Scripps CEO Discusses New Book On Leadership

TOM FUDGE: Our top story on Midday Edition, get outside yourself, know your people, create a culture of advocacy. Those are some chapter titles in a book by Scripps health CEO Chris Van Gorder, who has offered us his recipe for running a successful company. Van Gorder is a former cop who got into the healthcare business after a serious car accident brought his one enforcement career to an end. Today he is the head of a healthcare company with thousands of employees and he says he tries to answer all of their e-mails. He joins me in studio today to talk about his book which is called Front-line Leader and to talk to us about some of the ways public policy, including Obama care, have affected the healthcare industry. And Chris Van Gorder, thank you very much for coming in. CHRIS VAN GORDER: Glad to be here Tom, thank you. TOM FUDGE: You were a police officer before you got into healthcare as I said and I assume that being a cop did not teach you much about running a large company, or did it? CHRIS VAN GORDER: Well it certainly did as a patient as a result of being a cop. Actually I was in and out of hospitals all the time as most police officers are as we end up with victims and other people that we end up being at least in the emergency department and so I think I know emergency rooms like cops and firefighters and I think it's true the other way around as well. But I also learned a lot being a patient in and out of hospitals for almost a year after my injuries as a police officer so I learned a lot about healthcare as a patient, though. TOM FUDGE: And your book is called Front-line Leader. What is the company's front line? CHRIS VAN GORDER: A front-line is that person that's taking care of the customer or in our case taking care of the patient. Is the nurse, is that technician, it is that physician they are the most important people certainly in our organization and I think in most businesses they are the front facing people in the organization. TOM FUDGE: At Scripps health how many employees do you have? CHRIS VAN GORDER: We have 14,000 employees and 2600 physicians and another few thousand volunteers. So it's a very large organization. TOM FUDGE: Okay. Do you really try to answer every e-mail that you get from every employee? CHRIS VAN GORDER: I do answer every employee I get from every employee. TOM FUDGE: And you've got 14,000 employees CHRIS VAN GORDER: And I encourage them to writing also literally every morning when I get the first thing I do is take a look at e-mails I might've received when I got during the night because we are 24 seven our operation the last thing I do before you go to bed at night is answer every e-mail that is coming to me during the day. TOM FUDGE: With that many employees how do you find time to do anything but answer e-mails? CHRIS VAN GORDER: Believe it or not I get a few hundred e-mails a day. I believe I can actually answer those in a very short period of time. I've taught a lot of people the secret is to not fall behind because once you fall behind you are doomed. But you know I think people expect, well I need to hear from the front-line. That is the most important and I do believe it is. I get a good sense of what is going on in the organization from not only from going to the front-line, going to where the work is done but also since we are so large I'm not going to interface with every single employee every single day but they know the they contact with me and I know I can connect with them and I can get a good feel even from an e-mail or a series of e-mails back and forth with people. TOM FUDGE: Now obviously this business of you answering every e-mail that you get from employees sort of speaks to what you consider to be your philosophy for being a front-line leader and I guess that's just, it simply making contact with employees in your organization, right? CHRIS VAN GORDER: That's correct. When I was a cop one of the things you learn early on is when you have a partner your job is to handle your calls together you are certainly watching the back of your partner and you know your partner is watching over your back as well and kind of the rule is you make sure your partner goes home at night if at all possible. Well you know, I think that managers and leaders have a responsibility to look out for their people. And we often, in management certainly expect if not demand loyalty on the part of our people. But I think company should be loyal and return to their people and try to take care of them to the best ability we have anyway. TOM FUDGE: One definition you have of loyalty is avoiding layoffs at all costs, right? CHRIS VAN GORDER: I believe a layoff is a management failure and it was our responsibility to anticipate changes in the marketplace and if possible, just our staffing you know, anticipating reductions and reimbursement and all those types of things as opposed to waiting till the last minute when look you know our number one expenses people as it is in healthcare and if we have to cut costs we have to cut people. We are going through the most significant change ever in healthcare certainly probably in 100 years, certainly in my career and we are going to need our people to help us create those changes to make us a better healthcare provider and to respond to the changing marketplace and if people are afraid of losing their jobs and they do not believe that their management team has supported supported them why do they help them make those changes. TOM FUDGE: You say that laying off people as a failure of management, and let, yet you just said you're working in an industry that seems bound to change the structure of any healthcare, any healthcare company when that structure changes don't you have to sometimes let people go? CHRIS VAN GORDER: What we do is we retrain and redeploy. So literally nine years ago we created what we call the career resource center. And if a person loses their job at no fault of their own we put our people in the career resource center and redeployed them for other jobs within our organization and if necessary that means retraining them. So in the last nine years we've had more than 1000 people go through our career resource center and over 90% of them are still with the organization. So again, the work is going to change. Positions are going to be eliminated but that does not have