Tuning Healthcare, Episode 9: Why Academic Medical Centers Must Drive Transformation

David Zaas, MD, MBA, CEO of Medical University of South Carolina (MUSC) Health – Charleston Division, and chief clinical officer for MUSC Health

In this episode of Tuning Healthcare, David Zaas, MD, MBA, the CEO of Medical University of South Carolina (MUSC) Health – Charleston Division and chief clinical officer for MUSC Health, discusses why healthcare leaders must step up, with academic medical centers leading the way. Preserving the current fee-for-service business model is not sustainable. Instead, health systems need to manage more of the healthcare premium dollar, shift to a patient/customer-centric system, and partner with organizations to drive innovations that drive real change and address the needs of their communities.

“I think AMCs have the opportunity to have unique partners, not just with other hospitals and providers whether it’s technology companies and payers, and to go back to the foundation of our mission. We should be the most mission-driven organizations of any industry in the country around improving the health of the communities we serve, educating all of our future leaders, driving the innovation and research to change what we do. For us to really achieve that at a greater scale and to accomplish things more quickly, we’re going to need to understand different partnerships. … How do we become nimble to identify those partners, to figure out how we work together to be willing to leverage our talent and brand to drive not just revenue and not just the existing business models, but to drive true transformation?”

– David Zaas, MD, MBA, CEO of MUSC Health – Charleston Division, and chief clinical officer for MUSC Health

In this episode, David and Lumeris Senior Vice President Nigel Ohrenstein discuss:

• How academic medical centers should lead the transformation of healthcare
• A blueprint for health systems to be successful in the post-COVID-19 world
• The role of leadership, mentorship, and collaboration in solving problems and improving health outcomes
• Finding synergies with outside partners to take risks and drive true innovation that meets the needs of communities
• The importance of not mistaking incremental progress for real transformation and change
• Shifting to a mindset that treats patients as customers, while also addressing the disparities of care delivery and social determinants of health
• Managing more of the premium dollar to create sustainable growth and support population health needs.

To tune in, subscribe below:

• Read Transcript:

  Nigel Ohrenstein: In this episode of Tuning Healthcare, I’m joined by Dr. David Zaas, the new Chief Executive Officer of Medical University of South Carolina’s Health Charleston division and the Chief Clinical Officer of MUSC Health. David and I discuss the role of leadership and how now more than ever, it is critical for health care leaders to step up. We also talk about the role of the Academic Medical Center and how it needs to evolve to meet the new challenges. Perhaps most importantly, David gives us a blueprint for what is necessary for a health system to do to be successful in the post-COVID world. Join David and I as we tune healthcare.

  David, thank you so much for joining me today. Delighted that we’ve got this opportunity to discuss healthcare. It’s obviously such an important topic for the country. But before we jump into COVID and the future of healthcare, I’d love to start by understanding, how did you get into healthcare? I read recently that, yeah, you were the first in your family to leave Ohio, and now, you’ve moved. You keep moving South, and who knows where is next after this, but love to learn a little bit about your story.

  Dr. David Zaas: No. Thank you, Nigel, for the opportunity to get to share a little bit of the story and talk about some of the amazing work that our teams are doing. Talking about myself, you’re right. I grew up in Cleveland, Ohio, and the family is still there. I left at 18 and have had an amazing journey. I think, right, especially now in the world, right, we get to appreciate how thankful we are for all the opportunities that we have. Not only our health, but for the chances to lead great organizations.

  So short version of a long career is I’m a physician scientist at heart and absolutely passionate about academic medicine and the ability of academic health systems to really transform healthcare. I started my career as a physician scientist trying to understand the pathophysiology and basic science of organ rejection and lung transplant, and really have had the fortune of having amazing mentors throughout my career and journey from a physician scientist to leading a world-class lung transplant program at Duke, to leadership roles in the school of medicine, faculty practice, and then for the last six years, as the CEO of our hospital in Raleigh, North Carolina and leading Duke health systems strategy in one of the most competitive and rapidly growing markets in the country. I’m now five weeks into my next adventure as the CEO for the Medical University of South Carolina in our Charleston division and Chief Clinical Officer for MUSC Health, which is a dynamic and rapidly growing academic health system serving the entire state of South Carolina. So I could not be more excited about the next challenge.

  Nigel Ohrenstein: That’s great, and the wealth of experience that you bring is clearly formidable. So I’m really looking forward to this conversation. Tell me a little bit how did you switch from the clinical side to the administrative side, and what was that like? Did you feel you had the skillsets to do that? What were some of the gaps, and how did you fill them?

