Focus on Quality and Safety Produces Patient Revenue at Owensboro Health

CEO Greg Strahan says health care workers seem to function better when the pressure is on, as the COVID-19 pandemic has shown again

By Mark Green

Mark Green: This COVID-19 pandemic that hit in March continues. Kentucky is experiencing a plateau in cases as we speak in late August. What are the main impacts for Owensboro Health, the key health care provider for a 15-county region?

Greg Strahan: The basic delivery of services was altered significantly. The mandate to not do surgeries was very difficult. You’ve got immediate surgeries, trauma surgeries–what part don’t you do?The loss of revenue. (There was) an immediate change in our plans and budget and financials. There were escalating expenses of responding—now we’ve got to have PPE (personal protective equipment), ventilators and more of other things, because this is a real issue we have to deal with now.

All the ‘nonessential’ people had to work from home. There is stress; it’s a new dynamic. You’ve got to wash your hands, wear a mask, wear PPE. You don’t know how the virus is going to be dealt with. Am I going to contract it? How do I protect our staff and our team? There was emotional impact.

The fear in the community was a big issue and still is. People have to go to work, they don’t know who is going to keep their kids or what to do with them; the dynamics of losing revenue, income, families losing jobs, being on furlough. None of our team members were sent home; we paid them all as if they were doing their regular job, we made that decision early. It’s what gave Owensboro the ranking of being the only metropolitan area in the country that had a lower unemployment rate after COVID than it did before COVID.

We made a decision early on that this is a market in which hiring a nurse is not the easiest thing to do and when you do, there’s six weeks of training to get them up to speed. If I furloughed our people, when it was time to come back they wouldn’t be there, either because they had to go find something to do because unemployment wouldn’t have been enough for many people or their spouse may have lost employment. We decided we were going to pay everybody, regardless of what they did. If they didn’t have any patients, they could be repositioned to something else–driving golf carts, greeting people, taking temperatures. We knew coming back and getting the staff back to speed would be more difficult and more costly. It turned out perfectly because we never lost a step.

There were significant challenges to deal with, but we have a pandemic plan now. We know we can put another hospital in our convention center and house people. We worked with city and state officials to make sure we would be able to take care of this. And with Twin Lakes (Regional Medical Center, a 75-bed facility in Leitchfield that Owensboro Health has a letter of intent to acquire) coming on, we have 18 counties. Because it’s a new facility, we can change every room in this hospital to a negative-pressure room, which can be critical-care reliable. We trained nurses who aren’t used to being in critical care to be critical care nurses in case we needed them. The creation of all of that was seamless. We put a team together and went after it as a challenge to redevelop ourselves into nothing but a COVID hospital. Then communicating what was happening in our hospital out into the public was seamless.

MG: Was there a most unexpected lesson?

GS: How fast we adapted in our ability to pivot has been remarkable. I’ve noticed all my career that health care workers just work better under pressure. They’ve learned how to think on their feet, they adapt well, they remember processes. They understand the need to be clear in communication when they’re dealing with a disaster. Their training kicks in when they have a disaster, and it did in this case.

An unexpected lesson was the coordination we had with the Daviess County Management Group, the city, the mayor, the judge-executive and the health department. We got together with the school system and talked about what they needed to do to be safe. It worked well.

You’re never prepared for a worldwide pandemic. Supplies were getting harder to get. We had to go to national stockpiles and Washington. We got what we needed, and we were able to manage.
And there is this simple, unexpected lesson: People need to use common sense. Wash your hands, cover your face and mouth with a mask. Social distance and don’t get in crowds. Whether it’s the flu or a common cold or a pandemic or some other virus, those are key elements everybody should learn. That’s a lesson we will re-establish every time we have flu season or people with pneumonia. Those are key elements to fighting resistant bacteria, viruses and the like that people ought to think about every time.

MG: Is Owensboro Health still the largest employer in the state, west of Louisville?

GS: We say we’re the largest employer west of Louisville and I-65. If we include Twin Lakes Regional Medical Center, we have about 4,900 team members. We have about 260 employed physicians and about 140 nurse practitioners. At our hospital, we have about 230 doctors on staff and about 180 nurse practitioners. We have independent physicians who aren’t employed and people who are out in clinics. Out of that 4,900, a good 2,000 to 1,800 would be nurses if you include Twin Lakes.

