Rae Woods (01:02):
From Advisory Board, we are bringing you a Radio Advisory, your weekly download on how to untangle healthcare's most pressing challenges. My name is Rachel Woods. You can call me Rae. It is no secret that the healthcare industry is going through some challenging times, and that's especially true for hospitals and health systems. And one way that those health systems are looking for help and solutions is through partnerships. Now, I'm going to be honest with you, that word does a lot of heavy lifting. Partnership can mean a lot of different things and some folks might throw it away as something that's fluffy. Some might think this just means outsourcing, but outsourcing doesn't do justice for what long-term, strategic, complex relationships look like and the way that those relationships are emerging in the market today. That's why this week I've invited George Sauter Chief Strategy Officer at John Muir Health and Chris Pass, president of Optum's Market Performance Partnership. Together, they discuss how their partnership evolved, how it's always changing based on where they are in the industry, and how John Muir and Optum are successfully partnering together. Hey, George. Hey, Chris. Welcome to Radio Advisory.

George Sauter (02:23):
Hey Rae. Great to be here.

Chris Pass (02:26):
Hi, Rae. Hi, George.

Rae Woods (02:28):
George, I want to start with you a little bit. First of all, where in the world are you?

George Sauter (02:34):
I'm in Walnut Creek, California, upstate or Northern California.

Rae Woods (02:40):
Not surprising based on the institution that you're joining us from, is this a good time for me to tell you how unbelievably jealous I am that that is where you're dialing in from? I couldn't convince you to come to Alexandria, Virginia to record this?

George Sauter (02:53):
No, I like it here as much as you do.

Rae Woods (02:58):
Well, George, I really think it's important to start with your perspective as a leader and as a health system, as the health system representative. And if I'm honest, every health system in the country has some level of outsourcing. They've got a long list of vendor relationships. Maybe they have a handful of what we would call meaningful partnerships. But my understanding is that your organization, John Muir, might actually be a bit unique here, at least in the desire to find meaningful long-term partners. Why is that? What is it about the identity of John Muir that makes the system more, let me say, proactive than the average organization when it comes to these kinds of partnerships?

George Sauter (03:42):
Well, it's a few things. First of all, the market that we compete in, we compete against some very large health systems. Kaiser Permanente, Sutter Health, even Stanford and UCSF, all of them are significantly larger than us and they have scale economies that inherently give them an advantage in the marketplace.

Rae Woods (04:07):
I wonder if we should put some numbers to that for a second, and you're going to test me if I did my homework correctly. John Muir is a $2 billion organization, which I think objectively sounds like a big number. Kaiser is $93 billion, Sutter $13 billion. There's definitely degrees of difference if we think about the two.

George Sauter (04:27):
Absolutely. 50x and 10x for sure. You see it in the way that Kaiser can advertise in a different way or use information technology in a different way, for example. So we needed some avenue, some strategy to gain the scale that is needed to be competitive again in this immediate market. So given the market environment, we developed a strategy that relied very significantly on partnerships.

Rae Woods (04:58):
I appreciate this reality check, let's say, of what you can do alone and what you can't do, but what I find very interesting, and I think it gets back to perhaps the DNA of the organization is that you are looking for partnership and not ownership. Tell me more about the desire on behalf of the organization to stay independent. I might even describe it as a relentless desire to stay independent.

George Sauter (05:26):
We think there's a visceral difference between an organization that is governed and owned and operated in one market versus one that has a corporate headquarters a hundred miles or even a thousand miles away. For example during the pandemic, we were able to completely pivot and react to the pandemic and much, much quicker and much more in a leadership role in our community because we had the board at our side, we knew our board, we're all members of the community, and we actually led the response to the pandemic in our local market. And we're not dragged along, but we had Kaiser and Sutter participate, but we were the leaders and we had nurses out in nursing homes and skilled nursing facilities helping with patient care and distributing protective equipment, et cetera. So that's just a real breathing, living example of why we think that this independence is so important.