  Dr. David Zaas: Yeah. I think when I reflect on my career, I think each of the different roles, while it may sound convoluted, right, gave me some real skills that enabled me to be successful at each of the subsequent roles. So I’ll even start before I was even busier as a clinical leader. I was really trained as a physician scientist, and writing grants, and publications, but really learned some unbelievable skills around how you build teams, how you solve problems, how you make arguments, right, to successfully get funding, and maybe most importantly, right, how you tell stories to tie these different threads together. I had some unbelievable research mentors at Duke, but my clinical passion was lung transplant and was fortunate to lead one of the largest lung transplant programs in the country to not only some of the largest volumes of 150 lung transplants a year, but outcomes and research productivity, and realized that my real passion is working with teams, leading people to solve problems, and really make that impact around the health of the communities.

  While I love my science, I was really passionate and excited about the opportunity to lead people and teams. I thought for a lot of my career that would be within transplant and more clinical specialties. But even in that sense, I realized I needed to get the skillsets. So I went back to Duke and got my MBA about 15 years ago and realized that in order to lead programs and to lead people, I needed to really understand not just what I needed as a clinician and a scientist, but I really needed to understand the finance and business world that is healthcare, and the opportunity to solve problems in healthcare. Working with other business school students that were outside of our industry was absolutely fascinating. I realized there was so much we could learn from other organizations.

  The series of changes after that were really not intentional. I loved each step along the way, but it was… if you’re doing really well in a role. I was fortunate that other mentors found me and said, “We want you to stretch and to try something different.” Then, looking back on 20 years in many ways, right, the skills of not only a scientist and a clinician, but also, learning how to lead in the school of medicine, in a faculty practice, as well as a hospital and health system differentiated me and gave me a perspective to say academic health systems should be leading the transformation of healthcare in this country. We are really positioned to not only lead the research and innovation, but really lead the transformation of delivery, of our reimbursement models. So it was really a journey along the way that was not intentional, but it was really… Again, I couldn’t have charted a more perfect course from at least my perspective of enjoying every step along the way.

  Nigel Ohrenstein: Right. That’s great. I think I’m sure many people have said it, but I think it was [Ralph Waldo] Emerson who first said, right, “It’s the journey, not the destination,” right, “that really matters.” I can tell you that I try and deliver that message so regularly to my teenage kids that, “enjoy the journey.” Enjoy each step, right? Don’t be so focused on the destination. If you do the right things, work hard, and enjoy the journey, take the most and give the most in every opportunity, the destination will more often than not be a big, good outcome. You clearly embody that.

  Dr. David Zaas: Yeah, I couldn’t agree more. I think that’s a critical component of being successful at each of those steps is really trying to make that impact in each phase of that journey as well as, for me, what really helped is the value of relationships and surrounding yourself with outstanding peers and mentors. What excites me about coming to work every day for the last 20 years is the ability to work with really passionate, talented people that have taught me so much in each of the different roles. That’s been the exciting opportunity about even stretching for new roles and new opportunities, has been the opportunity to work with other leaders that really inspire you for how they follow their values and how we really make an impact and many things around the challenges we face in the world, right? Healthcare leaders are needed now maybe more than ever.

  Nigel Ohrenstein: Yeah, absolutely. Right. Before we leave Duke and your time with Duke, as you look back, what would be one thing that disappoints you the most? You wish you had achieved X, and for whatever reason, you didn’t. You didn’t get it done, or the market wasn’t right to achieve it, or some healthcare partner, we know healthcare systems are so reliant on a whole host of different partnerships and collaborations to be successful, wouldn’t play ball. Is there something you look back on and say, “I wish we would have done that, but I didn’t quite get that done?”

  Dr. David Zaas: So I’ll pick one personally and professionally, and I’ll go on to opposite ends of the spectrum. So personally, as I said, my passion has always been a physician scientist, and I never wrote my R01 grant or never submitted it. I still, to this day, wish that personally, as part of my journey, that I probably would have continued the research journey a little bit longer, and submitted it, and got funded with the R01 grant. I had some amazing colleagues and mentors that I worked with that I really could have, but like many of us, we were juggling lots of things at the time when I made the transition.

  When I look at what we accomplished at Duke, I mean, so many things that I’m so proud of. But to your question of what we didn’t, I wish we would have even developed more partnerships. I think that there’s a culture in academic medicine to think we can build and we can do everything. A lot of that, we do exceptionally well due to the wealth of talent. But in the world that’s changing so quickly, I think academic health systems need to really understand how to be good partners and how to create relevance through different types of relationships, different types of partnerships not just for horizontal integration and growth, but vertical integration to really transform care delivery. The one thing, Nigel, that I think we… and I would say most AMCs could do better is be more willing to take risk and enter into those partnerships to really bring value to other partners as well as the communities we serve.

