LEDI 79 | Disruption in Healthcare

Every health system leader has unprecedented executive management challenges facing their organization in the wake of the pandemic. This disruption in healthcare has necessitated a transformation in the landscape to make it more convenient and ultimately safer for customers. Today’s guest is Scott Nordlund, the Chief Strategy and Growth Officer at Banner Health. He discusses how the pandemic has impacted the healthcare system and offers creative solutions for companies to adapt and pivot for the future. There is no post-pandemic or “back to normal” because these changes will remain as the industry evolves. Tune in to learn how you can stay competitive and relevant in the market as we move into a new era in healthcare.

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The Disruption in Healthcare: How You Should Pivot and Adapt For The Future With Scott Nordlund

We’re glad to have you back listening to us talk to two leaders who are on the cutting-edge of what’s happening in healthcare now. Before I get into introducing our guests, I’d want to say thank you again to the Baldrige Foundation. This is a service of the Baldrige Foundation to help you, as healthcare leaders, do your very best and help your organizations grow and improve in everything that you do. Also, a quick thanks and shout-out to ABOUT Healthcare, who is our sponsor for LeaderDialogue. As always, I am joined by Darin Vercillo and Ben Sawyer, my colleagues here. Welcome, guys.

It’s great to be here.

It’s good to have you back, guys. I’m so excited about our guest. It’s Scott Nordlund, the Chief Strategy and Growth Officer at Banner Health. More importantly, Scott is a dear friend of mine. We used to work together. He has worked on both sides of healthcare, the for-profit and not-for-profit, the Wall Street and Main street. He’s the Executive VP, Chief Strategy and Growth Officer for Banner, but he has worked for select healthcare. He has also worked for Trinity, where we worked together. He has worked at Dignity Health. He also worked at Baxter Healthcare in Chicago for a while.

His resume is amazing in terms of talking about the digital front-door that’s necessary for us to help our systems connect with patients and to achieve the kind of growth and potential that we have to. Scott is the perfect person to help us have that discussion. Scott, you’ve done it all. As Ben, Darin and I tried to ask the questions that we know that our audience want to ask or would ask, your resume is impressive. Thank you for carving out time out of your busy schedule to join us. Thanks, Scott.

I’m delighted to be here. I look forward to our discussion. I miss working with you as well.

We get to do stuff like this, so that’s great. Thanks, Scott. To start things out, let me ask, what’s going on post-pandemic at Banner? I think the heavy lifting falls to people in your position. What’s the strategy? How do you pivot and get back to where you were?

We definitely believe that our payer capabilities are going to be a huge part of our future, and we're building an infrastructure that allows us to take on more risks to be that payvider. Share on X

It probably differs a bit by market, by type of health system, but I do believe that there are some general themes that really have emerged as we’ve out of this. First, I’m not sure any more that there’s really a post-pandemic world as we had hoped. I think now, it’s just a world where we’re going to live with ongoing changes and waves of COVID. We’re going to have to be flexible and based on what we see from whatever newest strain we’re dealing with.

That said, I think most health systems are pretty laser-focused right now on engaging and re-engaging our workforce, retraining, building our core staff as we wean off of the contract labor that we’ve all had to utilize. Focusing on strategic growth, driving volumes, which really have not fully recovered from the start of the COVID era. Creating the safest environments for care that are possible, so that we keep the trust of our customers. Reexamining our corporate overhead expenses to make sure we’re being as efficient as we can in how we deliver care and services.

Continuing the creativity, the innovation, the digitization and automation that was spurred by the pandemic. I think all of those are things that most systems to some degree are focused on trying to solve for right now. I’ve stopped saying post-pandemic because I think we’re just living with this now. It’s going to be how healthcare is delivered from this point forward.

That’s a great point. There’s no going back to 2019. It’s not there anymore.

That’s really true, and in some ways that’s really scary. In some ways, to move a giant industry like healthcare to a better place, you almost need this kind of Black Swan event, and fix the things that we all have known for years that need to be fixed.