MG: What priorities did Owensboro Health’s most recent Community Health Needs Assessment find, and how are you addressing those?

GS: The requirement that we do a Community Health Needs Assessment also requires us to have a plan to deal with it. We do have a strategic plan in place for these. We update them annually and have internal review priority teams focused on those strategic areas that popped up as for us. Health behaviors, for example: poor exercise, poor eating habits, obesity, and related diseases. Mental health is a big one, and that’s a tough one because we don’t have as many psychiatrists, mental health counselors in our market as we’d like, and we continue to look for those. There’s not a lot of mental health space either. There’s a bigger need than the number of beds available.

Substance abuse, children and teen issues. Smoking is still a big one. We have a group focused on population health management. We have tobacco-cessation classes, specialists who provide nicotine-replacement therapy and tobacco-free policies. We’re a part of a collaborative and helped write some of the state laws. We are a smoke-free facility, smoke-free downtown, restaurants are smoke-free, and all federal buildings are (smoke-free). But it’s a tough habit, so we work with people.

Low-dose screening for lung cancers is a big thing we’ve led the charge on early in the state, working with UK and their lung-screening program. We developed it many years before we got involved with UK. There have been a significant number of people we’ve found with nodules by using low-dose X-rays that allow us to see those nodules early. Many of them would be dead with cancer today if we hadn’t done that. Screening for lung cancer continues to be one of our strategic initiatives because in Kentucky smoking is a big issue.
Part of our strategy is to pay our team members a success year (bonus) for reaching those goals. And we set a goal to do better and to find opportunities to improve the health of people we’re serving.

MG: How did the pandemic affect Owensboro Health financially? Are there any numbers that you can inject, maybe even percentage numbers or anything?

GS: March 12 was our first pandemic case, right before the governor shut down elective surgeries and other things, recognizing that those were the right things to do at the time. In that period of time, from the cancellation of elective surgeries and non-essential procedures, we had a significant reduction in our revenue: approximately $45 million worth in that month and a half before we got back into bringing those people in. The increase in our pandemic costs and expenses was about another $20 million more than we budgeted. That totaled about $65 million in either lost revenue or increased expenses. And then add onto that we kept all of our employees here; we didn’t take away expenses.

MG: Did Owensboro Health implement new disinfection protocols as a result of the pandemic, such as the use of UVC lighting or other strategies?

GS: We evaluated that. The cost of those machines is significant, but they do have a significant impact; many hospitals around the country use them. We’ve always held a high standard on how we clean our rooms. When I go in to talk to our new hires and they include housekeepers or people who are not the highest-paid here, I make a point of saying the most important people in the room are the housekeepers.

Those people work hard. They are responsible for keeping us from spreading germs and viruses. When they decontaminate a room, they spend a lot of time. Processes are in place so we never have people getting a disease from being in this hospital because of our rooms. That’s been the case for many years, and is part of our expectation. We check it, we watch it, we know when we’ve had people who have gotten sick in the hospital and there’s very few of those ever.
We did look at the UV thing, but took other extra precautions, using Clorox wipes and wiping off our elevators. We started having elevator operators to touch the buttons and wipe down the inside after. It was a lot of extra manpower, but when you have extra people you didn’t furlough you have an opportunity to put them to work doing things that make a difference in how we treat our patients.

MG: Kentucky health care consolidation driven by network formation has slowed, but Owensboro Health recently acquired Muhlenberg Community Hospital and is about to add Twin Lake Regional Medical Center in Grayson County. What strategy is involved?

GS: We’ve been asked to come to other parts of the state and add a hospital to our system. Some are right, some are not right. Either they don’t have the same culture in being able to take care of people, or there’s (a system) closer they ought to be hooking up with as opposed to us. Our limit is about an hour away. At that point you’re getting into other people’s territories and unless you’re invited, you don’t want to do that.

