Editor’s note: This is a longer version of the interview than what appears in the August magazine.
Mark Green: Where do you now stand in numbers of employees, facilities and providers at Norton?
Russ Cox: We’re right at 14,000 employees. That includes the 900-employee physician group. About 4,800 are nurses. We’ve got five hospitals, seven outpatient centers, 13 immediate care centers and about 260 physician practice sites; there are about 300 places with access to some sort of care in the Louisville/Southern Indiana geography.
MG: Describe the geographic footprint where you operate, please.
RC: The main geography would be the Greater Louisville area, but we consider ourselves a regional provider. We still get a lot of referrals daily, and people are helicoptered here for neurosurgery, for different orthopedic procedures, for the maternal-fetal medicine physicians for troubled births. Norton Children’s Hospital receives patients from all over the state, all 120 counties and from Southern Indiana, Tennessee, from Ohio.
MG: Why do the children’s services have a larger footprint?
RC: We’re the state’s only freestanding pediatric facility. That’s one reason. And it always goes back in healthcare to physician workforce. When you look at pediatrics, then at subspecialties in pediatrics, it becomes even more important. Take neurosurgery: There are only so many neurosurgeons; it really becomes fewer when you look at those who specialize in pediatrics. Because there are people and children in the state and region who have very specific needs, that’s something we take very seriously, making sure we can aggregate and have enough volume and cases for physicians to want to be here. Physicians want to make a difference and be in a place that has enough volume to keep them busy. It is more about the physician workforce and specialty/subspecialty side than anything.
MG: How many physicians are part of your 14,000?
RC: We employ 900 physicians or advanced practitioners. There are some VNPs and nurse practitioners who see patients just like a physician would, but the great majority of that 900 are physicians. Over the past four or five years we have grown by 50 to 100 physicians. Our strategic plan has been very much pointed toward making sure we have enough physicians to provide access to those who want to get care. Access is a big issue in our state and region.
The world of healthcare has changed because physicians now want to be part of an integrated delivery system. A lot of things have driven this, one being the federal mandate around electronic medical records; that’s very expensive on your own. Another thing is, as a physician looks at quality of life and call coverage; as part of a group or system you may only be on call a couple of nights a month, whereas in your own independent group you’re going to be on call more.
Being part of a system able to deliver all levels of care for your patients, being able to make sure you’re able to manage their care, is attractive to physicians. This employment model is the most preferred over the past five years.
We have grown in a very intentional way. It’s been around primary care; it’s been around those difficult-to-recruit subspecialties – orthopedics, neurosurgery, neurology. Once you get a critical mass of primary care, you’re going to have patients who need to see those subspecialists. It’s been an overall recruitment strategy, if you will, making sure that we have the access that we can provide those subspecialties to people that are referred out of the primary care offices.
MG: A few years ago our coverage found some of the major provider groups had grown their specialties too fast ahead of their primary care physicians, who feed them patients. Did Norton intentionally grow the primary care providers first?
RC: We did. Our board of trustees started this process of aggregating and employing primary care physicians 20 years ago. Norton was one of the first in the region to employ primary care physicians, and it was a difficult process. A lot of healthcare providers were doing it 20 years ago, but most of them got out very quickly because quite honestly it was a drain on the financials, and there wasn’t a lot of information about how best to integrate what had previously been independent practice into regional health systems. And from the back office perspective it was a difficult management process understanding how primary care physicians work. Our board stayed with it.
MG: Norton reported 2016 revenue of $2.09 billion, an increase of 4.6 percent over 2015. You were in the black by $89 million on patient services and by $142 million for overall operations and investments. That was a 4.3 percent margin for patient services and it looks like 6.8 percent overall. A lot of big systems are in the red. What strategies is Norton using to achieve these results when many others are reporting losses?
RC: Some information released last week speculated that this year 50 percent of hospitals will be operating in the red, so our 2016 results certainly are unusual. The differentiating factor for us is that that 900-physician group has done a great job of working together, making sure we do the right things for patients and consumers as far as being available. We were able to increase volume.
