At the Helm

Warner Thomas built a $3B health system in the wake of Hurricane Katrina. Here's how.

Lessons from the C-suite: Warner Thomas, president and CEO, Ochsner Health System

by Eric Larsen, Managing Partner

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, Warner Thomas, president and CEO of Ochsner Health System, talks to Eric about rebuilding a stronger health system after Hurricane Katrina, managing "hypertrophic growth" by focusing on the patient, and the most rewarding part of being a leader.



Warner Thomas
Warner Thomas, president and CEO of Ochsner Health System

Question: Ochsner is Louisiana's largest health system, with 29 hospitals (owned, managed, or affiliated), 18,000 employees and 2,500 affiliated physicians. That size and geographic scale is notable in its own right, but doubly so when most of that growth occurred after New Orleans and Ochsner endured the single most catastrophic natural disaster in U.S. history in 2005—Hurricane Katrina. Before we talk about who Ochsner is today, Warner, I'd be interested in your reflections on 12 years ago—and how that helped propel the system to what it is today.

Warner Thomas: Nobody knew, at the time of Hurricane Katrina what was going to happen, but I think everybody realized immediately that the size and scale of this storm was very, very different. Fortunately, Ochsner had studied what happened at other organizations when they went through similar disasters as part of our emergency preparedness efforts. When the storm hit, we were very prepared. We had facilities both on the North Shore and in Baton Rouge; therefore, we were able to transfer patients and move staff to Baton Rouge so we could start caring for patients immediately post-Katrina. We were also using EHRs then making it easier to access patients' information, whereas most health care organizations that were flooded lost the majority of their medical records. Our quick response mitigated a lot of issues.

Q: Hard to imagine what you all went through… I understand you even lived in your office, Warner, for three months because you had no power at home. Once you and your team stabilized the situation, how did you pivot to thinking about rebuilding and Ochsner's long-term service to the community? I'm especially curious in how you thought about attracting back to New Orleans many of the caregivers who departed in the wake of the storm.

Thomas: After the storm, we realized we had to have a team to maintain operations. We had a team committed to staffing and housing—thinking through how to get our evacuated staff (Team B) back into the city and provide relief to staff that were onsite during and immediately post-storm (Team A). We had to have a team concentrated on getting any of other facilities back up and running.

We also had another team who analyzed the "go-forward opportunity." We knew that things were going to be very different post-Katrina. We started conducting outreach to community physicians to see if they were returning to the city, if they needed a place to practice, was there an opportunity to work together? We had many, many physicians who were looking for a professional home, and they came back and joined Ochsner.

At the time, New Orleans was in a very challenging position. And for Ochsner, New Orleans was and always will be home. When your home is under assault, you do what you need to do to make it better.

The energy and commitment that got us through the devastation of Hurricane Katrina only strengthened our culture at Ochsner Health System and moved us to decisive action around revitalizing health care in the region. Not only did we not lay off a single person through Katrina—even though we lost $70 million in five months—we were supported by a board who had the courage and the foresight to invest more in New Orleans.

Together, we made a large acquisition to purchase several Tenet facilities and restore and expand health care to New Orleans in 2006.

In retrospect, it was the right move. It fundamentally changed the health care landscape in New Orleans forever, and certainly was a catalyst for significant advancement of Ochsner and our strategy to become a much more regional health care system.

Q: Let's talk about that growth into a regional system. By any measure you've had pretty hypertrophic growth since 2005, almost tripling in size. I can't think of another system nationally whose growth came out of such market disruption and instability as post-Katrina New Orleans. Talk a bit if you would about Ochsner's growth strategy and philosophy.

Thomas: When you're thinking about growth, it comes back to the question of, "Why are you doing it?"

We don't think about growth for growth's sake, or from a revenue perspective. It's about helping more people, changing and saving more lives, and providing a better service for our patients.

We took care of 670,000 people last year. If you go back to Katrina, it was probably about 200,000 on a trailing 12-month basis. From that perspective, it has a much different connotation and importance than revenue, because if revenue grows but the number of people served doesn't grow, you're not headed in the right direction because you're not attracting new people to your system.

In 2007, I remember being at a lunch with Jeff Immelt, CEO of General Electric, right around the financial crisis. I remember asking him a question about how do they deal with growth and how do you run a company of that size (at that point around $160 billion). One of the things he said which I'll never forget is, "The larger you get, the more simple and straightforward you have to be." We really think about creating more streamlined systems on how we approach things, whether it is our talent management system, our revenue cycle system, the way we do accounting or consolidate certain services. From that perspective, that simplification, that consolidation was really important in how we set out to manage the growth going forward.