Our strategy is if we can get to them within an hour, then we can help them develop services that will meet the needs of their hospital and if they need a tertiary-care referral center, they can send their patients to us. That makes for a good relationship. We don’t ever say you have to send your patients to Owensboro. We always said, send them wherever you think they’ll get the best care. But if you can’t send them to us because you don’t think they’ll get the best care, then let us know because we need to fix our care.

MG: Other hospitals approach you rather than Owensboro Health reaching out to grow and acquire hospitals?

GS: We would never push ourselves on anybody because I don’t think there’s a good relationship when you do that. Our relationship is built around, ‘How much can we help you?’ When you talk about Jasper, Ind., or Tell City, Ind., or Breckenridge or Ohio counties or even Twin Lakes, during COVID-19 we had all of those folks on the phone talking about how we could help them. It was not, ‘You have to send something to me.’ It was, ‘Do you need something? Do you have PPE?’

The other reason we did this is because we wanted to know what they were experiencing in COVID patients, because if they have them, sooner or later we might end up with them. We wanted to know what the market looked like in terms of how many people were COVID-19 positive, so we could be prepared in the event they needed to send them. And that happened. The nursing home in Grayson County had an outbreak, and it went through several of the staff and residents. They called and said, ‘Look, we can’t take all these patients.’ I said, ‘Send them to us.’
We had the Green River Correctional Complex. They had no social distancing, no masking, they had no testing going on, and they called us. We did a whole wing that was nothing but prisoners.

MG: Is it likely there will be further acquisitions or enlargement of Owensboro Health in the near future?

GS: There’s going to be continued consolidation of sorts. The critical-access hospitals are on a 1% margin; they get 1% more than their cost. It’s cost-based reimbursed, and that’s a hard sell to get 1% more back than you spent, and try to make the necessary changes to make it work. Things are tougher, and trying to find doctors to go to those hospitals becomes a real problem.
If you want to be a part of a system, we’ll work with you to make that happen. We’ve done affiliation agreements to provide services in hospitals: general surgery, cancer care, urology care. We put physicians out into the marketplace to help hospitals have access to services. That helps them keep going, and I’m happy for that. But when they do need to have that conversation, ‘Can you take us home?’ The answer’s going to be, ‘Absolutely, we’re glad to do it.’

But it’s not something we proactively seek out. We are responsible, as a tertiary-care referral center, to take care of Western Kentucky. We’re the only one in this area now that Henderson and Madisonville have changed. It gives us the opportunity to be that referral center for all these hospitals and let them be what they want to be.

MG: There is a trend for systems such as yours to align with large providers or networks like Mayo Clinic, Cleveland Clinic, MD Anderson or UK Markey Cancer Center. What is Owensboro Health’s strategy?

GS: I’ve been here 15 years, and we’ve had a long history of strategic partnerships. We want to keep Kentuckians in Kentucky. It’s better for their insurance, and it’s better for our health care system to take care of our own. We have relationships.

UofL rebuilt our heart services before I got here. They would send us cardiac surgeons, and they put us back on the map. They got a lot of our business if we couldn’t do that work.
We have a relationship with UK Markey Cancer Center, which has a National Cancer Institute designation and all of the testing, all of the trials. Being part of Markey Cancer Center network allows us to send our patients to those trials should they need them, and participate in their lung cancer screening trials.

We have a UofL nursing program here, a UofL family medicine residency program, and a UK Pharmacy program, where we take fifth-year students and train them to be subspecialists, whether it’s ER or in the critical care unit or on the oncology floor. We’ve been a part of UK Gill Heart Institute.

We’ve talked with Vanderbilt, but people hate to go to Vanderbilt because Nashville is so busy; going to Lexington, going to UofL is easy. People go to Mayo, they go to the Cleveland Clinic, they go to MD Anderson. But most of the people who go to those places usually find that the doctors there say, ‘Look. Y’all have a great medical center there. You got a great cancer center there. They’re doing great work. You can have all your services done there and save you a lot of time and effort, and we’re happy to participate in that from here.’

We have a good relationship with Mayo, have a good relationship with Cleveland Clinic. They would like it to be better, but it is what it is. We feel we need to support other hospitals in our state that are teaching facilities. We’re a part of the Kentucky Health Collaborative with nine other of the largest health care systems in our state. We meet and talk about things we can do together. We need to be talking about improving quality and safety. That needs to be a primary thing we talk about regularly and do.