Also, we spent $200 million two years before that on our electronic medical record, which was epic. We began to feel the benefits of efficiency related to getting an EMR installed and understanding how that could help us. We were some of the first into electronic medical record installation. If you look at our financials from ’14 or ’13, we didn’t have a positive margin because it is a difficult process, a real drain on cash and accounts receivable, and it just disrupts the process.
The other thing was we benefited from Medicaid expansion. 2016 was the year people had not had coverage did have coverage. We had the physician workforce to accept those patients and that made a difference.
Norton Healthcare is locally governed and locally run. Our 23-member board all live in this town. They understand healthcare in a different way and have an ability to be nimble, to act quickly. They understand what’s going on; they understand the need to seize opportunities as they come up. That’s a bit of a difference.
In healthcare over the last five to seven years all everybody wanted to talk about was how important scale was. You saw mega-systems coming together, and they would be run out of a town somewhere else. There are a lot of those. Some of them work; some of them don’t. We believe Kentucky healthcare is very much a local thing, that people appreciate it having a local feel, local flavor. It’s worked well for Norton Healthcare that we have remained local and our brand has remained strong. Having that local board, having the 14,000 employees here feel like it is their organization and that they are responsible for executing on the mission, vision and values, is a real differentiator.
MG: Some systems generate their profits off the largest cases and procedures like organ transplants or brain surgery. What are Norton’s most important revenue-generating services or procedures that feed into that good financial result?
RC: When you’re a not-for-profit healthcare system, you have to have some services that do make a profit because you have a lot that don’t. The ones on the more positive end for us are neonatology; cardiovascular services; oncology – we’ve been making certain we continue to grow our access for our oncology patients, because we are entering a time where we’re diagnosing much earlier. Orthopedics and spine does well. Those predominantly have been helpful in achieving that margin.
MG: In a national survey, hospital administrators said their top concern was financial challenges, and within that Medicaid reimbursement, increasing costs for staff and supplies, and then reducing operating costs. Is that what you see at Norton?
RC: When you’re a CEO, you get that question about what keeps you awake at night a lot. You could produce a voluminous list. The first thing we ought to worry about is, are we doing everything we can to provide a safe environment for patients. It’s much more difficult than people realize to make sure you are providing safety from infection, safety from adverse events. We start with wanting to be the safest place that we can possibly be.
If you ask what financial things I worry about, one of the things I’m going to say is Medicaid reimbursement. We already lose money on Medicaid reimbursement, and not in charges – I’m talking about in costs. And inflation continues to grow in the medical world; the cost of supplies, drugs and wages continue to grow, and way outstrips the increase in reimbursement. And with what’s looming in the future about Medicaid, that’s something that would keep us all awake.
MG: Does Norton lose money, break even or achieve a margin treating Medicaid patients? And what about Medicare patients?
RC: For Medicaid we use a number called a cost-coverage ratio. Think of 100 percent as being that your costs are equal to your reimbursement, that’s a good number. With Medicaid, we’re at about 86 percent. And for Medicare, it’s about 98 percent. What’s being proposed, talked about and hashed out is a diminishment of Medicaid reimbursement, and when a system like us is already at 86 percent, anything that further reduces that is of grave concern.
MG: What are the key strategies Norton and your board are pursuing in this current healthcare business environment? Is it to grow personnel, focus on in- or outpatient care, or add certain types of capacity or facilities?
RC: We’re trying to become more consumer-centric, and make sure that we provide as much access as is humanly possible so that we can take care of more people. One of my goals was to simplify the five-year strategic plan and make it a plan that has lots of tactics and a lot of aspirational and inspirational things, but more than anything else one that all 14,000 people could understand, via simplicity, what their part in this plan was.
Strategically, we want to be an organization about Great Human Interactions, a term I coined because I believe it. Often people come to us in the worst possible state they can be in; their families are in the worst possible state they can be in. If we can make every interaction with those people the best it can possibly be, we’re going to be a long way toward everything else we need to achieve. That goes for patients, for families, for vendors and with each other. That’s a plank everybody can nod their head on right off the bat: Let’s focus on having those great human interactions.
The second thing is, we want to be the safest. We want to make certain we don’t do any harm while you’re under our care. We want to make you better. The best way we do that is to be safe, so we started a Reach For Zero. We don’t look at success as achieving safety numbers better than last year; we look at getting to zero.