to mean that we have to eliminate the person. We just have to redeploy them in a different job. TOM FUDGE: My guest is Chris Van Gorder, he's president and CEO of Scripps health in San Diego and author of a book called the Front-line Leader, building high-performance, building a high- performance organization from the ground up. How much money do you make? CHRIS VAN GORDER: How much money do I make? That is in the 990s. I'm not going to go ahead and give you my salary right here in the interview. TOM FUDGE: I was searching for a certain answer because I think this is a question you get a lot from high school students. You said in your book, what do you say to them? CHRIS VAN GORDER: And I tell them more money than I ever thought I would make and that is true. You know in fact what I wanted to do is call this book falling up because for whatever reason after I got heard many people ended up falling down and going through tragedies in their lives and I ended up falling up. The publisher did not like the term falling out and actually suggested the front term later but I've been very fortunate in my career and feel very very blessed, which again is why you know and I know the people that have worked for me probably have made me successful. So I work long hours, it's a 24 seven job the organization in the marketplace treats me well for that but I believe I owe our people a lot of that same kind of caring that the organization has made for me. TOM FUDGE: I guess I asked about your salary because sort of in the context of your book you are in a way justifying the salaries that you make the salaries of executives is something that is very controversial in our society. I mean, I guess how do you justify the money you make? CHRIS VAN GORDER: I don't determine the money that I make. TOM FUDGE: Is it working 24 seven, that tremendous dedication to the job? CHRIS VAN GORDER: You know, I think is the chief executive again the Board of Trustees does a market survey and determines what the market salary is. And there's clearly a low-end to that and probably the high into that and based upon the success of the organization the boards of the salary within the market. Our organization has been very successful and it's a front-line employee that has made a success was organization to retain our position. So you know I don't know how else to answer the question. TOM FUDGE: You know there was one moment in your book where you talked about having to lay down the law to a hospital director who is losing money. And you told him he had a certain amount of time to start making his hospital profitable and apparently he did. And I was surprised to learn after reading that segment of your book that Scripps health is a nonprofit company and yet you expect hospitals to be profitable. How does that make sense? CHRIS VAN GORDER: It makes a lot of sense. What I often tell people is not for profits if we do not make more money then we spent we are going to go bankrupt in go out of business just as fast as anybody else and that means we're not going to take care of any patient, not going to employ any employees so we have to generate a margin. Now every function within Scripps health makes money. There are places where we make more money that the payer mix is better than for example Scripps Mercy Hospital where this chief executive works which is very much a charity based organization with a very poor payer mix. For years the hospital lost a lot of money and when I talk about making money that was more making budget because we actually have, we hold people accountable for making their budget, that may be a loss. TOM FUDGE: What are the parts of the hospital company that are profitable? I mean, I know your emergency room doesn't make money. But what parts do? CHRIS VAN GORDER: The emergency room might make money depending on the payer mix. So if you end up with a lot of patients of commercially insured insurance you might be making a lot of money. On the other hand if you end up in a community that has a lot of underserved or underinsured or actually uninsured patients you may be losing a lot of money. So hospice for example right now is losing money. But we believe it is an important part of our continuing of care so we provide that for the community. We have, both of our hospitals in the South actually generate in operating margin, but not enough to replace themselves. So remember we have still missed ASB 1963 the seismic safety act which is going to require us to replace all the hospitals by 2030. At $3 million a bed for tertiary hospital that's going to take just for mercy alone about $1.2 billion. Mercy will never generate that type of operating margins so the hospitals in the North for the better payer mix will help fund the ability of us to be able to replace those hospitals along with philanthropy from the community. TOM FUDGE: So are there certain specialties that tend to be profitable? CHRIS VAN GORDER: Well you know, I get it depends on the payer mix. If you happen to be taking care of patients with no insurance every specialty is going to be losing money. So it really depends on the community. That's why you see a lot of hospitals across the country moving out of inner-city areas where there is a poor payer mix or a lot of government insured patients because in most cases we are losing money from those patients at least we are, when I say losing money we are not covering the cost of care. So, and sadly our hospitals and healthcare systems are moving out of the underserved. We are not. Our intention is to continue replacing those facilities and continue serving the entire part of the San Diego community that we take care of today. TOM FUDGE: Chris Van Gorder is my guest. He is CEO of Scripps health and author of the new book called front-line leader. Sound like you take a strong interest in public policy in fact you send out an e-mail every day to employees with kind of the recent news in the healthcare industry? CHRIS VAN GORDER: What I do every morning I get up at about five o'clock in the morning I log onto my computer and I summarize the articles for example that may be health care related in the Union Tribune, that LA Times, KPBS, Wall Street Journal etc. and I will summarize those and send them out to my leadership team, a lot of our physicians, employee 100 graduates etc. because again the other thing I will throw couple