MG: Owensboro Health’s 2019 annual report lists 17,000 inpatient admissions, 28,000 surgeries, more than a million outpatient visits. What are your annual financial results and how does that compare to the industry?

GS: In our last annual report period, which ended in May, we were almost identical to the 2019 admission and surgeries and even the outpatient. Even with COVID-19, they’re all within a couple hundred.

Our annual revenue—net revenue not gross—was about $681 million. Our operating income was $22.4 million, and our net income for the fiscal year ’20 was $13.3 million. The pandemic negatively impacted volumes and financial margins this year for hospitals around the country, as you know. We’ve not been immune to those impacts, but at the end of this fiscal year we were better than last year. Kaufman-Hall came out with a report this week that said hospitals’ operating margins for the first seven months of the calendar year are down 28% compared to the same time last year, and our operating income and total net income for the fiscal year is higher than last year. So ours was not affected that way.

If it had not been for us keeping our people here, the chances of us recovering as quick as we did would not have happened. Before COVID-19, we were $10 million ahead of our budget, and we still ended up about $7 million over. We had a little hit, but we were able to recover a big chunk of it just because of those factors.

MG: What revenue areas are growing, which are decreasing, which are the most important?

GS: The category we’re seeing for the future—and what I see happening now—is geriatrics. Our hospital is going to eventually be a geriatric hospital. Things are moving outpatient more and more, so we’re preparing for a geriatric-type facility—taking care of the elderly prior to them going to a long-term care facility. We are hiring geriatricians, and quite frankly it’s because internists are difficult to find as it is. Thank goodness we have the UK (College of Medicine regional campus) in Bowling Green that is going to train for internal medicine, because what we see is a big aging population. We are having success taking care of those folks and understanding their needs. That’s a long-term strategy you have to have. That’s going to increase as the baby boomers continue to roll out, and then the next generation has a bigger population than the baby boomers.

Geriatrics has been a big boom for us this year. We’ve just finished our first year, it was very successful, and it continues to be a needed service.

Important areas include surgery, and addressing the obesity issue, particularly when we think about children in school. Maternal/fetal medicine is significant, taking care of our babies and our NICU. Our heart services are growing; we probably have 10 or 12 cardiologists and two cardiothoracic surgeons. We have an electrophysiologist, we have an interventional radiologist. These are new services.

Our neurology stroke care has been enhanced and doing a lot better. Endoscopic GI (gastrointestinal) procedures are growing. Oddly enough, we’re having a boom year in births; we’ve exceeded the numbers of the last three years. At one time, our pediatric population was almost nothing; we started rebuilding when we built this hospital (in 2013), and it’s come back.

General surgery is big and it continues to grow. Ortho is a large business because of our (area’s) involvement in outdoor activities—soccer, baseball, football. It’s a big sports city. And we have three doctors who all trained in Texas and are phenomenal plastic and reconstructive surgeons. Cleft palettes and all those things have become very important.

MG: What metrics do you look at most closely to assess how things are going?

GS: Quality is what drives revenue. Twenty-five years ago, when we were doing a budget, we always said you have to have 4% (income) on the bottom line to replenish yourself. And then we realized that if we do better quality work, you don’t have to worry about growth. It’ll find you. You don’t have to worry about money, because money will come with people finding that you have the highest quality, safest care, and you’re doing the best job.

(A key metric is) pushing our four-star hospital to be a five-star. Our transitional care unit is a five-star today; our hospital is a four-star. Muhlenberg’s a five-star for us. Quality is the big thing that I look at.

I also look at our serious safety events, which is part of our Target Zero program. We communicate with staff that everybody has a right to question what’s happening in our hospital to make sure we’re doing the right thing for the patient and we’re safe when we’re doing it. We make sure we follow those guidelines. They get touted all the time, and have been for years. We started that in about 2012, and it’s been a big win for us.

On The Leapfrog Group (quality and safety survey) we’re almost at an A; we’re hoping to get that A this year. We could be a four-star, five-star hospital and an A rating in Leapfrog. Those are things that we always look at.