The third plank of our plan is about convenience. For too long we looked at the patient and instead said, what works best for us as a hospital or healthcare system? That’s how we developed all our system, all the things we do from a procedural and process standpoint. What we committed to do was to flip that and look at everything we do from the patient or consumer standpoint. That could be extended hours, that could be location of the facilities to be easier to access, that can be not asking for their insurance card and driver’s license every time they come in. Part of that process was focus groups and asking a lot of questions, and saying, what is the process that you want?
The fourth part can be corny, but it does resonate: We need to be the friendliest healthcare system in the country. It doesn’t cost us a thing to have a great environment people enjoy being around and want to be a part of.
Now, let me answer your question from the tactical side of it. The one word that describes the most important part of what we do is “access.” We have to be able to provide you the opportunity to see a doctor within 24 hours of when you need to see one. The way we’re going to make a difference in reducing healthcare costs is to give people access to primary care medical ‘homes’ where they can be seen when they need to be seen, where they can come in for health and wellness sorts of things, where we can make sure we keep bad things from happening. This plan says, what are all the ways we can expand and create more access and opportunities for people who need care to get care?
We’ve begun a lot of that. We’ve started some expansions at Norton Audubon Hospital. We’ve begun expansion of Norton Children’s Hospital. We announced we’re going to have primary care offices with the YMCA in West Louisville. We need to provide more access in the underserved parts of the community, so our plan includes how we go there. We’re expanding the mobile prevention unit that does cancer screening, cardiovascular screening. We need to be able to get out in the community, in the underserved areas, everywhere. The more we can get out and do more screening, get people involved earlier, the better we are.
MG: How much of a management problem is the uncertainty about public policy on healthcare, both for the seven years the Affordable Care Act has been around and now in trying to plan for the next few years when it may or may not get reformed significantly?
RC: It’s a frustration more than anything. Everybody I talk to is uncertain about what’s going to happen in their industry. I’ve been in healthcare since about 1981. We thought when DRGs were introduced in 1984 that the sky was going to fall and the world was going to end. We figured it out, and it didn’t. In 1997 when we had the Balanced Budget Act, where everything was wiped out and cuts were draconian and everybody thought the world was going to end and healthcare was going to be denied, we figured it out, and it didn’t. Now, while we would like current reform to be less draconian with fewer cuts and not as austere as it sounds like it could be, healthcare folks will figure it out.
If you sit around and worry about what’s going to happen, you’re going to miss the opportunity to be innovative. You’re going to miss a great opportunity to make a difference in a lot of people’s lives, to take care of patients who are coming to you because they trust that you can do it. I always say the same thing: If we do those four strategic planks, we’re going to be fine. We’ll figure it out. If you’re in healthcare, you pretty much knew when you signed on that it’s going to be dynamic, it’s going to be riddled with change, and you’re going to have to figure it out as you go. And that’s a competency for us in healthcare: the ability to deal with change.
MG: How does the Louisville healthcare provider market fit into the overall Kentucky and regional picture? What are the unique characteristics of Louisville’s healthcare sector?
RC: We are fortunate in Louisville to have great systems that work hard to take care of the people and their needs in healthcare. Most communities don’t have what we have. Louisville has the state’s only freestanding children’s hospital, that’s the first thing that’s important about healthcare in Louisville. Four out of 10 children in the country are on Medicaid. Norton Children’s Hospital is the largest Medicaid provider in the state. That’s important. That begins to set the tone for the future. That’s very important.
Look at what physician workforce is being trained at the University of Louisville and the University of Kentucky, and the ways we’re beginning to all work together from the standpoint of how do we not only train the medical workforce and the nursing workforce, but how do we retain them in the state. That’s a big part of it. UofL trains great physicians; they’re attracting the right kinds, so that’s a very important aspect of what Louisville brings. If you go into the disciplines in Louisville and look at what’s happened in neurosurgery, what’s happened in cardiovascular services, what’s happened in the transplant areas, at the numbers of people in the state coming to Louisville, it’s a very impressive array of services that are provided extremely well.