Some might say it was a necessary disruption as you just alluded to. It has taught us a lot of things in terms of how we value our customers and how we relate to them, how we communicate with them. When you’re telling people, “Don’t come, stay home,” unless you’re really ill, then when it’s all clear, when we realize that all of our revenues have dried up or much of it have dried up, how do you communicate that? How do you get them back?

LEDI 79 | Disruption in Healthcare
Disruption in Healthcare: All of the diversification, digitization, and all of these things that we were all doing for convenience really became ways of delivering care safely.

That’s what we’re trying to figure out now. What we focused on when all this first started to erupt and take place was not, “Don’t come here at all,” but “How can we see you in different ways than we’ve seen you in the past?” All of the diversification, all of the digitization, all of these things that quite honestly, we were all doing for convenience, really became ways of delivering care safely. We pivoted that message from convenience to safety to say, “We have digital ways that you can interact with us in ways that we can keep our colleagues while you’re still getting healthcare advice. We’re making sure that things don’t get out of control in your health ecosystem.”

Pivoting back to say, “We’re in a safe place for you to come in and deliver care,” we actually created a safety seal at Banner to let you know that when you saw this seal, it indicates these are all the different things that we’ve done to make sure that you’re safe, that our colleagues are safe. I believe that that trust piece, that safe environment, those are messages that are being strongly delivered by systems that are seeing volumes recover, but we all have a ways to go on that.

Good for you, that’s a creative way to solve that problem. One of the things that I recall when we worked together was you were always so open to new ideas, and partnering and creating partnerships, with payers and with other providers. I’m sure you’re doing that with Banner, but it occurred to me that perhaps some patients found workarounds. If they couldn’t get to see their provider, if there wasn’t an option to see them remotely, did people flood to the internet and find other ways to get their immediate problems taken care of? How did you deal with that?

They did. I think that was part of the problem, especially early on where there was so much misinformation about what to do and how to protect yourself. That theme of trust, which is actually part of our vision statement, “To be our consumers’ most trusted health partner,” that becomes really critical in those moments.

Many health systems are such great community citizens. They do many things beyond just delivering healthcare services. This is a time where I think a lot of us stepped up even stronger to be a voice of reason, to help you sift through all the information, to help you understand what was a real way to protect yourself and what wasn’t. I think that we’re going to carry that theme of trust through to our next series of five-year strategic planning exercises because we believe that it will eventually be a competitive advantage for those of us who do it the right way.

We want to get to your predictions maybe at the end, just a little heads up on that. I also wanted to know about payer relationships. Looking through your resume and being reminded of the for-profit, the not-for-profit, you’ve had payer relationships with Medicaid, with Medicare Advantage on the board, you’ve helped create these things. Has this driven health systems closer to providers? Is that relationship tighter or are they each going their own way trying to make sure that they keep their patients and their customers on the boat?

Our tagline is care and coverage. We're taking care of you on both ends. Share on X

I will generalize a bit here when I answer that. I’m going to use Banner’s strategy as an example of what some of the larger systems are thinking about in terms of payer partnership and capability. At Banner, we definitely believe that our payer capabilities are going to be a huge part of our future. We’re building an infrastructure quite frankly that allows us to take on more risks to be that payvider that you hear about out there.

What does that mean? I think this gets tossed around a lot without a full understanding of what you’re signing on for when you say that’s going to be a big part of your strategy. This means investments in your front office like sales and marketing, regulatory affairs, broker management, investments in the middle office. Things like utilization management, care management, behavioral health, risk adjustment, all the analytics that go along with that. Back office as well, here are things like customer service enrollment, benefits set up claims adjudication, provider contracting, customer portals, and then even corporate services like legal, risk and compliance, and HR, finance, accounting. These are major new investments. It’s not part-time work for someone that already has a day job so to speak. Until you have those capabilities in house, it’s difficult to take on upside and downside risks.

Banners learned that through some trial and error. Now, we have nearly $3 billion in premium revenue through the avenues mentioned, Medicaid risk. Our commercial insurance JV with Aetna that’s over 350,000 members now. That space in particular, it’s crowded with startups, itinerary plans that are often PE-backed that care more about growth than profitability long-term viability. That creates real challenges as you’re thinking about benefit design as they’re often super aggressive. They don’t price correctly because they’re focused more on short-term membership numbers with a view that they’re going to be acquired eventually by a bigger player. It’s more about that than long-term sustainability.