Rae Woods (06:26):
And if I'm honest, that is a bit of a difference from what I see in the rest of the healthcare market. Perhaps it's not the desire to remain independent. I think that is there almost universally, but when push comes to shove, so many have found themselves needing to become part of a larger organization, merging across geographies, becoming part of a massive vertically integrated ecosystem. And the difference for me is twofold. First, it's this kind of relentless focus on this is our purpose. We must be independent, we must be the staple of the community. But for me, it comes back to one of the first things you said, which is we recognize what we can do and what we cannot do. And that proactive nature I think is quite rare. If I'm honest, a lot of the organizations I work with wait until they are bleeding to ask for a lifeline. My question is how do you know when to actually pull the trigger on something like a partnership?

George Sauter (07:30):
There's not a stoplight that turns red or green when we hit a certain point in time. It is part and parcel of what we do. We consider partnerships as a way to just advance our organization. It's an option we consider for all lines of our business, and it's kind of a continuous process really. We don't hit a certain point and then think about partnerships.

Rae Woods (07:56):
Does everyone share your kind of optimistic view that that partnership is a good thing and something we should go after and be proactive about?

George Sauter (08:05):
I would say I'm probably on the more optimistic side of the ledger for most things, but-

Rae Woods (08:13):
You and I are real different then George.

George Sauter (08:16):
... There was a response we needed to do in our market. It was a strategy that we put together and we have a leadership team that's very largely bought into the idea and the concept, and that leadership team includes our president and CEO, our board, and really the leadership team itself. We also have some really positive examples of how these partnerships are working in the best interest of John Muir Health and the community that we serve.

Rae Woods (08:45):
It's helpful for me to know that so many of the leaders at John Muir are on board with this idea that you can't go at it alone and you have to seek the right kinds of partners, but there's a difference between when to partner or if you should partner and deciding what the heck you actually outsource. How do you know where to stay true to John Muir, this needs to be what the health system does. This needs to be what we do to serve the community versus getting someone else involved?

George Sauter (09:15):
Well, Rae, you used the term outsource. Partnership is not outsourcing. It is working with another organization in a line of business or in a functional area to do what we do for our community at John Muir Health. We don't necessarily exit businesses, but we try to bring other people in who have either scale, or experience, or frankly even a cost structure that could enable us to succeed.

Rae Woods (09:45):
Let's bring one of those people into this conversation. So George, we're not having this conversation alone. There is someone else on the line. Chris.

Chris Pass (09:56):
Hi, Rae.

Rae Woods (09:56):
Thank you for being patient as I chatted with George about the organizational DNA of John Muir Health, what's been going through your mind as you've been listening to our conversation so far?

Chris Pass (10:11):
It helps to hear, again, some of the origination, and the goals, and the importance of these health systems to the communities that they serve. And like you working in healthcare, we all have those moments where I think you recognize that what you're doing is a little bigger than just a job and the impact of what you're doing really makes a difference to people. And I always enjoy having those conversations with health systems and hospitals and it reminds you why what we're doing is so important.

Rae Woods (10:45):
And Chris, you are here to represent one side of a success story of a case study, of a partnership that John Muir Health has. You are here to represent the Optum side of the partnership with John Muir. What is this partnership and how perhaps would you describe it as being different again from what we typically see when I think about a vendor relationship or when I think about a typical partnership?

Chris Pass (11:13):
Yeah, Rae, it's a good question and there's sort of two ways I would answer that question. One, I could get very tactical to tell you that within the partnership, we do these services together, we do these services this way, and it does include really key services in the organization around revenue cycle, and information technology, and informatics, and things like that. But why it's really a partnership and what the partnership is, is similar to what George mentioned, and that was and is two organizations coming together to bring some of the best things they do and make those things better or fill in gaps that one or the other don't have. And so when I think about that tangentially against being a vendor, a vendor typically has things that they sell that are products that they can sort of go and deliver and they know exactly what you're buying, exactly the outcome you're supposed to have.

(12:10):
And it's a very transactional relationship. When you think about a partnership, at least the way we think about it is there are things that we do that we can either do them faster, we can either do them longer in the day, so maybe we can extend the hours of the service to think 24 hours instead of eight, or 10, or there. We can do things of capabilities that we can share across larger organizations. And I think the key thing here, particularly with John Muir, is we are not going to deliver care locally to that community the way that can be sort of prioritized in the way that John Muir can do. But what Optum does do is it surrounds John Muir and helps support that care, whether it's adding a nurse advice line or adding capabilities so that they can pivot to having two types of urgent cares through a pandemic or whatnot. So we really try to lean in both with the capabilities that we decide together are going to be important for the market versus I'm going to pick up this widget, buy it, and go implement it.

