CEO Insider: Perspectives on Technology and Digital Transformation

Thanks for tuning to Digital Voices podcast, where we chat digital transformation, challenges, and opportunities across healthcare and life sciences. And now, your host, Ed Marx.

Ed Marx here. Welcome to another edition of Digital Voices, where we're going to talk about digital and transformation through the lens, through the eyes of a CEO. These are some of my favorite podcasts to do because I'm always super interested in how the CEO thinks about technology and digital. And we're very fortunate to have one of the most progressive CEOs that I know, and that's James Hereford. So James, welcome to Digital Voices.

Thanks, Ed. It's my pleasure.

So James, you are the President and Chief Executive Officer of Fairview Health Services, and we'll break that down what that all includes here in a minute. But we first met a few years ago. I was with another CEO, and we happened to all meet together, and I was super impressed with you in terms of what you were trying to do at Fairview with digital transformation and just how you looked at the world. And I was like, I want to meet that person again, have more time with them. So it was fortuitous recently when I was in Minnesota, I went to a medical alley. event, which we'll talk about as well, and, and got a chance to meet you. So again, thank you for being part of Digital Voices. Now, James, the most important question that we have on Digital Voices is what's your playlist look like? So what kind of songs do you like to listen to?

Mine is quite eclectic. I have a fairly broad range of music and somewhat influenced by my wife as well, trending more towards country, you know, Alan Jackson, uh, the, that kind of ilk of the kind of prior generation of country. But, uh, that, that tends to be kind of my go-to, uh, in, uh, my listening when I'm listening to music.

Yeah, that's right. We're gonna learn when it, when we find out a little bit about your background, you're actually from Montana. And so I imagine some of that musical influence may be, you know, from that kind of living.

And, uh, yeah, I think sins of the past have come back to haunt me.

Yeah. So let's talk about that a little bit. Tell us about how you grew up, where you grew up, and, you know, just kind of to where leading you to where you are today.

Yeah. Well, if you've ever seen the show Yellowstone, yes, it is supposed to take place in the Paradise Valley outside of Livingston, Montana, outside of Bozeman. But it's actually filmed in the valley I grew up in, in the Bitterroot Valley, little town called Hamilton. I was the youngest of 6 kids, quite a bit of distance between myself and the next brother. Wayne was 9 years older than I was. So pretty clearly was not a planned child. I think my parents had thought they could no longer kind of achieve reproduction at that point in their lives. And I surprised them. I always like to tell my siblings it took them a while, but they finally got it right. My siblings didn't necessarily appreciate that, but I grew up on a working ranch in Montana.

That's pretty cool. And I don't meet too many people that have grown up that way. What about your siblings? Did any of them go into healthcare as well?

No. Um, kind of an interesting, uh, kind of pathway. So it's only myself and my brother Glenn who lives in Kansas. My closest brother Wayne died in Vietnam. Frank, died of cancer. Roger died in a plane crash and Peggy just died. She was, you know, natural causes. So I, I and Glenn are the only ones left and my parents have both passed at this point.

Wow. Well, I'm, I'm sorry to, sorry to hear that.

Um, no, it's, it's fine. And again, it's, I mean, old age is coming for us all and given I was the youngest by far. So it, uh, it was interesting in growing up that way. It's just, I had a, I don't know, a, an awareness of the frailty of this thing called life and therefore appreciate it. But I was also the only son of Charles and Margaret that went to college and got a degree, et cetera.

Yeah. So how do you think that shaped you? Like working on a, growing up on a ranch, growing up in that environment, how did that shape you to be as a CEO today? Like, what are some of the things that maybe you learned? From that lifestyle that applied to you?