Additionally, the growth of our physician Group Practice is central to our ability to care for more patients. In 2005, we had about 500 physicians in the Ochsner Group Practice. After the storm, we lost nearly 100 and today the Group Practice is made up of more than 1,200 physicians. And it's not just that we have grown in terms of recruitment, we have grown in our capabilities as well. Back then, we did not have a single specialty ranked in the Top 50 by U.S. News & World Report and today, we are ranked as number one in Louisiana, in the Top 50 in the country in five specialties and high performing in eight specialties. We have also invested in state-of-the-art technology and tools so our physicians can continually advance patient care.

Ochsner Health Network

Q: Let's talk about Ochsner today and some of the unique characteristics of the system. Let's start with your Ochsner Health Network (statewide clinically integrated network). We've seen a lot of these non-equity collaboratives proliferate across the industry, with a high degree of variability in terms of success—some hugely impactful, others not so much. What are the outcomes Ochsner Health Network wants to achieve? How are you grading success?

Thomas: The focus of the Ochsner Health Network is to work together to set the health care agenda for the state, evolve the payment mechanism more to value versus volume, and help coordinate and improve the quality of care. At the same time, we know partnering with payers and positioning ourselves to partner with employers is critically important. But the rationale behind why we got together, and we were very intentional of who we choose to partner with. We looked for higher quality, well managed, and culturally aligned organizations.

I think where some of these networks (nationally) have failed and why we are on a good, positive trajectory is because we always thought about it as creating value first. For example, a lot of our network partnerships started with telemedicine. We took a slightly different approach and said, "Okay, we're going to provide a service around telemedicine that helps people keep more patients local versus being a strategy to just ‘ship' patients to Ochsner." About 70% of our stroke telemedicine patients stay local. It's about a patient retention strategy, not a patient referral strategy.

Now we are moving down the path toward value-based and direct contracting. The first goal is to have a network that's attractive to both payers and employers. The second goal is to build products together that we can put in the marketplace that are built around our network. Then we can advance to clinical and financial integration, so we can do the right contracting components together. It's an evolution.

Q: Ochsner of course already has extensive experience in direct contracting and delegated risk, having had a provider sponsored-health plan up until 2004, when you divested to Humana but kept the Medicare Advantage (MA) risk relationship. How is Ochsner thinking about the timeline to assume more risk? Obviously a lot of well-documented health system struggles here… both on the provider-sponsored health plan side, but also frustration voiced by health systems that feel they are ready to take on more delegated risk, but are encountering unwilling payers.

Thomas: I think that is a fair characterization. For Ochsner, our appetite for more risk is healthy, but managed. Our strategy is to create enough integration with the payers to get the appropriate level of risk, so that we'll have the right upside without having to invest all of our capital in risk-based capital.

And you're right—we did own our own health plan up through 2004 and then divested to Humana. But we always kept the risk even after we sold the plan and we have a true partnership with Humana in Medicare Advantage. We've been globally capitated with Humana since 2004, and prior to Humana we were globally capitated going back to the 1980's. We have the capability to work with the Blue Cross Blue Shield, Humana and others to build products around our network that we think will be attractive to employers, and that's the direction we're headed. We have a lot more risk assumption in the MA area, with about 50,000 lives, and we'd like to see more of our MSSP—also around 35,000, in Track 1—convert into MA over time. To me, we're just evolving to a new level, a new chapter and what that's going to look like going forward. You can definitely expect more from us in this area.

Patient care

Q: Let's pivot from some of the bigger, macro-strategic questions about CIN's and risk, to a more focused discussion around one of your key close-to-home priorities—patient access. Cleveland Clinic pioneered the 'would you like to be seen today?' question that greets anyone calling the Clinic. Ochsner has an interesting take on this—"Do you feel you need to be seen today?" I understand you were really deliberate about the syntax of that sentence and how you worded it.

Thomas: Yes, absolutely. Ochsner is very much a physician-led organization, and it's always been about patients first. I said to the physicians, "Why don't we ask everybody, do you feel you need to be seen today?" And if they say yes, if for whatever reason they feel they need to be seen, they've determined that they need to be seen, then we should move heaven and earth to try to see them today—regardless of whether they actually need a same-day appointment. That is about as patient-oriented as you can get. And our physicians felt that made sense.

We had some concerns about being able to meet demand, but we found only about 16% to 19% of people say they feel they need the same-day appointment. We're getting that solved about 90% of the time. We're not perfect yet, but it's continuing to improve. Overall, we have about 270,000 or 280,000 same-day visits a year, out of a total of close to two million visits.

Q: Another key priority for Ochsner, and related to your access push, is augmenting your access points for behavioral health. Adequate mental health care provision is an acute issue nationally, but particularly in Louisiana, which ranks 38th in the union in access to mental health and substance abuse services. How is Ochsner addressing this?

Thomas: We definitely think there needs to be more access to mental health services, both on an ambulatory and inpatient level.