A s you’re thinking from a system standpoint about partnership in this space, I think you have to be very thoughtful about who your partner is, what their strategy is, what their long-term plan is, how capable you are in terms of handling and managing risk, and how a partnership is going to reflect on your system. If the elements are in place, I believe this is an incredible space for partnership. You can get great payer capabilities, skills. They can get a great care delivery system with great capabilities. You can have care and coverage that a population needs.

Going into this, you have to go in eyes wide open because it’s a very difficult space to bust into. It’s highly competitive. We have a core business that requires that we have good relationships with payers. While at the same time, you may be thinking about taking on some of those responsibilities and having things delegated to you. It’s a very tricky avenue to take, but if we want to manage populations, if we care about that as we all say that we do, the only way to get to that, in my opinion, is to be able to manage a population through this kind of vehicle, because that’s how you get reimbursed for both keeping people healthy and dealing with them when they’re sick.

If you do it right, you’ve got the whole spectrum of services covered. If you do it wrong, taking on risks that you’re not capable of managing, losses pile up very quickly. You would have to know what you’re doing. This is not a part-time job for somebody. They can’t be your CFO of the system, then also do this payer stuff on the side. You’ve got to really have the right to build these. It’s very important and expensive. I know we’ll talk about scale and a little bit here, but it’s one of the reasons why I believe strategic scale is becoming more and more important.

One of the things that I wanted to ask Scott is because of the commitment you have to trust with your consumers and patients, did you then put that as a threshold for the relationship when you were willing to work with payers? In other words, they would commit to, for example, the AAA and there would be an alignment of vision and how you were going to approach the consumers, particularly because it’s become a little bit of the Wild Wild West in terms of who plays in that space?

LEDI 79 | Disruption in Healthcare
Disruption in Healthcare: You have to be very thoughtful about who your partner is, what their long-term plan is, how capable you are in terms of handling and managing risk, and how a partnership is going to reflect on your system.

It absolutely is something that we put front and center with our commercial insurance JV with that. We talk about this all the time. It’s one of the reasons we’ve been able to grow so fast. We’re Aetna’s largest partner in the commercial JV space and a centerpiece for what they like to talk about. It’s also why the government risks that we take, Medicaid and Medicare, we do it on our own. We’re not with anybody in that. Those capabilities that I described, we’ve built them so that we can run that business ourselves. We’re running it successfully.

Trust is even more important, but also because of the reputation that Banner has as a care deliver, we get a little carry over on that on the coverage side. That’s our mantra. Our tagline there is, “Care and coverage,” so you know that we’re taking care of you on both ends. We’re trying to keep you healthy. We’re keeping you insured. We’re watching out for your health and wellness. When something goes wrong, we’re also here with all of our assets in your market, and we can help take care of that as well.

One quick follow-up question on that. We hear in the markets sometimes when it’s entirely payer managed, that the adjudication decisions are not necessarily on what’s going to be best for the patient, but more of what is best for the financial performance of that particular transaction. Whereas on the provider side, like you’re talking about, it’s a commitment to care and making sure that that patient gets what they need. Can you describe that a little bit in terms of the difference and how you navigate through that? Because there is an important financial imperative, yet you’re coming from a provider caring, and a commitment to the best health of the member.

It would paint all payers with too broad of a brush, but I know the point that you’re trying to make, so I’ll answer it in that spirit. When I was at BJC HealthCare system way back in the ‘90s, when we had our own plan, we priced it totally to advantage our hospitals in our care system. Many people did that back in those days, and then wondered why we couldn’t pick up membership. We couldn’t do all the things that we wanted to do for growth. There’s been an understanding that this business is a business that you have to run in order to advantage and do the right things for your insured population.

To do that, you have to have the kind of financial discipline, all the things that it takes to run a health plan successfully. You’ve got to treat it with that separate organization that you built like that is your business. There’s a certain separation that you have to have, and you have to be agnostic a little bit. Your point is valid that we also are in the care delivery business. We have professionals who are concerned with the population, with the health. We live in these communities. Our kids play soccer with your kids. There’s a side of that that I think does make it a little bit different in terms of how things are adjudicated, but you still have to be financially sound when you’re doing this kind of work. We try to do that as well.