Rae Woods (13:11):
And it really comes back to deciding perhaps not what can the health system not do, but what should they not focus on first? So let them focus on the care delivery, but the back office stuff, someone else can do. The rev cycle stuff? Yeah, someone else can do that. Perhaps they can do it better. Perhaps they can do it cheaper, faster, longer, as you've described. And getting to that point where you're deciding who should focus on what I think is an important first step in establishing what is a true partnership.

George Sauter (13:40):
But Rae, let me interject here. It isn't somebody else do it. That's not the partnership. The partnership is we're going to do this together. We're going to take advantage of some unique capabilities that Optum may have for that. But if you view this partnership as an outsourcing, it's like, phew, I don't have to worry about IT anymore or I don't have to worry about rev cycle anymore, it's doomed to fail.

Rae Woods (14:07):
That's a good point.

George Sauter (14:07):
And that's a really important point.

Rae Woods (14:11):
Which is perhaps again why you said, "Mm, it's not outsourcing," it's not a vendor relationship, it's not outsourcing. It is this new definition of partnership. How did this all start? How did your two organizations come together? What was the spark? Who reached out to whom first? Tell me about the origin story here.

George Sauter (14:31):
We had looked to quote outsource our revenue cycle for quite some time. It's just within healthcare that's something that is reasonably commonplace. But in that journey in that we spoke to Optum and kind of came to a conclusion together that's like, wow, there might be more here than simply a revenue cycle. What do you think about applying some of the concepts of the other partnerships that we have within John Muir Health, like for pediatric services or for cancer care that we do with other providers? What if we apply some of those same concepts to these administrative services?

Rae Woods (15:14):
Wait, wait, wait. You pitched them?

George Sauter (15:17):
I would say it was kind of a mutual pitch. Chris, am I characterizing this from your side? What was your perspective?

Chris Pass (15:27):
I definitely would say it was a mutual curiosity.

Rae Woods (15:30):
Curiosity. That's an interesting word to describe the early days here.

Chris Pass (15:35):
Yeah, that both parties were really trying to explore and you had the detractors, you had the optimists and the parties came together. And frankly, I think the interesting piece here was the strategic vision of both organizations were going through a place in time where, okay, this may make a lot of sense. And then we got more and more energy and more and more folks. And it literally was a wonderful discovery process to go through to realize, oh, this could be valuable to a health system. Oh, this would be really valuable for us as a health system or Optum. And so it really... I would tell you we probably spent the most time making sure the cultures aligned more so than... The business had to be there, but the nuance was in the cultures.

Rae Woods (16:23):
Which is another thing that I think really sets this apart. But I will say I think the business reality is probably something that is familiar to a lot of our listeners in that there is some financial struggle. You're looking at market forces, whether you're looking at things that are happening locally or across the country, right? You're noticing where your business is suffering, where your business needs help, and you're starting to explore the idea of a partnership. And I will say that in and of itself is not an uncommon story in healthcare, especially when I think about independent providers trying to stay independent. The difference in my mind is that's an old story from independent medical groups. It is not a story that I've really heard coming from health systems. Is this the first example of something like this? When you think about a hospital or a health system kind of seeking shelter absent employment using, asking for some of the same back office support that say an independent medical group has been looking for, for decades now?

Chris Pass (17:30):
Rae, that is such an insightful point. And I think in the past you had health systems or hospital systems join larger systems for just that. You've seen the same consolidation with physicians looking for just that. I think this was as far as we can tell the first example of doing something like this at the size and scope across the US healthcare system. I'm not sure there's been one that's gone before.

Rae Woods (18:02):
And when did this initially start?

Chris Pass (18:07):
2019.

Rae Woods (18:08):
Okay.

Chris Pass (18:08):
The work started in 2017.