A lot of folks come to Louisville from out-of-state for specific subspecialty coverage. A helicopter lands at Norton Brownsboro quite a few times during the day with stroke patients coming from other states. We’ve got an orthopedic surgeon who does total hip replacements in 23 hours and avoids an overnight stay for patients. He gets a whole lot of requests from patients in other states because his outcomes are unbelievably good. His infection control is astoundingly good; the recovery is astoundingly good.
Louisville has done a great job. We’ve not done as good a job of talking about it and making sure everyone else knows about it. The healthcare economy and healthcare opportunities in Louisville are great. Norton’s played a huge role in that. I mean, when you talk about Louisville, we are the market leader as it relates to healthcare services in Louisville. So we’ve certainly been involved, and we’ve certainly not done it alone. We’ve done it with partners. And the other systems have done a great job, from my perspective, too.
MG: What advice would you have for employers in other business sectors who want to lower their costs for health insurance for their employees?
RC: We have 14,000 employees at Norton Healthcare, so we join that conversation because we’re self-insured. Certain things make a difference. I encourage a whole lot of education, a lot of incentive around physical activity; I encourage and support anything around wellness, early detection, any kind of screening. Education about how to utilize healthcare services is the best thing you can do. So many people don’t have a primary care physician. Then when something happens they go to the emergency room at a hospital, one of the most complex and highest-cost areas in healthcare. Educate your workforce to the right level of care, that’s a great way to save money. We have 13 immediate care centers that are open not 24 hours but pretty close to it.
With our program called “In Good Health,” we’ve seen great cost reduction by providing incentives that encourage wellness and healthy lifestyle as well as providing education for people. Having open, honest, confidential conversations with individuals about their health and what they need to do to improve their health is a very good investment. Not only is it a way to save money, but more importantly this is the way to build a very healthy and vibrant workforce.
Many employers look at facilities like Norton Healthcare and ask what can we do together? Could you have a clinic on site? Could you send somebody here? Could you send your mobile prevention unit here? The best way to reduce costs is through training and educating employees on the best possible way to interact and interface with the healthcare system.
Pharmaceuticals and drug utilization is a whole lot of the cost for employers. There are a lot of opportunities that can get people off those drugs, that help in the long run. If you can get people who are diabetics in a good nutritional program, get them in a good physical regimen, you can reduce medication. There are many ways you can reduce hypertension just by facilitating other activities and reduce the costs.
MG: A new Norton Cancer Institute is under construction in eastern Jefferson County and the Jennifer Lawrence Foundation Cardiac Intensive Care Unit is part of an investment at Children’s Hospital. Is there increasing demand for these services, and what will providers be able to do there that they can’t do in your existing facilities?
RC: We currently have a Cancer Institute site on Old Henry Road (in eastern Jefferson County) in a building formerly owned by KentuckyOne Health. You can imagine they didn’t want us in that building; our lease is ending, so we had to move. When we looked at what’s best, we determined our model downtown works so well – a Norton Cancer Institute facility on Broadway where everything is under one roof and everything is integrated. The one on Old Henry Road had radiation therapy and medical oncology.
We decided to build this new facility on the campus of Norton Brownsboro Hospital to get some of the synergies of the hospital so we could manage costs. Just like we had done downtown, we could put under one roof every service a cancer patient, outpatient-wise, should need, from infusion to alternative therapy to radiation therapy to medical oncologists. They can get everything in one setting.
Norton Brownsboro is also in a growth corridor. We’re getting a lot of folks from Bullitt County, from Hardin County, Meade County. They get on I-65 and on the Gene Snyder Freeway (I-265). The East End Bridge (on I-265) now goes over to Southern Indiana, so that certainly opens some doors as well. Having a facility there is somewhat like being at the corner of Main and Main; it’s on two very good highway arteries that draw from a regional perspective as opposed to just Louisville.
It’s going to have something cool that I’m proud of: our Norton Cancer Institute Prompt Care Clinic. Often when patients are going through the regimen of chemotherapy or radiation therapy, later that night they feel awful. Instead of having to go an emergency room in the hospital and go through that process of explaining everything, we’re going to have a prompt-care clinic after hours where cancer patients can come and we will deal with their specific problems as they relate to the cancer treatment.
