Welcome to the "Lessons from the C-suite" series, featuring Managing Partner Eric Larsen's conversations with the most influential leaders in health care.
In this edition, Tom Zenty, CEO of University Hospitals, talks to Eric and Managing Principal Liz Hughes about how Tom knew he wanted to go into health care administration at age 15, why he has a Charles Darwin quote in his office, and how his system is approaching the "new age of consumerism."
Tom Zenty, CEO of University Hospitals
Question: Tom, you've been CEO of University Hospitals (UH) since 2003. If my facts are correct, you knew at pretty early, precocious age—15—that you were destined for health care administration. I don't think there are too many teenagers who know at that age what career they want to pursue. How did you know?
Tom Zenty: I grew up in Northeastern Pennsylvania in an agricultural and a former coal mining town, and my first job was as a farmhand around the time I was 13. It's dangerous work, so you grow up fast in that environment and you accept a lot of responsibility. It was a great learning opportunity for me and I performed well academically.
When I was 15, the one local physician in our community took an interest in my career development, and I spent probably about five months working with him in his practice. I admired the scientific rigor that went along with medical practice, the time that he spent with his patients, and making a difference in their lives, but found that I was far more interested in scale, population health, epidemiology, and a broader base of understanding of the business of health care.
He suggested a career in hospital administration. After that, I made a point to meet with the hospital administrators in our region and all were very encouraging.
Q: And now you're helming UH, with 26,000 employees and $4 billion in revenue. Interesting to note that UH is marking a big anniversary this year: 150 years. There's such a storied history and sense of tradition here… and at the same time, I can't help but notice you have a Charles Darwin quote about adaptation in your office. I'm always keen to hear how leaders of historical institutions like UH think about that line between preserving tradition on the one hand, and driving innovation/adaptation on the other. What's your philosophy?
Zenty: I do have a quote attributed to Darwin in my office that reads, "It's not the strongest of the species that survive, nor is it the most intelligent, but it's those that are the most adaptable to change." I believe the key element in your question is to make sure that you clearly understand the organization, its historical underpinnings and its values, while creating a compelling vision for the future reflective of contemporary needs, opportunities and challenges.
As I was watching our video commemorating UH's 150th anniversary, it became abundantly clear to me that we have remained committed to the principles that led to our creation. We were founded by the community, for the community so that individuals who needed health care could access our service regardless of their financial wherewithal. And we're still true to that vision today; our mission is to heal, to teach, and to discover, and we execute on all three of those domains on a daily basis.
There's no question that health care is going through dramatic changes. We have to be responsive to our communities' needs and continue to build a values-driven, world-class health care delivery system.
Guided by vision, committed to community
Q: That community aspect definitely resonates, and I know you're not alone in that commitment. Talk a bit more about Vision 2010… What was it and how did it guide UH toward that aspiration?
Zenty: We created Vision 2010 in 2005, and it set the foundation for our future. Our commitment is to live local, work local, and buy local. This philosophy supports our broader community, a 15-county region of approximately 4 million people. Our services include primary, secondary, tertiary, and quaternary care in our integrated delivery system which includes almost 4,000 physicians in a combination of employed, independent, and Clinically Integrated Network framework. We also employ almost 25,000 professionals across our entire system.
The first thing we knew we had to do to complete Vision 2010 was to find a leader who had a real passion around purposeful work. Interestingly enough, the person who we chose to lead Vision 2010, which included about $800 million in building and construction, had no meaningful construction experience. He's our Chief Administrative Officer and an accomplished artist, and artistic people find creative, non-traditional solutions to very complicated and complex problems. He led the initiative not only to complete our project on time and on budget but to be inclusive in supporting our broader community.
We set goals where 5 percent of our spend would include female business enterprises, 15 percent minority business enterprises, and 80 percent of our spend would be awarded to Northeast Ohio-based businesses. We exceeded every one of those goals. In fact, the Massachusetts Institute of Technology and University of Maryland created a case study around Vison 2010 a few years ago, and by working with Cleveland Mayor Frank Jackson and other elected officials, our voluntary goals were adopted by subsequent building projects that have transformed the city in the past several years. What had been ceilings in past construction became floors for future development projects.
Q: Vision 2010 also made an unequivocal commitment to diversity and inclusion. When you started Vision 2010 more than 15 years ago, why did you decide to focus there? How does that commitment and value manifest today?
Zenty: The demographics of our community are unequivocal. We know that underrepresented minority groups are more likely to seek medical care in an environment that resembles their community, and we knew we needed to create opportunities for our underrepresented community to participate in completing Vison 2010.
We also knew that if we were going to be helping this local economy improve, supporting diversity in our supplier, construction, engineering, and architecture community was vitally important.
I was asked once how you could tell if your organization really values diversity. And I said to begin by looking at the composition of the board. That visual will really help to clearly define whether an organization is truly committed to diversity. Approximately 34 percent of our board members come from diverse backgrounds, and diversity has helped shape our vision of the future in both clinical and non-clinical dimensions.
Q: I'd like to ask an adjacent question about your success in the philanthropic space, particularly because you've had such a strong response from your community. You've raised nearly $1.5 billion in less than a decade. Can you give us an inside look into how you think about choreographing a 10-figure philanthropic campaign?
