plan with Anthem (Wisconsin Collaborative Insurance Company). And of course you have a long-standing, often cooperative (and occasionally contentious) relationship here in Chicago with Blue Cross Blue Shield of Illinois (BCBSIL). How are both relationships progressing?

    Skogsbergh: These relationships are critically important to us, but we've all had some changes, right? BCBSIL had some changes, there was a change at Anthem, and you could argue that there's been a change at Advocate Aurora. So we believe that it's a unique time. We have a window to really reshape these traditional partnerships and redefine what success looks like for these organizations.

    Now, we don't think we'll ever get away from these. We're not going to get away from the largest provider in the respective states. But we can figure out a way to create a win-win situation, which I define essentially as a reasonable one. And this is largely a spirit thing—you either bring that spirit of, "Let's figure out a win-win" or you don't.

    We’re excited about our relationships with Anthem in Wisconsin and with the Blues of Illinois. These relationships are very, very important to us. I just think it's a new day for both sectors to carve out new scenarios where we can both succeed, because I don't think the traditional "win-loss" approach is an enduring kind of approach.

    We're very much moving forward with MA, but enrollment is actually higher in Wisconsin than it is in Illinois. We have opportunities for growth, but Illinois has not penetrated the MA market. So we may end up with two different partnerships in the two different states for MA—but we don't know for sure. We're going to see where it shakes out.

    Expansion and scale

    Q: Let's talk about potential future expansion for Advocate Aurora. From day one, you and Nick were very open that if this Advocate Aurora combination is the final merger, that's great—this is a terrific platform to do meaningful transformation. And if you ultimately expand—find likeminded partners in new geographies—you're open to that too. Any refinement to this thinking, now 18 months in? Lots of speculation these days as to where you might go next.

    Skogsbergh: To be honest, Eric, our thinking really hasn't changed. We do believe in scale, but we don't believe in scale for scale's sake, right? We do know that the organizations out there that are disrupting are massively larger than we are. So we are still favorably disposed to future growth and open to those conversations. But we no longer think it's necessary that this has to be built with contiguous states. We thought that through and realized it almost creates a false sense of comfort, like somehow it's easier if it's contiguous. For us, it's more important to work with organizations that share our worldview—organizations that have the same values, the same vision for the future, the same appetite for partnership that we do. Those things are much more important to us than how far away are you from Milwaukee or Chicago. If you're 90 miles, you might as well be 900 sometimes, and it's not like we're going to move patients from one state to the next.

    So we're having a lot of interesting, fun conversations. This is a time when everybody is talking to everybody. And we should. I mean, this should've been happening a long time ago. I think a lot of my colleagues still feel almost obligated to defend their independence—and maybe it's easier to say this when you're the Advocate Aurora in the deal—but I just don't see the world that way. I never have. I was always a believer in this notion of coming together and working more collaboratively. So I bring that spirit of, "Let's see how we can work together for a win-win" to these conversations. And if we can't strike a win-win, okay, that's fine. Best of luck to you.

    Q: This idea of avoiding "scale for scale's sake" is a consistent theme for you, Jim. And I might add, something of a countercultural idea given how rapidly the health systems are scaling up (the top 100 health systems now control over $700 billion in revenue). But you and I talked a moment ago about how gigantic our non-traditional competitors are—from trillion-dollar market cap FinTech companies, to private equity spending over $100 billion in our industry this year alone, to payers vertically integrating and acquiring providers. So when you survey the landscape, not just from a scale perspective but from a "legitimacy of threat" perspective, how do you think about that?

    Skogsbergh: It's a great question, Eric, and we're talking about this all the time. Because when you're talking about organizations that are not three, or five, or even 10 times your size, but 200 times your size, then that's daunting. So we do believe that if we scale up appropriately and in so doing become stronger—not just financially, but in terms of health outcomes, safety, really every sense of the word—then I think we have garnered a seat at the table for broader conversations. Who made the quip that if you're not at the table, you're on the menu?

    Well, we prefer to be at the table. So we like scale in that it gives us an opportunity to do that, to be involved in those conversations that can have tremendous impact, not just in our community but nationally as well.

    Now, the disruptors entering or already in our space have a great advantage with their scale, and they probably intend to claim health care as their space. We've heard things like, "Oh, we're going to be the new front door" and those kinds of things. But none of them are saying, "Boy, I can't wait to build hospitals." Many of them are saying they're going to leave inpatient behind to be only outpatient, only home.

    Q: That's most of them.