I was going to ask a follow-up question too. I live part of the year in California and it’s highly competitive with Medicare Advantage programs and plans. I’m sure you’re finding this too. You’ve been talking about this that people seem to trust. It’s easier to trust a plan that is associated with a health system that you’d know and trust. The unaffiliated are trying to seduce people away with all these benefits and low-ball everything. You get in there and say, “That’s not covered, that’s out of network,” and all that sort of thing. It’s interesting how this has gone full circle. I think the product is a helpful, comprehensive way to manage your healthcare to assume risk and take care of patients at the same time. Darin?

What we've tried to do is focus our digital business team on digitizing and creating an easy button for services. Share on X

From that standpoint, in terms of what you’re doing, you can’t just give away care that isn’t needed, but at the same time, I think if there’s a jump ball, you’re going to lean towards giving the care to the people who need it, as opposed to the other way around, making it more difficult. Because we do deliver care, I think some of the things that we can do with the way that we structure benefits and that whole claims process, adjudication process, we can make it more frictionless for people to get what they need. That’s generalizing. I don’t want to paint every payer with the same brush, but I think there are advantages.

It’s easier to trust the health system who’s cared for you, than just to a payer.

Scott, great information that you’ve shared with us thus far. Banner as an organization, a big and complex organization, lots of layers, a dominant player in Arizona, with competitive markets and areas like Phoenix and so on. We were talking about before that we don’t really call it the post-pandemic. We’re going to live with what we’re doing now and maybe the volumes haven’t quite come back.

The question I wanted to pose to you is as you look strategically across the organization, all the different types of care that you’re providing and how those interact, when you think about referral management, how the organization crisscrosses and the business of patient care back and forth, and how you compete in those competitive markets to bring in that business on the ambulatory side, to bring it in on the inpatient side, leverage what you have there. How are you targeting making sure that if those physicians or providers are looking for services for their patients, how do you get the referrals to the right place, the right time and service those needs both for the care of the patients, but also to capitalize on the business at hand?

The ability to keep patients in the network you’ve built has been a challenge for almost every big system. We’ve attacked it in a couple of ways. One of the primary ways that we’ve looked at this is through our digital business. When you think about a digital front door, this has always explained it to our board. The digital front door is like the top end of a funnel. That’s everything from call in, to walk in, to click in kinds of services. You need to have easy ways for people to use their phone, to find where you are, to find appointment availability, to find wait times, all that kind of stuff. You need a great contact center so people who don’t want to click in need to call in. This business obviously went up dramatically during the start of COVID because we have many questions about, “What am I facing here?”

Also walk in services, you need a good network of just ambulatory spots that are co-located where populations are. You need that top end of the funnel. Once people come in through that digital front door, you need to make a frictionless experience. That is where I think large health systems in general have struggled. What we’ve tried to do is focus our digital business team on digitizing, or what I would say is creating an easy button for services.

LEDI 79 | Disruption in Healthcare
Disruption in Healthcare: Non-traditional and traditional systems have to learn to coexist. You have to decide where you’re going to compete and where you’re going to partner.

Digitizing the pieces of our service so that you almost have to want to leave Banner purposely. It’s lopsided, right? That has two benefits. One, we feel like our care ecosystem, if you stay in it, you’re going to have a more comprehensive, cohesive experience. Two, if you do see people repeatedly leaving the system in a certain area, that also becomes a spot that you troubleshoot immediately and say, “What’s going on here? Why are you so eager to get out and not go to this service?” A lot of times, you find great operational improvement areas there as well to understand what’s going on in our business that’s making people leave to pick up this particular service when Banner offers it.

That whole process, we’ve invested pretty significantly over $100 million in our digitization, our digital front door on the tools that we use. I know we’re going to come to scale in a little bit here, but that’s not an easy traunch of capital to invest because you don’t see the immediate return, or it’s returned two degrees of separation. It’s a little bit more difficult for us to think about in a traditional sense that most health systems have invested in capital. It’s important investments for us because it became a safety issue for us where we were able to provide safe and effective care digitally.