Zenty: We have a generous community and a supportive Board who believe in our organization and its mission, and a superb team of fundraising professionals. Having an engaged Board of Directors, generous philanthropists, and community leaders who were personally involved in creating our philanthropic vision created a strong basis for both setting and achieving our attainment goals.
Over 300 donors have supported us with gifts over $1 million each, and we have more than 72,000 donors to our organization. Donors want to give to organizations that they believe in, and they believe in the great work that we're doing. This comes back to my earlier point that we are a community focused, not-for-profit corporation with strong roots in our community.
I'll also share with you an anecdote that demonstrates the importance of having superior fundraising leadership. In this instance, we'd received an unsolicited check in the mail and my associate says, "You probably want to look at this letter and check." She handed me the envelope, and inside was a check for $1 million with a very brief thank you note regarding care recently received at UH.
I took it to our development officer who tells me, "Don't cash that check." And I said, "Why not?" She responded by saying, "Well, if someone is willing to write a million dollar check who we don't know, imagine their level of interest in us when they get to know us." And in about 120 days, that $1 million gift became an $8 million gift.
Accountable care and delegated risk
Q: Let's pivot a bit and talk about strategy. By my count, you have three ACOs (Medicare, Medicaid, commercial) covering 300,000 lives. UH was one of the early movers on the ACO front. What can you tell me about your ACO strategy?
Zenty: We thought the ACO was a vehicle that would have staying power because it represents the future of health care and was part of the Affordable Care Act. In the early stages of ACO development, there was a financial upside and downside in the Medicare Shared Savings Program (MSSP) and after the downside risk was removed, we joined in the MSSP program.
And now we have created a clinically integrated network to add more physicians to our ACO and broaden our reach. Our ACO helped us to coordinate care for over 300,000 individuals, take on population health management, and improve outcomes at reduced costs.
We review our ACO and our performance regularly. It's not just about having dashboards and performance metrics; it's about comparing UH against the best and continuing to find better methods to provide lifelong care.
Q: A key point you just made is the downside risk. How do you think about delegated risk and taking downside risk, particularly since UH once owned an insurance company?
Zenty: Some risk sharing activities have somewhat of a natural life cycle. We're going to wait for the right opportunity to engage in financial risk sharing, and we're preparing for it. We're doing everything that we can to provide efficient and effective care that we know we can provide to the patients while better understanding risk assumption.
Six years ago, the volume-to-value equation was expected to be an overnight phenomenon, and it's not. There will be the right moment in time where the expertise that we have gained as providers will match with the actuary work that needs to be done in assuming risk, and we'll find the right opportunities.
Q: Our readership would be interested to hear about some of the innovative projects UH is involved in. What can you tell me about your pharma endeavor, the Harrington project?
Zenty: The Harrington project is the only model of its kind in the world. It has been successful beyond any of our predictions. The goal of the Harrington Project is to be able to bring promising discoveries from the laboratory into the development of pharmaceuticals on a worldwide basis. It aims to bridge the "valley of death" that occurs when funding for promising research runs out and there's no opportunity to further the research or help to commercialize it.
The project has two components: a not-for-profit organization, called the Harrington Discovery Institute, and a for profit fund, called BioMotiv. The concept was supported by our largest donor, the Harrington family, who provided a $50 million gift to create the Harrington Project.
To date we have evaluated over 1,500 applicants, and have approximately 75 Harrington Scholars across the United States and Oxford, England, who are performing world class research that we anticipate will lead to breakthrough pharmaceutical discovery.
We have also raised $135 million for BioMotiv to bring these breakthrough discoveries towards commercialization. We've had disease-specific foundations who have told us, "We've been supporting research in this disease-specific area for 30 years, and we have nothing to show for it. You have the only model that allows us to bridge that gap."
Q: UH also has been highly progressive in terms of consumerism and consumer access. How are you thinking about consumerism in health care, and distilling what is real versus some of the more hyped and unsubstantiated claims surrounding the 'activated consumer' in health care?
Zenty: As an industry, health care has been oriented to an insurer rather than consumers. We need to facilitate as much frictionless access to our system in a new age of consumerism as we possibly can. To be truly consumer facing, we need informed consumers who can access the right care in the right environment at the right price. We are focused on ease of access to meaningful information for consumers, multiple access points to our providers, direct patient access to their personal health records, and a full continuum of services for uninterrupted care.
At the same time, our Customer Services Center combines our physician and non-physician services in one location to assist in facilitating access, answering consumer questions, providing prices for care for potential patients, and handling all of our revenue cycle activities.
Q: You've architected a pretty exceptional career, Tom, one that's required a good deal of what I would call 'intentionality'—considerable commitment to your vision, along with the flexibility necessary to adapt to an industry in flux. As you reflect on the path that took you from your early days on the farm there to here, what are you most grateful for?
Zenty: I am grateful for the opportunity to work in a noble profession, with the most intellectually gifted physicians and Board members, generous benefactors, committed volunteers, and over 5 million colleagues in clinical care positions across the country at every level who have dedicate their lives to improve the lives of those who entrust us with their care.
I am often asked, "If you had to do it over and choose another career, what would you do differently?" My sincere answer is, "Absolutely nothing."