    Skogsbergh: Almost all of them, right? Nobody wants the hospital business, but it's still a service that needs to be rendered, if admittedly more and more on an outpatient basis. So we've got to take steps to make sure that we're not defined as just an inpatient business, because we're not—we're a health care company. We're actually broadening our definition and saying publicly that we're no longer just an inpatient/outpatient clinic, home care company. We're a health care company, and we're defining health much more broadly today.  

    And because folks are already in that space or have capabilities in that space, therein lies the partnership opportunities. One thing we have is millions of patients who have relationships with us. And we're trying to make those relationships more intimate, and I think that can make us attractive to partners. 

    I think there are so many advantages to scale and you emphasize different advantages at different times. So the economies of scale argument I think cannot be debated; it's a fact. We do better when we buy as a $12 billion company than we do as a $6 billion company. No question, proven, take-it-to-the-bottom-line kind of thing. And then there's attraction and retention of talent—done right, scale will help us attract, acquire, and retain talent. I dare say that there are clinical folks who never would have thought about coming to an Aurora or an Advocate, but who have absolutely come to us as Advocate Aurora.

    And I think as we scale up, we'll have more opportunities to be heard around the topics that influence total cost of care—whether this regulation gets implemented or not, etc. And just with the law of big numbers, we'll have a better chance of bending the cost curve, spreading and taking risk—scale helps with all of that. You also mentioned our ACO success. So I see all those advantages of scale ultimately translating in some way to helping lower the total cost of care.

    Wrapping up

    Q: Jim, a couple closing questions as we wrap up. First, setting aside the most obvious change— from co-CEOs to singular CEO—what is different about how you spend your time now? What's different about how you allocate your mind share from what you expected 18 months ago?

    Skogsbergh: I'm spending a larger amount of time in relationship building than I thought I might otherwise be doing. The selection caused some business leaders to wonder about our commitment to Milwaukee or to Wisconsin. So I'm establishing relationships and stating the obvious, which is, of course: "Wisconsin is so important to our organization. And the health of Advocate Aurora is dependent upon the health of Milwaukee in the state of Wisconsin."

    It's going very, very well, but it means that in these first couple of months, I'm a little less involved in the day-to-day than I otherwise might be. Now, the good thing is our team is superb and our direction is clear. I've got a team of 16 direct reports instead of half that, but these people are all self-starters, and they just sprint. So this has really been more of a personal challenge than anything else. I know it's not necessary for me to keep a pulse on everything, but I've always enjoyed that, and it's been an adjustment to recognize I don't have the bandwidth to do that.

    Q: I have to think all the time you're investing in the shuttle diplomacy and relationship cultivation is incredibly critical to the long-term flourishing of the enterprise. And it leads me to a broader question around the cultural integration between the two organizations. How is that progressing so far? 

    Skogsbergh: I'd say we've probably already checked that box. When Nick and I brought the organizations together, we had a very accurate sense that our organizations are much more alike than they are different, and that gets born out every day. I just change the names, and everything's the same.

    Having said that, and even within Advocate, we've always had micro-cultures, right? Christ's a little different than Lutheran, and Lutheran's a little different than the next, etc. But differences are minute, and the commitment to excellence, to service, to continual improvement—all of that is already there. So I don't want to say that bringing together these two organization has been easy, but it hasn't been as difficult as you might think because we started at a place where we were—

    Q: Pretty darn alike.

    Skogsbergh: Pretty darn alike. Yeah.

    Now, I imagine some people who read this might say, "Oh my gosh, he missed this, that, or the other thing." And I know there are some differences, but I think, at this point, we need to celebrate those differences. Recognize that, "Hey, that's something that's unique and special and isn't that great that we have that."

    Q: One final question: If you look across everything you're doing, what in Advocate Aurora right now are you most passionate about?

    Skogsbergh: I think we have an opportunity with this transformation work to truly redesign how health care is delivered. Now, we're not exactly starting with a clean sheet of paper, which would be my preference. And oftentimes we're stuck with, "Well, what do we got? We've got these buildings, we've got this equipment, and so on. Now let's make it work." But we're willing to tackle what we have to do differently: If we're going to get to zero serious safety events, what do we have to do differently to accomplish that? If we want to reduce our costs—not by 3% but by 30%—what are we going to do differently? And we have the courage to ask those questions and take some bold steps.  

    So I'm fired up about that. I do not for one second underestimate the daunting task, but there's a willingness to take it on and lead into the unknown. It's a little scary to say, "Oh, God, what's that going to look like if we do it that way?" But it's like, "Let's see. Let's find out." And if we miss, we'll pick ourselves up and dust ourselves off and try something else.

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