Rae Woods (18:10):
Mm, meaning that initial, let's talk, let's see how to get the cultures aligned, let's have this curiosity with each other, it took two years to then establish the actual partnership. Wow.

Chris Pass (18:24):
Yes. Yes. We tried to open the aperture as wide as we could to think about what would make sense that we could partner versus do ourselves. And it fundamentally came down to a health system is measured by its community on the quality of care it provides. The back office, the other things, they're critically important to the business, but it doesn't really drive the perceived quality. I think the thing I'm most excited about is today as we're moving more to the consumer, both of us are trying to do the same thing, and it really aligns those incentives about getting better with the consumer than we ever have been in the past.

Rae Woods (20:01):
George was starting to get at this idea that a partnership is not black and white. It is not merely that there are things that group A does and things that group B does, and we can call it a day. I want to think more about that middle part of the Venn diagram because I imagine that's actually much more difficult to decide what do you need to do together versus it's kind of obvious of like, yeah, let Optum do the back office, let Optum do the revenue cycle because I really want to focus on care delivery. What needs to be in the middle of that Venn diagram?

George Sauter (20:33):
In our case, for example, our person who's running our information technology is an Optum employee, sits in our leadership council, the top 10 or 15 leaders when we get together and plot out strategy for the organization and problem solve as a leadership team, that person's involved. And that's what I mean. You'd never do that with just a vendor but a partner. That's I think one huge difference there.

Rae Woods (21:04):
It's also a practical difference of needing to be on the leadership team or be embedded in the leadership team, in the governance, and the decision making, and so on, so forth.

George Sauter (21:13):
Right.

Rae Woods (21:14):
What else fits in that middle kind of ground that you need to share or go at together?

George Sauter (21:20):
I think there's a self-reflection piece that is required. A lot of this just falls on, well, I guess on both sides you'd say if something didn't work, let's figure out why together. And it may be partially some of the things that John Muir Health did not move and work on or put enough effort in. It may have been a shortcoming that might've been from the Optum side, but you do that together.

Rae Woods (21:51):
How do those conversations happen? I mean, those conversations are hard enough when everyone is getting the same paycheck from the same person, let alone when you're talking about two different organizations, how does that honest moment happen if at least you have the shared goal of the partnership? But that's got to be a difficult conversation.

George Sauter (22:12):
I think we both have an enormous amount at stake here, and we both want this to work, and that really overrides the sometimes of perhaps tit-for-tat, you didn't do this, I didn't do that moments.

Rae Woods (22:25):
And I think the idea of having something at stake is actually built in to the, dare I say, contractual relationship between your organizations. Is that right?

Chris Pass (22:38):
Absolutely. And I think just to build on what George is saying, the whole idea of that it's not a tit-for-tat, it's not a Chris, George thing, it's literally something bigger. And I think as people realize, okay, this is organization and organization, we have to communicate and make this work. And so it's almost being in an escape room. We got to figure out how to work together so we can get out of this escape room and succeed in the goal. When you see that behavior, it works incredibly well. When it gets challenging a person to a person or a right versus wrong, that's when I think you start to see it break down.

Rae Woods (23:14):
And what is the consequence? What is the reason why you can be so relentlessly focused on, we're in this escape room, we've got to get out together? What's the downside that you're trying to avoid?

George Sauter (23:24):
Well, it's just mutual success is so valuable to both of us.

Chris Pass (23:27):
Yeah, I mean, Rae, ultimately the consequence is George said it best, we both have to be successful. And so what does success mean for Optum? Success means we're delivering on our promises and we're both incentivized contractually. So it's written down that we have to succeed and that penetrates through the organization and people understand, okay, this is the goal. The consequence if we don't hit it is both on Optum as well as our partner John Muir.

Rae Woods (23:57):
If I'm honest with the two of you, the term partnership gets thrown around a lot in our industry. It's been thrown around a lot in this conversation. And for me, one of the differentiating factors of if it's really a partnership is, is there actual compromise? Is there actual sacrifice that one or both needs to do because that's what a partnership looks like in life and it's also what it looks like in business. So my question for you two is what have been some of those compromises that you've had to make as you forged this partnership?