  Nigel Ohrenstein: I’d love to explore the role of AMCs with you because you obviously have as much experience perhaps as anybody in the country inside AMCs, the role of AMCs as we think about healthcare. I’m sure those listening would love to hear your perspective. So use the term there you wished AMCs would take more risk. Are you using that in terms of a business term as like, “Just take a chance here. Let’s see if this works out?” Right? We don’t live in the world of perfect to use a Silicon Valley-ism, right? Make it just good enough, and then put it out there, and then figure how you evolve and improve it, or were you using it in sort of the take more financial risk? How were you thinking about the term you wish AMCs would take more risk?

  Dr. David Zaas: Yeah. I compare it to my friends that are in different industries where we know the ability to experiment and fail fast, and to really focus not on preserving the existing business model, but to try to be developing and shaping the future business model. Right? Tech companies and others I think have, over the last two decades, really led in that ability and led moving from different businesses to achieve what is their value proposition. I think healthcare in general has tried for a long time to preserve a business model that has helped sustain so much of what we do. But I think AMCs have the opportunity to have unique partners, not just with other hospitals and providers whether it’s technology companies and payers, and to go back to the foundation of our mission. Right? We should be the most mission-driven organizations of any industry in the country around improving the health of the communities we serve, educating all of our future leaders, driving the innovation and research to change what we do.

  For us to really achieve that at a greater scale and to accomplish things more quickly, we’re going to need to understand different partnerships. So when I refer to risk, it really is saying, right, there’s others out there that have core competencies that would really be synergistic. How do we become nimble to identify those partners, to figure out how we work together to be willing to leverage our talent and brand to drive not just revenue and not just the existing business models, but to drive true transformation? Let’s improve the health of the communities that we’re serving, and to do that, it’s going to be getting into things outside of what we do within the hospital, but that has to be our core value proposition that I think were inherently linked in healthcare still preserving what we know and what we do really, really well. We do great sick care. Best sick care in the world, but we aren’t very good yet at realizing that to truly transform health– it’s going to be through partnerships and new relationships in a very different way.

  Nigel Ohrenstein: David, in the post-COVID world, does the pandemic force the academic medical system to speed up the move away from fee-for-service and say, “I don’t want to be in a situation where I have such little control over my revenue, and I’m going to speed up that transition to take more risk and take more value-based care arrangements in order to have greater control over my revenue, or does the AMC say, “You know what? For the next year, 18 months, three years, whatever it might be, we’ve lost some revenue, and we really need to double down on what we know best, which is filling as many beds as we can for as many specialties as possible?”

  Dr. David Zaas: I think AMCs need to use the lessons from COVID to really drive change, and I think there’s three things that come to mind that I think are going to drive that change. Most importantly, I think is the health disparities that we’ve seen as a result of COVID. So although we have the best sick care system in the world, the health disparity is within our vulnerable populations, within our Hispanic and Black populations due to the socioeconomic determinants of health—[it] should be really disturbing, I would hope, to anyone who is a leader in healthcare. To realize that despite all of our attempts, that the health disparities have made our vulnerable populations bear a huge disproportionate impact in the setting of this crisis. So our delivery model needs to change. Just providing the best care in hospitals and clinics, right, isn’t good enough.

  The second driving force for change I think is going to be a wave of consolidation. Hospitals, independent physician practice groups…I suspect many will struggle to survive, and if they survive, are going to realize they are at risk going forward. They’re going to need to be part of larger organizations, and systems, and different models. So I suspect both horizontal and vertical integration as we see a wave of consolidation starting later in the year or into 2021.

  The final piece of the reimbursement model is the fee-for-service model, really puts healthcare at risk in this time where we are dependent around so many of the procedural services that drive revenue and the episodic care that drives revenue, and I hope will drive AMCs to realize we need to understand if we want to improve health, if we want to grow, we need to have a stable business model that involves more premium dollars feeding into the system and a more consistent revenue stream to enable that growth and enable us to focus on all of the things that will really impact the socioeconomic determinants of health. So I think those three together means that the successful AMC and the successful health systems will change markedly over the next few years in what they look like, in how they deliver care, and how they get paid.