Well, certainly, I mean, this, it was a working ranch, so the emphasis on working. And I think I realized that I didn't want to be a rancher when I grew up. My dad had got me up in the middle of the night one time to go check on the cows. It was calving season. Uh, it was probably March. It was a little snowy. It was cold, 2 o'clock in the morning. You know, we're in a pickup bouncing around the field where the cows are at and checking to see if any cows are calving. And sure enough, one was down and my dad gets out of the truck and looks at the cow and comes back to the truck, says, well, you're going to have to— this is a breech calf. You're going to have to turn it. Keyword in that sentence was the pronoun you. And I was a little bitty guy. And I just remember being up to my armpits in cow in the middle of the night. It's cold. It's spitting snow, it's wet. And I'm thinking, this is not what I want to do for a living. And so I paid a little more attention in school after that.

Yeah. So how did you end up going on a path into healthcare?

Totally accidentally. So I was going to Montana State. I ended up with a master's degree in mathematics. Uh, you know, I had to figure out what I was going to do with a degree in mathematics in Montana. So I ended up teaching high school math and coaching basketball in a little town called Lewistown. I did that for 7 years and it was delightful, but my standard throwaway line is you can only teach Algebra 2 trig so many years in a row before the thrill is gone. We moved to Seattle. I was working on my PhD in statistics. We found out we were pregnant with our first child after I passed my first year comps, pregnant with our second child when I passed my, um, or my first year qualifiers, my third year passed my comprehensives. But, uh, we're finding out we're pregnant with a second child. I got motivated for revenue and, uh, was teaching a class summer quarters, stats for engineers or business majors, whoever it was. Nobody wanted to be there, but the chair of the department forwarded an email from Boeing that said, we're starting the 777 build. We're going to implement TQM. We need somebody who understands DOE and SPC and has some platform skills. I didn't know what any of that first paragraph meant, but the second paragraph started with, we'll be paying $50 an hour contractor wage. And I immediately volunteered, went to the library, checked out Juran and Deming and Feigenbaum, and started to learn what this stuff is and started first teaching and then got involved with project work at Boeing, was involved with helping them build out their quality program. And all their suppliers had to meet the quality program specs. So I was doing consulting around the Puget Sound with their suppliers, helping them understand what they had to do. You know, SPC charts, all of that. And by sheer random accident, somebody introduced me to the VP of quality and planning at an organization called Group Health Cooperative, which is an old staff model HMO, you know, care delivery and health plan together. And they asked me to come in and do some work for them. And I thought, well, sure, why not? Their, their money's as good as anybody else's. And I ended up falling in love with healthcare. More smart people per square unit space than anywhere.

Yeah.

The mission orientation was so compelling. They're there for, you know, a calling, a very specific reason. And their processes were so screwed up. I couldn't help but help and ended up, I was a a consultant for a period of time. They offered me a job. I said, okay, fine, I'll do this. I'll get my dissertation done. Um, 20 years later, I'm still there. I was running their care delivery system, never did get my dissertation done, but had this amazing experience across all aspects of healthcare in group health.

Oh, that's great. It's so interesting how people transition into healthcare. So super cool story. So now you're at Fairview Health. So share with the audience a little bit about the mission and vision of Fairview and how Fairview Health came together.

Well, it's kind of a classic large, or, you know, we're, we'll be close to $8 billion of total revenue next year, uh, 11 hospitals, but kind of a, you know, classic integrated healthcare delivery system. We largely, uh, are in the metro plus area of the Twin Cities, but serve A fair amount of Minnesota and a little bit of Wisconsin. We have a large complement of physicians, relationship with the University of Minnesota. So both academic employed and then community physicians have a number of capabilities and subsidiaries include a senior care living Ebenezer, one of the larger senior care living entities. And it's, you know, it's, we're here like almost all C3s to be able to support the health and wellness of the communities we serve, which is a privilege.

Yeah.

And we have all the challenges that go with that. Right.

What, what might be one thing that the average person, maybe someone that doesn't live in the Twin Cities, what's one thing that someone might not know about Fairview?