of photographs on it, some of those people may be looking at the e-mail just to be looking at the photography other people may be looking at the titles and others may be actually reading the articles. The intent is for to understand the context of the changes that we are making. If you are a nurse and you happen to work in the intensive care unit you are not thinking too much about the affordable care act, or the seismic safety act, or all those things that are actually forcing and causing management to make very critical decisions on how we deal with the organization. And if they don't understand the context of what is going on in healthcare it's very difficult for them to understand the decisions that are being made. So what I do is I send those out and are people actually read those articles and give them a better understanding of what where healthcare is today and where it's going and why we are making the changes we are making. TOM FUDGE: Let's talk about Obama care, Scripps chose not to provide a healthcare plan through covered California. Why did you decide that? CHRIS VAN GORDER: Because we don't have an insurance company that we couldn't provide we actually are on Blue Shield. And a number of other insurance companies, we actually are on the exchange could we actually have to go to the insurance company, look us up and sign up with our doctors and hospital so we are on the exchange just like every other healthcare organization down in this community. TOM FUDGE: How has Obama care changed your business? CHRIS VAN GORDER: It's a very complex issue we are actually in favor of the affordable care act because it got more people insured. And none of us in healthcare believe it was appropriate to have a large number of insured and underinsured people. But at the same time what the affordable care act it was actually reduce reimbursement to hospitals to help fund the expansion of the insurance product. So we were already losing before Obama care losing around hundred $50 million a year taking care of Medicare issues and that made it more complicated because over the next 10 years we see another $150 billion a reduction in reimbursement to help pay for Obama care. Under the theory that more people are being insured. Understand what that means is that a lot of people were insured now under Medi- Cal and we actually lose money taking care of Medi-Cal patient so while they are insured we are still probably losing money taking care of them TOM FUDGE: So with Obama care it sounds like you got a bigger volume, but it is still not profitable. CHRIS VAN GORDER: We actually have not seen volumes go up so much but what we are seeing is a shift in payer mix. Instead of people coming here with no insurance they are having some insurance that may not be covering the total cost of care. But what happened as well as we have the insurance exchanges and again it is complicated, what we had been doing for many many years ever since Medicare was established in the 60s is cost shift to the commercially insured patient. Now with the insurance exchange we're seeing compression on that reimbursement as well. So that is why we anticipate over the next you know, now and in the future we are seeing in a compression on reimbursement so our costs continue to rise. TOM FUDGE: So it sounds like if anything Obama care has been a financial hardship for hospitals. CHRIS VAN GORDER: I think it's been very very positive for people that didn't have insurance or could not access insurance before. What it's doing for us is causing us to ask the simple question, are we as efficient as we can be? Is there waste in the healthcare delivery system and we believe it is. And so-- TOM FUDGE: You believe there is waste? CHRIS VAN GORDER: Absolutely there is with because there's too much fragmentation in care. We cannot the patient to the ambulatory environment, they almost get the care started over again because to be honest with you we had not been following the patient's post discharge in many case he handed them off to their provider. Today we are now starting to connect the pieces to gather like we've never done before. We flipped our company on its side about four years ago we've taken out about $340 million of operating costs. If we hadn't, we been losing money today and be a very different position. And so we've prepared because we saw what was coming and so we prepared for that. In addition we are kind of shifting our organization from what I have to and polycyclic business because we were in business to take care of you when you are sick and that's how we were paid to shifting to being something that is more like a wellness business where we are actually shifting through capitation and other changes in reimbursement to actually being financially incentivize to keep you out of the hospital and keep you well. That is a global change in how we have managed our business in the past and I think it is a positive one. TOM FUDGE: And you know, once I was speaking to you many years ago and you said we already have guaranteed healthcare because I can't turn anyone away from my emergency room. With Obama care, is that still sort of the situation? CHRIS VAN GORDER: That is the intolerant regulations and I think we've always had a moral responsibility somebody shows up to our emergency rooms we have a moral responsibility to take care of them and also a legal obligation to take care of them so we had what I call back in a national healthcare system it was the emergency department. Well we are developing a broader healthcare delivery or national healthcare system now through Obama care that is a good thing. We still have patients that are coming into our hospital that are uninsured. This did not carry over to the undocumented and there are still people that are not signing up with insurance and we still have an obligation to take care of them so we still do a certain amount of charity care we have more patients that are insured but in many cases they are not covering the cost of care. So we have challenges but we are dealing with them. TOM FUDGE: Well my guest has been Chris Van Gorder. He's the president and CEO of Scripps health and he is the author of a new book called the front-line leader, building high-performance, building a high-performance organization from the ground up. And thanks very much for joining us. CHRIS VAN GORDER: Thank you, Tom.