The Jennifer Lawrence Cardiac Intensive Care Unit is a part of an overall $78 million renovation project we’re doing at Norton Children’s Hospital. Lawrence, a Louisville girl, has done great – Academy Award winner – and she has an unbelievable heart for children; the whole family does. Whenever she comes through Louisville, she finds a way to sneak into Norton Children’s Hospital and visit patients; she is spectacular with them, they love seeing her. She came forward with a wonderful gift to create the Cardiac Intensive Care Unit.
Right now, all the children dealing with cardiac issues are with other intensive care patients. This gift and renovation will allow us to aggregate these patients in their own unit. We’ll have nurses and clinical staff who only deal with cardiovascular patients. We’ll have physicians who only work in that unit. This gives us a great opportunity to specialize even more and to improve outcomes. This is a great thing, and Jennifer and her family got us jump-started.
MG: One of the most recent things Norton did was create a nursing apprenticeship program. Will this provide nurses to Norton or to the state? Why did you do this?
RC: My early roots are in teaching and education. I spent two or three years as a teacher; my parents were teachers; my sister’s a teacher. Education is an incredibly important part of any industry. We have always been very involved in training nurses, because that is the lifeblood of our workforce. The nursing workforce is extremely important. One of the reasons we have weathered storms that others haven’t is because we’ve invested in training and apprenticeship programs for nurses. We have our own Norton University that allows them to get new skills once they’re here. In our robust Norton Scholars program, you go to school and do rotations with us.
This apprentice program is meant to formalize the process and make it available for all who are interested in a nursing career. We are the first in the country to formalize an apprentice program, and we hope it will be adopted by other health systems throughout the state and the country so we can all work together to replenish the nursing workforce not just in the present but in the future.
With ours in particular, we’re hope to answer clinical workforce needs. We also recognize some folks want to work in other states, and we understand that. So it’s not just designed to answer our needs; it’s designed to begin to answer some of the questions about the discipline of nursing and how we begin to replenish that workforce. One of the single biggest limiters in healthcare right now is a trained workforce. There are a lot more people seeking care these days, so we need a whole lot more people to take care of them. We view it very much as planting seeds that will grow trees that maybe we won’t get to enjoy the shade in, but hopefully the next generation will.
MG: Healthcare is more diverse than we have time and space to talk about. Was there an area we didn’t cover that you’d like to address?
RC: What’s so often overlooked with what regional health systems provide is community benefit. In 2016, Norton Healthcare provided $155 million in community benefit. We have to file that on the (IRS Form) 990. We understand: It is our responsibility because we don’t pay taxes. That $155 million is pretty significant. That breaks down as $4 million in charity care, about $97 million in the unpaid cost of Medicaid services. We spend $35 million a year in educational support with the University of Louisville, University of Kentucky or other colleges and institutions.
Those things are very important when you look at how healthcare is delivered and what the not-for-profit healthcare system does; community benefit is important.
Also, Norton Healthcare is a place that understands the value of connecting and partnering. One of the reasons healthcare as an industry found itself in a mess is that everybody had to have their own everything. You know, we could go build our own post-acute care, our own home health, our own fill-in-the-blank-of-what-we-don’t-have. That’s not what’s responsible going forward. We need to be able to partner with entities that have that competency and have a partnership that makes sense.
We have a great partnership with LifePoint, a for-profit healthcare out of Nashville, working in the more rural hospital areas. We’ve got a great partnership with UofL around pediatric training. We’re part owner in Passport Health. To work better and build a better network for economic development in the healthcare sector it’s important to do more partnering and less duplication. What we talk about a lot is, what’s best for the community is for us to be able to meet the needs in a way that is responsible.
MG: Do you have a closing comment?
RC: Healthcare is an important part of the economic development structure of Kentucky, and being able to grow jobs and being able to have opportunities for people to get training and to stay in the state and to have a great occupation that helps others is a wonderful thing. Don’t underestimate the importance. If we continue to cut all of this reimbursement and to change things, we are also impacting something people don’t think of with healthcare sometimes: the very important economic development aspect of what we do.
Mark Green is executive editor of The Lane Report. He can be reached at [email protected]