Well, I think maybe it's a well-kept secret, but hey, we have one of the best specialty pharmacy functions literally in the world. It is amazing in its ability to, through medication management, manage patients more effectively, impact cost structure impact, and to the degree that we're now getting ready to spin it out into a national entity that provides services to other integrated healthcare organizations who participate in 340B, et cetera. And as you can imagine, the 340B program is fairly complex. Yeah. And we're really good at being able to manage that, the relationship with the payers, the relationship with the pharma companies. And so we're getting ready to spin that out here at the beginning of the year, which I'm excited about.

That's very cool. So before we head into sort of innovation technology and that sort of thing, I have a selfish question, which is about being a board member. So I'm a board member of a couple hospitals. And actually, one of my former bosses is on your board, Barclay Verdun. And what makes a good board member? So for those listening that may be on a board, or many people aspire to be on a board, what makes a good board member?

Well, your former boss is a great board I think as a CEO, you appreciate the role of governance and where the line is between governance and management. And I think that's part of what makes a good board member. And I'm so lucky. I've got a great board, really deep experiences from a variety of backgrounds covering both local and national. But I think it's that ability to hold the organization and the management team accountable.

Right.

And that really is, if you can do that as a board member, you are fulfilling your obligations from a governance perspective. And it's not easy because what we do is hard and it's easy to, you think about the individual experiences you may have as a patient and then translate that into a board member. That's often not as helpful as, you know, try to think back about what the whole ecosystem looks like and what the You know, how does a system like this work? And so probably the other aspect I would say is being a willing learner. Because I mean, I've been doing this a long time and I'm still learning about healthcare. And if you're a, you know, a banker, a lawyer, you know, whatever field you come from, it is a steep learning curve and as a board member. And so being a very willing learner is critical.

Yeah, those are, those are really good. Thank you. Yeah. So I know you have a big focus on innovation and digital at Fairview. Why is this important to you? So, you know, why, why is this area of focus for you?

Well, I think, I mean, the, the most basic answer is we have an affordability challenge in the US when it comes to healthcare. And we've been playing this cost shifting game for, you know, the last 20 to 30 years where commercial insurers are supporting the Medicare and Medicaid populations in the sense that We don't get paid what it costs us to deliver that care for those populations. And so businesses are paying more and we're cost shifting. That game is completely falling apart. The letters I get from patients about the affordability aren't from people who are on Medicare and Medicaid so much as commercial. What we used to think of, you know, back in the day is you never had to think about the costs of healthcare. You had good commercial insurance. That has fundamentally changed. average deductible in the US now is $5,000. So the key question for healthcare has to be, how do we deliver commensurate or better quality, safety, and experience at a lower price? And the only way we can do that is through innovation. We have to think about people, process, and technology in a way that does what we do better, different. We're using leveraging technology more effectively and really thinking and rethinking, you know, Our care models and, you know, our approaches. You think about inpatient care, we largely deliver inpatient care the way that it's always been delivered in a hospital environment. Yet there's all these advantages of technology. And then the other thing I would say is a lot of the technology we've applied, and I'm a big fan of the EMR. I'm old enough to remember, you know, paper records. That was not an ideal system. The damn paper record was never where you wanted it.

Right.

But it's actually added to the burden for caregivers.

Mm-hmm. Yeah.

And so we have to change that. And part of why we have to do that is cost. But the other part is it is a burnout factor for our caregivers.

Yeah.

When you're spending more time in the EMR charting, clicking buttons, navigating that than you are in care and caring, that's a problem. And too often that's the case.

Yeah. You Are doing a lot with innovation, and you already mentioned specialty pharmacy. Is there one other example where you've done something particularly innovative or something with technology?