It’s better for consumer access. We all would prefer to do things on our phone when we can. We’ll schedule appointments, getting notifications if there are delays so that you’re not rushing to a spot and then waiting. Trying to eliminate the waiting room, which is something people hate anyway. Digitally, you’d have text messaging that tells you when it’s time for you to come in, so that you don’t have to sit in a waiting room. All of these things are investments that I think are important, and investments that keep people inside the ecosystem so that we can deliver better care. You create all these diversity assets, then you pull them all together with a digital foundation. I think that’s a real winning formula and something that Banner is 100% committed to.

Scott, just a couple things before we let you go. Could you talk a bit about the disruption that is created by some of the non-traditional players? When both of us were with Trinity, you were talking about Walgreens all the time and WebMD, CVS, and all those kinds of partnerships. What’s happening in that space? Is that ramping up? Are we going our separate ways? Are we coming together more?

It’s ramping up. The non-traditional competitors are here to stay. They’re well-financed, willing to invest and fail as they learn. They decided that they can deliver certain services better than traditional health systems. When you look at players like Optum, it’s hard to say they’re non-traditional. They’re simply a major competitor. The problem is they’re a major partner in many spaces as well. I think you have to learn to coexist. You have to decide where you’re going to compete, where you’re going to partner. This is going to be a system-by-system, market-by-market decision.

If you look at primary care disruption models, it’s stunning how many players in the field now got ChenMed, Iora, Oak Street, CVS, Walgreens, Walmart, One Medical, it goes on and on. They’re offering an incredibly diverse set of services from patient transport to walk-in appointments, telemed, home-based care, health coaches, onsite imaging labs, etc. You’ve got to decide what your value proposition is going to be. You can’t take all of them on across every aspect of everything that they’re delivering, and you have to not get distracted, but understand what it is you want to do in the market, then figure out what you’re going to do and what are the partners around it.

We've got to figure out how to optimize the business of today while we innovate and grow the business of tomorrow. Share on X

When we were at Trinity, you know my philosophy on this. You have to be open-minded. There are people that do things better than we do them. What you want to find is a best-in-class partner that can represent your system as well as you feel you represent yourself in a community. When you find that, it’s a win-win.

It’s a great way to close this this off. I think we want to go further, so hopefully we can talk you into doing some more with us, Scott. This is so helpful. When we first started talking in this interview, we talked about how do we, as a health system, adapt and adjust so that we don’t stiff arm new things, but how do we embrace them? How do we allow and actually create opportunities for us to be more of what we know we should have done? That’s what the last few years has done to us. This is stuff we knew we had to do. We just weren’t forced into it like we have been, and now we’re better as a result. Any last words, Scott? Any advice for our audience?

When you start to look out into the future, we’re not in a business as usual world. COVID has changed the landscape of healthcare in a profound manner, and that’s here to stay. There’s unprecedented clinical demand, the labor, supply chain disruptions, new utilization patterns, customer expectations, and so on. It does require a fundamental transformation in our work. When you add to that, the things that you just talked about, the predatory incursions by PE and venture capital, as well as large and aggressive for-profit companies trying to take control of primary care and other aspects of our business. This all means we need to be thinking about a new mode of business and new ways to compete.

That should make all of us look at a different lens on scale and skills. When you look at the top 4 or 5 healthcare system by net revenue, it probably averages about $30 billion. Top 4 or 5 payers, more like $150 billion. Top pharma companies, $60 billion. Everybody is getting bigger and stronger. I think to be efficient and make the non-traditional investments that I’ve talked about, digital payer capabilities, customer experience, we’re going to have to get more efficient. We’re going to have to get larger.

We also need to recognize, as we’ve talked about business as usual, it’s not going to work anymore. Forget about the competition for a minute and think about the macro things that are going on. We’re part of a $4.2 trillion ,market likely to be $6 trillion by 2028, 20% of the GDP, yet up to probably 25% of the spend is probably wasteful. It’s things like $200 billion being attributed to medication non-adherence.