  Nigel Ohrenstein: I mean, we can probably spend two hours just on those three. That’s a great blueprint. Let me touch on maybe each of them really briefly and ask you a couple of things just to maybe elaborate on each one. So the first one is incredibly disturbing. Actually, one of Lumeris’ missions is to help our clients ensure that the great quality of healthcare that they deliver is delivered to every person, irrespective of their zip code. As you know, I live in The Bronx, and life expectancy of somebody in The Bronx is five years less than in Manhattan, which is just a couple of miles away. Obviously, a lot of other reasons for that, but it shouldn’t be the case. Right?

  So you spoke about transforming the delivery model. So I’d love you to just give us a couple of thoughts on the clinical side. I’m a big believer, having spent the last decade plus studying this topic that the financial model and the clinical model have to be tied together. When they are separated, you either could have great care at extremely high cost or you could have poor care at low cost, and that’s obviously not a great answer for a sustainable healthcare system. So we’ve spoken a little bit about the financial model. I’d love your perspective obviously as a clinician, as now the Chief Clinical Officer of MUSC. How do you see the clinical model? What are some of the few things that you think, if you were to advise a health system, they must be doing around the clinical side of care that might be different to what they’ve done historically to try and reduce these inequalities that we see?

  Dr. David Zaas: So, Nigel, I think the first thing that we need to focus on is really designing the care delivery model around the patient. We’ve talked about that probably for a decade, but I would argue that it’s still based around the provider. We still use templates and appointments, and create barriers to access that no other industry has that creates challenges for customers to access their services. A lot of organizations, in response to COVID, are focusing on the growth of telehealth. But in many ways, right, we’ve taken the broken model of our clinics and shifted it to telehealth, but we haven’t fundamentally changed how we deliver the care. You still need to call and make an appointment. You still need to be scheduled at a time that’s convenient for the providers. You still are driven to a physician instead of a lower cost provider that could potentially see you more quickly and better meet your needs.

  So I think we need to, again, go back to the idea that the patients are our customers. For us to really improve their needs and all of their health outcomes, the barriers to access need to go away. How we deliver services to them, how we deliver services in real time when the customer wants them, how we diversify the portfolio of our care team providers, how we transform the role of physicians to lead teams and probably do less primary acquisition of data, how we transform our EHRs to better utilize technology and artificial intelligence to allow that data to be utilized.

  So I think some of the celebrations of telehealth that we’ve seen in relation to COVID, it’s incremental progress, and what we need isn’t incremental progress. We really need transformational change, and I think that there’s an opportunity to do that, especially if we can line up the reimbursement models that this will actually be a lower cost way to deliver those services. So that’s just one example of, I think… Again, with the guiding principle, our mission isn’t to deliver the best sick care. Our mission is to improve the health of our customers. Realizing to do that, we need to make many more changes, and we need to do experiments. We need to be able to define how we do it, and we need to be willing to embrace it and take some of that risk. So that’s where I think putting the patient as our customer, we would do it totally differently.

  Nigel Ohrenstein: I mean, even the words, right? I’m a big believer that words matter. Even as you refer to the patient as “the customer” as opposed to “the patient” is…even that little change of terminology is critical to changing how people think about it. I would imagine if we surveyed most of the people that walked into health systems, they would say they walk in with a very different attitude or feelings when they walk into a hotel. Right? When they walk into a hotel, I would imagine 100% of them say, “I feel…” Maybe 99%. There’s no such thing 100%, right? Would probably say, “I feel like I’m a customer, and I act like a customer. I have an expectation because I’m treated like a customer.” Not always, but a lot of the time. But when they walk into a health system, even if they’re coming in for a physician visit that’s going to be…they might be in and out in an hour…more often than not, I would imagine, say, they feel like a patient, not like a customer, and I think you’re on to something here, which I’m… I’m exploring a lot right now. Is there really actually an enormous value opportunity for the health system now that stands up and takes a leadership role in really becoming customer-centric because there’s an opportunity now with the advent of telehealth to perhaps market to a broader audience, right? Therefore, for the health system that truly takes on your advice here to become customer-centric I think has an amazing opportunity not just for the health system themselves, but for the customers that they end up serving.

  Dr. David Zaas: I couldn’t agree more. I think the health system that really embraces all of technology, but maybe more important than only the technology, the mindset of willing to put the customer first, all of a sudden, right, geographic boundaries of your market are now totally changed. Partnership opportunities, right, are totally different when we look at the patient as a customer and leveraging the ability of technology. So when I think around telehealth, while we’ve made baby steps, the two opportunities for us, right, are really breaking down all of those barriers to access.

  The other one that we haven’t talked about yet is really lowering the costs for some of our highest acuity patients or the ones where we’re really consuming significant healthcare resources. So it’s not just shifting in-person clinic visits to virtual visits, right? That’s baby steps, and it’s incremental progress, but the real transformative change would be breaking down the barriers to access and really lowering the cost of that complex high-acuity care by moving it outside of the hospital, doing it closer to your support network, doing it in the environment of your own home or other environments. I think those are the areas that a few health systems are really starting to push, but we need to move faster.