Well, I can tell you the one I'm most excited about that we're really moving to aggressively this year is around nursing. So nursing is such a core backbone to what we do. It's the largest single population Um, you know, we need to make sure that nursing is an endeavor that people can do and sustain their practice, and especially in the inpatient environment. So we're kicking off and have kicked off a fairly aggressive effort to fundamentally rethink how do we use, again, people, process, technology in the inpatient environment to support our acute care nurses. In ways that support the entire effort, right from admission through discharge, and are the ways that we can help them focus more on care and caring and making sure that our patients are getting great care, compassionate care, and less time in front of the technology, and using virtual options, using other technologies to be able to do that. And that's a critical aspect of this. But what I'm really excited about is how our chief nursing officers. And our nurses are engaged in that process to really rethink it. Because it also, to me, the cultural change that goes with that kind of technology change is also essential. And that's what we're seeing. So I'm very excited about where we're going there.

Yeah, that's pretty cool. And we were talking about being a board member. You're also a board member of Medical Alley, and that's all about medical innovation. Can you tell us a little bit about Medical Alley and how you've partnered with them in any sort of way at Fairview?

Sure. Yeah, I'm privileged to serve as the board chair for the next couple of years. And, uh, you know, Medical Alley goes back to kind of the original days of the medtech industry in the Twin Cities, which it was really kind of born here. The way that Medical Alley has shifted over time is it's one of the few places where the entire healthcare ecosystem comes together. Care delivery, payers, medical technology, pharma, all coming together to think about, well, What's our common ground here? Because so often we're in competition or it's a zero-sum game where I'm winning. And if I win, you lose. And so it is a unique forum to bring all those parties together to talk about what, where do we compete and where don't we have to compete? Where should we be collaborating? How do we change so that we can get, you know, more access to behavioral health, better access from a health equity perspective? And those are things that we all have an opportunity to contribute to. And it, you know, what's also exciting is it's, you know, it's not just a local entity. It is truly an international entity. Our membership spans the world. And so part of that is because of the Twin Cities and the kind of medical innovation that is part and parcel with our particular geography. But part of it is that ecosystem where people come together and It's true for established organizations as well as startups and all the challenges that startups have getting access to capital and getting access to organizations to be able to test those good ideas. So it's a very fun other job that I have with Medical Alley.

Yeah, I, I, I could, I bear witness to what you're talking about. I had a great time and I met so many people. And to your point, they came from all verticals within healthcare, which was nice because I hadn't seen that before. Where all these, you know, like you said, you know, medtech, payers, providers all together trying to think, hey, what can we do in the future to make healthcare delivery better? So as a CEO, so I want to sort of come back to CEO point of view on digital tech and the future. So we've, you've already given us a few hints about where you think not only Fairview's headed, but generally where we're headed with tech. What are your other thoughts about digital Digital transformation and where do you see this going in the next 3 to 5 years?

Well, I'm a big fan of, proponent of AI. I think it's going to be a game changer. I know we've, you know, we've got a lot of concerns and there are things that people look at and say, well, that's going to be a significant barrier. We have to keep in mind we are at the very beginning of the kind of generative AI lifespan. And yes, we're at the peak of the hype cycle. So, I mean, you can't— every pitch I hear, every commercial I hear has AI in it somewhere. But it is going to fundamentally change, or, and it needs to fundamentally change the way that we think about our healthcare organizations and who does what, how they do it, where they do it. And I don't think it's necessarily going to be the large language models. I think it's going to be much more the specialized language models that require much less data to train, and will have very specific use cases. And I don't necessarily believe that we'll not have humans in the loop in some way. It's not going to replace, certainly not going to replace proceduralists, diagnosticians. I think it's going to impact those jobs significantly. And we already have plenty of evidence to say, look, an AI, a well-trained AI does a better job diagnostically of radiology.

Yeah.

So I do think it has a tremendous impact potential on healthcare delivery. The challenge will be it can't be just a technology independent of operations and care delivery. And so it's up to us as care delivery organizations to really reflect and think about how do we use this powerful technology safely, effectively, that maximizes its potential, but also Use it to maximize the potential of the human beings.

Yeah. Right?

