‘This is the right time to transition to the next generation of leadership’

Lloyd Dean, CEO of CommonSpirit Health will retire in summer of 2022. The merger between Catholic Health Initiatives and Dignity Health closed in Feb. 2019 and was under the co-leadership of Dean and Lofton, who retired in 2020. Dean is ending a 22-year run at Dignity. He first joined the organization when it was Catholic Healthcare West.

Modern Healthcare Senior Finance Reporter Tara Bannow spoke with Dean about his decision and what’s in store for the future of CommonSpirit Health.

MH: Why retire now?
Dean: It was always the intention that after CommonSpirit Health was functioning and integrated, after a leadership team was selected that at some point, to be determined by myself and obviously by the board, we would select a sole CEO who would lead CommonSpirit for the long term.

So while we haven’t talked about it publicly up until this point, that was always the plan. We set some criteria for when that would happen and I’m excited that we have met that threshold. And then we were confronted with the virus. I’ve been happy to lead the organization through something that we never anticipated, a pandemic. But this is the right time for the organization and I’m so pleased with where CommonSpirit Health is right now.

MH: What criteria have been met that now allow you to make this transition?

Dean: Number one, we’ve been able to skillfully navigate COVID-19. We set some fiscal targets and we strengthened our balance sheet. We also wanted to continue with organic growth and to expand even within our existing markets and our services. As you know we added Virginia Mason to the organization, we added Yavapai in Arizona. On the technology side, we went from a couple thousand (virtual) visits to almost 2 million. Our footprint has the capability to serve one out of every 4 Americans.

We have strong leadership team in place not just at the executive level but throughout the organization. We’re one of the county’s leading, largest and most diverse health systems. We’ve accomplished all of that in three years and I think we’re positioned to be a voice for health and healthcare in this country.

MH: CommonSpirit had some operating losses in the quarters following the deal, your first operating gain was in the quarter ended Dec. 31, 2019. But you’re also making progress toward an aggressive cost-cutting goal. Where do you see the organization moving financially?

Dean: We were two organizations with different financial performance. When we aggregated those and created one of the largest systems, one of the things that we had to do was consolidation and integration.

I’m very proud that even with the virus, our adjusted admissions were almost back to where we were prior to the pandemic. Our payer mix is excellent. When I look at 2020 and 2021 in terms of our commercial, our Medicare and our self pay, we are almost back to pre-merger. Our operating revenue has grown from $28 billion to $33.2 billion. We ended fiscal year this June 30, this last fiscal year in 2021 with an operating EBITDA of $2.9 billion.

We set a very aggressive integration target by realizing efficiencies for the two organizations coming together and we said that our synergy target would be $2 billion over four years and we are right at the 50% of that, which was our target.

Even during one of the most difficult environments that this country has ever seen, we generated sufficient capital to invest in our key projects to do renovations, to invest in our technology, cybersecurity, and infrastructure. To build systems that gave us additional capacity and capability as it relates to our virtual visits.

For days cash on hand, when we were formed, we were at 152 days, we are now at 245 days. We just completed a process with our rating agencies and we are optimistic we will have a great outcome.

You are correct that when we initially came together and aggregated all of the financial metrics of the organization, we started with some challenges. But I would say that as you compare us to other systems throughout the nation as we sit here today, by any metric, CommonSpirit Health is one of the strongest performing ministries of our size and complexity.

MH: What’s the future of the organization?

Dean: Extremely bright. There are 3 pillars that are a part of our vision. We will identify, design, and integrate new ways of taking care of people. Taking healthcare to the community using technology, innovation, and partnerships to ensure access. Looking at culture: ensuring we have a diverse population and that we are using our resources, our ingenuity and our voice to help relieve and to address health disparities and to ensure that our 150,000 caregivers and employees are not just in the community but of the community. I’m very, very proud we have one of the most diverse leadership teams in the country.

Our excellence would be the second pillar. Focusing on our clinical enterprise and health equity. Continuing to create and define our culture. As you know we were two very strong independent, if you will, organizations and now we have been focusing our attention on what we call one CommonSpirit. Under excellence is financial stewardship. Making sure we have the capital to better serve consumers and patients where, when and how they want to be served.

The third thing is we want to use our voice and scale to help address health equity. We are positioned to bring others in healthcare and Catholic healthcare together to work with legislators, to work with the administration, to work with community-based organizations so that some of the things we learned during the pandemic, which some are systemic, that we can come up with an architecture to respond in a much more effective way than we have.

We’ve developed our integrated delivery network. We are all-in, also, on value-based care and looking at risk programs so we can better serve consumers.

MH: Dignity was more centralized and CHI operated as more of a collective of local ministries. How did this affect the integration culturally?

Dean: We didn’t focus on the legacy operating models but what we looked at, ‘What is the model that we think would be the most effective and the most appropriate for us, for the future and for where healthcare is going?’

We have identified those functions that needed to be centralized while capitalizing on the strength and the expertise of our service areas and our divisional leadership and service area leadership. So we are a fully integrated organization now. We are not just a collection of geographies.

There are 15 functions that are, if you will, managed from the national level. But there is great hand-offs between what’s done nationally and what’s done within our operations. We believe that care is local but we want to take advantage of our economies of scale. We want to take advantage of best practices and to scale those throughout our ministries and to take advantage of the learnings of one ministry and to scale that up.

So we took our time looking at legacy structures. But not just choosing between the two. Identifying what is the best model for CommonSpirit Health to achieve its goals of the future. Where we landed was on a fully-integrated operating model. We are thrilled with the results of that.

MH: What’s next for you?
Dean: One of the reasons I feel so excited that this is the right time to transition to the next generation of leadership is because one of the goals that I helped set, along with the board and Kevin at the beginning of our formation, is something that we called a promise. To become good fiscal stewards of the resources that an organization of our size brings to us and we set very specific synergy goals. We’ve done that by being very focused and dedicated to our key strategies.

The other thing that’s a hallmark is securing that Catholic healthcare continues to be a meaningful and important part of the health enterprise of our nation. I think the role Catholic healthcare has played historically in our nation, we want to see that not only continue but be a part in ensuring that all people in this country have access to affordable, high-quality healthcare. We can’t do that alone. Our vision for quality healthcare for all is something that I am positive that the next man or woman who succeeds me will not only continue but will take to new heights.

I’m excited. It’s a great time for me. It’s not about age (71) why I’m retiring, it’s about the organization being ready for that next generation of leadership. I will continue to use my expertise and my voice around ensuring that not the poor and vulnerable have access to healthcare, but I also plan to use all the knowledge and relationships that I have gained over these 40-something years in healthcare to make sure people across the world have access. If the virus has taught us one thing, it’s that people around the world have to have access to healthcare.

Check in tomorrow for a reported story on the future of CommonSpirit Health.