One thing we're doing is repurposing a hospital we purchased in LaPlace into a $20-$30 million, 80-bed inpatient facility for mental health services. The hospital was an underutilized acute care asset that now is going to serve as a very robust, well-utilized behavioral health facility. I think it's a great success story for that area, and it's probably something that needs to be looked at as a model going forward.

We're also providing psychiatric telemedicine to all of our facilities and getting ready to offer this service to many of our partners. With psychiatric telemedicine, we're seeing ED wait times for beds cut by 55% and a 30% reduction in admissions for people coming out of the ED.

MedPAC

Q: You have a unique, national perspective on many of our industry hot-button topics, Warner, given your role serving as a MedPAC commissioner since 2014. I'd love your thoughts on this—as a nonpartisan advisory organization, MedPAC has a fascinating relationship with Congress—sometimes they take your advice, sometimes not. Talk a little bit about the dynamics of MedPAC and how it works.

Thomas: Making my comments as a private citizen of course—not as a MedPAC commissioner—I would say it's an honor to serve on MedPAC. It's a huge responsibility when you realize the amount of dollars that are invested, trying to balance what's right for the beneficiary, what's right for the government, and what's sustainable for the delivery system. I look at these issues from a personal perspective. What I mean by that is we can sit back and complain or we can lean in and try to do something about it. I really view my work on MedPAC as trying to bring some ideas and hopefully, some industry experience to the table to try to develop solutions that are workable in hospitals and health systems around the country—and that are good for the beneficiaries as well.

The work we do on MedPAC will hopefully continue to move the system toward a more value-based orientation than where it is today. I ultimately think we're only going to change the outcomes and the costs of the system if we have providers take more responsibility and have more flexibility and authority to make changes in the health care system.

Specialty pharmacy and drug pricing

Q: I think you and I would agree that pharmacy costs is an issue of escalating urgency for systems nationally, including Ochsner, and presumably a doubly interesting topic for you personally from your MedPAC perspective. What is Ochsner's strategy here? What's the prescription for addressing this crippling and unsustainable pharmacy spend growth?

Thomas: Pharmaceutical costs overall, to me, is a major issue in health care today. Hands down. It really is out of control. In some cases, we're talking about drugs that have been in place 20 or 30 years that are seeing threefold (or more) price increases suddenly. The only reason that we're seeing this is because it can happen—there's no price control for pharmaceuticals today, not even for generic prescriptions. Generics are escalating in price to the point where they're not much cheaper than branded drugs. It is hard to put a positive spin on it.

And it's hard to accept the argument that big pharma needs to run these 20% to 40% margins because they need money for R&D when, as you know, we're less than a 2% margin organization. We need to constantly turn around and reinvest into our organization, which is very capital intensive. This is an unsustainable situation.

Q: What about Medicare's role in drug pricing? Do you think Medicare should be deputized to negotiate drug prices? What about importation from abroad?

Thomas: I think Medicare has to take on drug pricing in a much more direct fashion. I've been very public about my view in that I think there should be a Medicare price set for drugs. It's really one of the only services that's provided for which there is not a Medicare fee schedule. There's a Medicare fee schedule for in-patient, outpatient, hospital, long-term acute care, rehab, home health, but not for drugs.

I do think Medicare should be able to negotiate. I think the subject of importation is a little more controversial just from a safety and quality perspective, but I think if the right people could get comfortable with it, it's something that ought to be examined.

Final thoughts

Q: Warner, as we wrap up, a theme I'd love to explore is mentorship. Over the course of your career, who stood out as having a disproportionate influence on you?

Thomas: Tom Wilhelmsen, the CEO at Southern New Hampshire Health System, was a great mentor for me early in my career. Tom taught me the importance of not just hard work, but the whole concept of courage. You've got to be able to stand up for what you believe in even if it's not the most popular thing, and to approach situations with confidence. He also taught me a lot about strategy, about how to position an organization, how to communicate and work with the board, and then certainly, how to be a good leader.

Q: How do you think about paying it forward? Do you have formal mentorship program at Ochsner, or does that bleed into the leadership institute that you created?

Thomas: At Ochsner, we have a very robust review program that looks at talent across our whole organization. And I certainly have folks whom I mentor or provide guidance to.

Someone who's provided a lot of guidance to me once said: "If you can't be emotionally invested in someone who works for you or works with you, then you shouldn't have them on your team." And I feel personally responsible for everyone on my team—for their success and for helping them achieve their goals and dreams. But beyond the people on my own team, there are several young leaders in our organization whom I mentor, provide guidance for, coach, and help support as they try to advance their careers.

I think that's part of being a good leader: You want to see people succeed. In fact, one of the most rewarding things I get from my job is seeing other people succeed and do well.



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