Because we, that's also a, a, uh, a component of healthcare delivery that is absolutely essential. The other thing that I think is gonna, has to develop and where technology can be a, a significant opportunity, and I really learned this when I was in an integrated model in Seattle, is I, you know, I think we've, we have over-indexed on primary care in so many ways, and it's not fair to primary care physicians, right? They, The idea that primary care physicians by themselves can fundamentally change the cost curve is a little stretch to say the least. Um, you know, I love the things that many of the organizations, primary care organizations have done and that have been purchased, but the valuations that I was seeing a year or 2 years ago, there's no way that you could, you could justify those. What I think is what I learned in Seattle and what I think is kind of the work that we all have to do is how primary and specialty care come together.

Mm-hmm.

And how do those 2 fundamental different approaches complement and serve each other? I used to, my, my office used to be a couple doors down from Ed Wagner, who was the father of the chronic disease model, in many ways the father of population health. And Ed used to talk about, and this is a lot, long time ago, and you'll know it from the He said, you know, it's not the cost of the specialist, it's the cost of the lead in their pencils, meaning what they order, what they do that really drives healthcare costs.

Yeah.

And it's so true. I mean, we don't, it's not primary care docs admitting into hospitals. It's specialty physicians, right? It's specialty physicians who drive the most expensive. And especially as we all get older and, you know, we know what the actuarial curves look like in terms of where money is spent in the lifespan. And so how primary and specialty care work together and how technology can enable that beyond what we've done with the current EMRs, I think is a rich opportunity for us to be able to bend the cost curve and to really leverage those 2 disciplines more effectively.

So a big part of our audience are tech and digital leaders and forthcoming leaders, and I know they're always curious how to best work with a CEO, you have great, you know, I know, I know Shabu and Samir that are serving your organization. You have some great leaders in those areas. How would you recommend to the listeners they best work with, with you as a CEO, like, you know, for in other hospitals? What's, what's the best approach for IT?

I think to get me to introduce you to the Samirs and the Sabus and the people who, it's interesting because, you know, I was at Stanford for a number of years and, um, I think people look at it and say, well, if I can get to the executive team, and especially if I can get to the CEO, I can really get something done. And the mythology is I have this magic wand and all I got to do is go tell people and they go do it. You know, I get to play that trump card maybe once or twice a year and that's it because we have incredibly talented people. And if I'm telling them what they should do and what their jobs are all the time, I'm not sure why they would ever work for me.

Right.

So, you know, I think the thing that if you're interacting with a CEO, understand what the problems are from the CEO's perspective and how your particular solution might support those, but then really try to get to the people who drive the change in the organization. Thing that I found is if you want me to kill your technology, the thing you want me to do is go advocate in my organization to other people about, hey, we should go do this.

That is so true.

It's like an immunological reaction. They'll say no first and foremost because they don't want me telling them what the right answers are.

Oh yeah. So, so true. Yeah. That's really good wisdom. Yeah. People think there's this magic wand and it actually can backfire on you. So that's good stuff. I want to finish up with leadership. Tell me about your approach to leadership. How do you think about it? How do you go about it?

So I think I've Probably learned most of my leadership lessons being a small-town basketball coach. Uh, you know, I think the challenge for us all is, and many of us are, you know, incredibly good problem solvers and incredibly capable people, is learning how to be capable through others. And when I was putting, you know, 15, 16, 17-year-old boys and girls out on a gym floor, entrusting them with my job because it, you know, you didn't win, you didn't stay. You learn how to get people aligned around a common purpose, how to best use their skills, how to have the hard conversations with people when they're not able to, or not fulfilling their role or their function in the way that they need to, or their interactions with other teammates, et cetera. To me, CEO or leadership as coach, excuse me again. I mean, it is so critical. And the further up you go, the less, it's back to our prior comments, less that you can tell people. You know, there's a time in my career, I was a great individual contributor. Just give me the work and I'll get it done. And what I had to learn over time was, yeah, that's great at a certain phase, but as soon as you become a leader that has any kind of portfolio responsibility, your job's to get great talent. Give them common cause, help support them, shape where you're going, but get out of their way as much as possible other than to support their success. And I've been very fortunate to have incredibly talented people around me. And I always find my IQ goes up significantly when I'm surrounded by a bunch of smart, motivated people who we've been able to do some pretty dramatic things.