Financially, I always look at days cash-on-hand. We had a low number of days cash-on-hand when I started as the CEO, and my objective was to get to 200 days cash-on-hand. At 200 days you can essentially overcome most anything that might happen; you don’t have to worry about collections or developing business. We’re at about 242. That’s the highest it’s ever been that I can remember.
Part of the reason we (kept all staff on) payroll was I knew we had enough cash to be able to do it and not keep us from doing other things that we needed to do. Our rating agency found 86% of the hospitals in the country got a “down” rating in terms of their outlook. They upheld our as “positive” because of what we’ve done on our bond rating.
The patient census is also something I look at: patient satisfaction and market share are key elements.

MG: Has big data collection and analysis had a significant impact on hospital administration and how significant do you expect it to be in the future?

GS: Big data collection is critical. We have a department of four or five people called our Decision Support Group devoted to that. We evaluate our data, look at our cost factors, look at what’s going well for us, where there are opportunities for us to drive costs down by changing processes. We have a Lean Six Sigma person or two. The metrics are critical. We spent about two years trying to understand and identify the purest data we can get, that we can give to a doctor and say, ‘This is the data we have on you and your patients, and these are the things that you’ve done in the past 60 days.’ And they look at them and say, “Every one of those are absolutely correct. That’s who I’ve seen, I remember all those cases…”

Doctors have phenomenal memories when it comes to patient data. When you give them something, they will be able to look at that list and go through there and tell you when it’s right or not. We make sure we collect data that is accurate so we can do detailed analysis for them and give them feedback on how they can grow their business, how we grow our market, where our market’s coming from, what people are in the market who haven’t been to the hospital. Do we know where the diabetics are, or the obese people, or the people who haven’t had a colonoscopy, or the one who hasn’t had a mammogram? The sourcing mechanism to be able to find that and get that information, and then give reminders to people is really going to be the key in driving health care in the future.

And it is helpful in terms of improving the population you’re serving. If I can get to them before they have an event, I’m going to preserve the long-term dollars they don’t have to spend on doing cancer treatment, because I’m going to catch them early. The big data is important.

We were the first hospital in America to achieve a Strata Level 7 integration for analyzing operations and service line costs. We bought a Strata program—it’s how you analyze the operations of any business. We implemented that and we got to level 7–the only one Strata had in the world. We went to New York and picked up a trophy for getting that. All of our data is merged into this Strata platform. We’ve been able to analyze and control our costs, identify where we need to make changes and adjustments. We do that on a monthly basis.

MG: You are about to retire. What advice do you have for your successor?

GS: When you get in the chair, make sure you’ve got a good tight hold on it. It is a big job, but it’s so much fun. It’s been a real pleasure to be able to do this work. I have been doing this since the early ’80s. You really have to have a calling to do health care, in my opinion. My calling was because I lost my first wife with a glioblastoma, a brain tumor. I was 27 and she was 24 when she died. I remember thinking, ‘Health care can be better than this.’ I wanted to get into health care (to) help make a difference.
The thing I would say to anybody who takes over this role is it’s the best job you’ll ever have. It’s a life-long accomplishment that’s so wonderfully rewarding. Owensboro Health has an outstanding team and a board that’ll support them like nobody else. Great things will be ahead if the next CEO takes what we’ve done and engages with the great team members who are here. Give them good direction, but don’t hover over anybody. You give somebody a job, tell them what they’re accountable for doing, and then you hold them accountable but don’t smother them.
Give them leadership, give them encouragement, give them the tools they need, and then manage it. The way I manage it is by knowing the people. I can go to any one of them and ask a question, and they will get the answer. Then I can build a strategy around that.

As a CEO you have to get out of the way of people doing their jobs. If they can’t do it, you move them on into something they can do. It should never be a vindictive or a harsh thing to say: “I need you to do this type of job. I’m going to need this job to be done by this person here, and I hope you’ll stay with the team.” Building character in people, giving them opportunity to grow and learn and improve, and then telling them how good they’ve done and supporting them is the only way to run a business. I’ve run six or seven different businesses, and I’ve found that to be true every time. ■

Mark Green is editorial director of
The Lane Report. He can be reached
at [email protected]

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