There are things like that that we need to fix. The digital age personalization that’s here. We’ve got to adapt to lead. There are 27 billion connected devices out there, 60 million plus in artificial intelligence. We’re heading towards a global digital health market that probably is going to touch 450 billion by 2026. You’ve got 1 in 3 people with multiple chronic conditions. Chronic disease is killing 40 million people. It goes on and on with these macro things.

On top of that, we’re also facing a healthcare worker shortage at the same period of time. My final say would be that ultimately, we’ve got to figure out how to optimize the business of today while we innovate and grow the business of tomorrow. To do that, we’re going to need customer driven strategies that create trust and loyalty, which we’ve been talking about. We’re also going to need relentless innovation.

I believe it’s probably never been more important for organizations to have a clear vision of the future of their role in it, to have discipline and focus, to understand how to grow strategically and achieve meaningful scale. Those are the ones that are going to adapt and thrive in this. No doubt, we’re in a period of profound disruption. It’s going to require organizational self-reflection, strategy, and clear vision for the future. That would be my parting shot.

Scott, thank you so much for spending time with us. Banner is very fortunate indeed to have you in your position. I’m glad they’re listening to you. I hope that, for as long as you want to be there, that things continue to go well. Thank you so much, Scott. We really appreciate this. Thanks to our readers. Thank you for tuning in. We hope to have another fascinating conversation for you next time. Take care.

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About Scott Nordlund

LEDI 79 | Disruption in HealthcareScott Nordlund serves as Banner’s Chief Strategy and Growth Officer and a member of the Banner Health senior executive leadership team. In this role Nordlund has responsibility for setting the strategic direction for the $12B+ organization across its six states. This includes directing all system wide strategic planning and growth activity as well as leading merger, acquisition and partnership development, innovation and digital business strategy, joint venture development, marketing, external communications and consumer engagement. He is also directly responsible for system-wide service line growth activities for key lines of business (orthopedics, neurosciences, oncology, women, infants, pediatrics, cardiovascular and general surgery). Nordlund was named one of Modern Healthcare’s top 25 Innovators in both 2020 and 2021. He currently serves on the Banner – University of Arizona Academic Medical Council board, the Banner/Select system JV board, the Banner/Aetna Commercial Insurance JV board, the Banner Medicare Advantage board and the Atlas Health Partners board.

Prior to joining Banner, Mr. Nordlund served as EVP Partnership Growth and Innovation at Select Medical (NYSE: SEM) and was responsible for leading strategic growth initiatives across the organization’s national network of specialty hospitals, outpatient rehabilitation clinics and occupational health centers. He was instrumental in the acquisition of US Healthworks (now under the Select Concentra division) which created the largest occupational health offering in the United States. Nordlund joined Select after serving as Chief Growth, Strategy and Innovation Officer for Trinity Health where he was responsible for systemwide growth, strategy, innovation, marketing, communications and consumer engagement across Trinity Health’s 20 state national market. Nordlund was also responsible for building and leading Trinity’s merger and acquisition function, growing the company from $8B to $18B and helping to build Trinity into one of the largest health care systems in the country. He served on the investment committee for the Heritage Fund and Abundant Health Ventures, in addition to serving on the boards at St. Agnes Medical Center in Fresno, St. Francis Health System in Delaware and St. Mary’s Health System in Langhorne.

Prior to joining Trinity Health, Nordlund spent 11 years at Dignity Health in a variety of executive roles including Senior Vice President for Strategic Growth, Network and New Venture development where he led merger and acquisition activity, and all joint venture development including building and managing the organization’s partnership based ambulatory service portfolio. He served on the board of Mercy Care, one of the nation’s largest Medicaid plans with 400,00+ members and $3B in revenue and chaired the Dignity/USPI and Dignity/SimonMed system ventures. He also held senior leadership positions at BJC Health System in corporate strategic planning and at Baxter Healthcare in Chicago (NYSE: BAX), where he was responsible for selling and managing all engagements in the Western third of the United States for Baxter Corporate Consulting.

Nordlund holds a Bachelor of Science degree in biology from the University of Illinois and two master degrees (MBA and MHSA) from the University of Michigan.

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