Yeah. That's, that's again, Kind of flipping it. I mean, you're, you're sharing some advice that I think is pretty profound, can help many people. How do you decompress? So you're CEO of this giant health system, a lot of pressure from different corners of the world. How do you, you know, make sure that you're not burned out?

Well, I'm a, I like to get outside. I like to play golf. I like to fish. You know, there's certain activities that, and I have a preference towards those activities that require your attention. Because there is no work-life balance in my estimation. That too is a bit of a mythology, especially as a CEO, the job just never turns off. So having things where it requires a certain level of disciplined attention that you can't do well unless you're focused on, I think is helpful. But the fact that, you know, I'm not trying to maintain work-life balance, I think also helps me cope with with the fact that you're always on, you know, that phone call could always be there. There's something you always need to do. The emails keep coming no matter what. And now it's not just email, it's texts and direct messages and, you know, all the other things that technology affords us. I don't try to keep a work-life balance. What I try to do is keep balance.

Yeah.

When I'm at work and when I'm not at direct work in the office is to try to stay balanced emotionally, physically, spiritually, et cetera. And if I can do that, then, you know, it's doable. You're not, I'm not gonna burn out.

Yeah. James, this has been super fascinating. I could go on forever. And it was great hearing stories of growing up in Montana and how that shaped you both as a person and as a leader and some of the work ethic. And then we talked a lot about Fairview Health and the great ministry, the work that you all do up in the Twin Cities and, and beyond in that region. Uh, we talked a lot mostly about innovation and digital and how you're actually doing things at Fairview and sort of how a CEO thinks about it and the importance importance of it. We talked about several examples and sort of the future with AI and technology that delivers better care models that work and reduce costs and reduce burnout, things like that. And then we talked a lot about leadership as well. Is there something that we missed or anything that you want to double down on? I'll give you the last word.

Well, right before this podcast with you, I was meeting with a couple of our fellows who are doing their administrative fellowship and getting to stick their nose in a bunch of different aspects of healthcare. And, and they ask the best questions because they're just looking at it and saying, why does this work this way? And why does that work in another way? I do think, A, there's got to be a generational change, frankly, in healthcare. I think, you know, old white beards like you and I are going to have seen our day and I'm going to have to leave the stage.

Yeah.

But we're also going to have to have a reckoning in this country about how this healthcare system works and Yeah. You know, I'm not a big fan of single payer. I think anybody who's been in a, or has studied a single payer system knows that it has plenty of deficiencies. But I also think that the way that we finance healthcare has to be rethought. And it's so hard in this political environment to, you know, have anybody come together to do that. But that's, that's my hope is that, you know, the next generation of leaders and the next generation of, you know, political representatives will be able to see the problem coming with enough time to actually do something about it. And then we won't wait until the problem is so dire that we've devastated our healthcare ecosystem. I'm especially concerned about rural.

Yeah.

Coming from a rural background, a small town, I see what's going on and talk with my peers in small hospitals. I think my job is hard.

Theirs is Nearly impossible.

And we have got to figure out a better approach. So that's my, you know, one thing that we didn't necessarily talk about, nor should we, but it's the thing that's on my mind.

Yeah. That would be, uh, the whole podcast, uh, to go deeper on that. I agree with you completely on all counts. James, thank you so much for, for spending time with us on Digital Voices.

Ed, thank you so much. I appreciate it. Thank you for listening to Digital Voices Podcast with Ed Marx. If you enjoyed this episode, subscribe on your preferred streaming service and leave a rating and review. And most importantly, thanks again for listening.

Thank you.