  Nigel Ohrenstein: Yeah. On your second point around consolidation, who do you see? What do you see happening? Obviously, people fear for the rural, the rural hospital, but what do you see? Who do you see being the consolidators, and who do you see needing to put the hand up and say, “I need help here?”

  Dr. David Zaas: So I think all of us are worried about the rural hospitals. We know the rural hospitals had significant challenges prior to what we’ve seen with COVID. I think even large high-quality physician groups that have been fully dependent around fee-for-service models and revenue realize that, right, their portfolio is not diverse enough to be sustainable. I think health systems have realized with the differential impact between insurers and providers that we need to vertically integrate in terms of how we sustain more predictable revenue streams as health systems.

  So in my mind, it’s a cascade, Nigel. I guess it starts with the idea that we’re going to have an obligation as groups need help within vulnerable communities, within practice groups to coalesce and form larger organizations in terms of how we horizontally integrate and become larger. I think the need of health systems to really have partnerships with payers and understand how to take premium dollar is going to be a critical step and maybe an inflection point that will change our delivery model.

  So now as a health system, if, right, I am receiving premium dollar, I have new incentives to really drive health of the community. Then, hopefully, health systems are more aggressive at working with those partners to address all those socioeconomic determinants of health because now we have even a greater financial incentive to keep those patients healthy out of the hospital that has been so detrimental. So I think it’s not a big bang. It’s not going to happen all at once, and I think they’re the three cascading steps if I had to have a crystal ball, which would say, “We’re going to step up, and we’re going to help those practices and hospitals that are in need in those communities, and we’re going to consolidate larger.”

  The successful systems are going to enter into partnerships with payers and realize they need to be able to take risk and need to take premium dollar in order to have the best outcomes and to sustain their expense base. Then, that last phase, which I think is the most exciting because it has the opportunity to really drive health, which is right now, the incentives are aligned to saying, “Let’s tackle a lot of those problems that we’ve talked about that actually keep our communities healthier and keep people out of our hospitals.”

  Nigel Ohrenstein: Yeah. David, we could probably go on for hours talking about what we need to do, and I’m sure you would continue to be quite eloquent and articulate as to how we can do it. We like to close with what we call the Quick Fire Round. What’s the best piece of advice you were ever given?

  Dr. David Zaas: So I would say the best piece of advice that I was ever given was to really understand the importance of relationships and partnership. One of my early mentors in my career really talked about that importance of no matter which side of any dialogue to ensure that our primary goal is to strengthen relationships and build partnerships, and that has really taught well even in settings of conflict to realize we are all striving for the same goal. To be the best partner and relationship is absolutely critical to our success.

  Nigel Ohrenstein: What do you do to relax, have fun?

  Dr. David Zaas: So I have an amazing wife and two teenage boys that love to travel, especially prior to COVID, as well as love to spend time together outdoors, sports, hiking, skiing, surfing, rafting. I look forward to getting through the challenges of COVID and getting back to our travel agenda.

  Nigel Ohrenstein: That’s great, and then if you could change one thing about healthcare, what would it be?

  Dr. David Zaas: I think a lot of us know where we need to be and are impatient to get there. So I would accelerate the reimbursement model changes that I think are critical to helping us really achieve our full potential. I think we have amazing talent and people in healthcare and especially in our medical schools and universities, and allowing our reimbursement models to change I think will just unleash all of that potential.

  Nigel Ohrenstein: David, thank you so much for joining me today. We’ve learned so much, and I’m sure we could continue to learn so much not just from your clinical and leadership perspective from a healthcare system vantage point, but also, what you shared with us around teams, leadership, leading people. It’s so important, and one of the things you said to me before we started the podcast, it’s time for the health system leaders to step up. Clearly, you’re one of those, and we wish you every success in your new role. Stay safe. Stay well. I’m sure MUSC will benefit enormously from your wisdom. So thank you so much for joining us today.

  Dr. David Zaas: No. Thank you, Nigel, and I enjoyed the opportunity. Hopefully, we get to do it again.

  Nigel Ohrenstein: Thank you for joining us today. Please follow us on your favorite streamer, and don’t forget to rate us as it helps others find our podcast. As we look to evolve and lead coming out of the post-COVID-19 pandemic, I hope you and your family continue to stay healthy. Please join us next time as we tune healthcare. This is Nigel Ohrenstein in New York.