Chris Pass (24:32):
I would tell you, I think that the easiest way that I would define that is, and we like to call this expansion joints, as we mentioned, the partnership started in 2019. We have made over 200 documented changes to the relationship since we started and we just celebrated four years at the end of September. So we're in this four years-

Rae Woods (24:54):
Wow, 200 documented changes.

Chris Pass (24:56):
... 200 documented changes.

Rae Woods (24:58):
[inaudible 00:24:58] painful.

Chris Pass (25:01):
Being sometimes on both sides of them, some are very easy, some are definitely painful, that's for sure.

George Sauter (25:08):
Yeah, and Rae, I mean, think about it, okay, what's different between now and 2019? Well, we're coming out of a pandemic that no one ever even imagined would be possible. The labor market is, we have low unemployment and high inflation. It's kind of an economic situation, economic environment that we've never had before. So all these things are changing and I think we have to... We're at a nice point now where we could say, okay, now we're partially way through our relationship, how do we reset things so it makes more sense in the environment in which we're working in today? Because it is very different than it was five years ago.

Rae Woods (25:54):
I'm hearing that constant change is a critical part of the success here, but really what's been a moment where you've gone, man, this is a hard thing for my side to give up, but we have to do it in order to focus on our mutual benefit and avoid those kind of mutual risks that we've agreed to do as we've set out this long-term relationship.

George Sauter (26:16):
Yeah, well, certainly one of the things right at the beginning is that we had to... Part of the arrangement was to move 540 employees that were once John Muir Health employees over to Optum, rebadge them.

Rae Woods (26:34):
Huge.

George Sauter (26:35):
And that's a huge, huge change and certainly unsettling, right? If nothing else to all those people affected. But both sides worked really hard to make that transition work as smoothly as possible. And I think at the end of the day, only one of the 540 folks who were given the opportunity to make that transition actually chose not to do it. There's some unbelievable number. You would probably think that over a period of 12 months one person would probably pass away or get terminally ill just during that time, much less all of them choose to make the transition.

Rae Woods (27:20):
Wow. Yeah, that is incredible.

George Sauter (27:21):
Yes, that's right.

Rae Woods (27:23):
Oh, you're right. I mean, talk about a difficult decision that's going to affect the very people that work for your organization, but ultimately sounds like it was the right move for the larger goal. That's what I'm talking about when I talk about sacrifice and compromise.

George Sauter (27:44):
That's actually too, if you look at it, many of the folks who made the transition have had much more expanded career opportunities within Optum. And it's given them an opportunity to grow professionally that just was not available within John Muir Health. Yet at the same time, they're able to keep a foot in their local community, if you will, and serve John Muir Health. Some may have moved on to other roles within Optum, but many have chose to stay. If executed well, and if both sides lean in, it could be extremely valuable.

Rae Woods (28:21):
How did the two of you define success or how have your businesses defined success when it comes to this partnership? How do you know if it's working?

George Sauter (28:30):
While I talk in very high, grandiose terms about mutual success, the underpinning of this is it's supported by a level of service agreements alone in the document, I don't know, Chris, it's got to be 500. It's a tomb that does memorialize our commitment to mutual success. This

Rae Woods (28:53):
This is not going to be the part of the podcast where Chris starts reading a 500-page document into his microphone.

Chris Pass (28:59):
No. Not at all. It's actually closer to a thousand, believe it or not.

Rae Woods (29:02):
But perhaps the more interesting question is, what is the way that your organizations hold each other accountable towards the collaboration that is required to move towards shared success?

Chris Pass (29:16):
You're identifying what I would say is one of the most challenging things of a partnership because to your point earlier, we've got a really large contract that has all the important things that we have to do, both parties. But when you really think about a partnership, the world doesn't stand still and you're trying to come at this from a way where I view success as making John Muir Health better than they would be by themselves. And so when they come to us with the things that they're trying to achieve, how do we help them achieve those goals? And our goal on the Optum side is figure out how does that help us achieve our goals? And as sort of high level as this is providing value for our owners is what we're supposed to do as Optum.

(30:07):
And so how do we find the right blend there? It's not, my job is to find that value on our side and also try to help John Muir find the value on their side. I don't want John Muir to have to worry about how do we find value for our shareholders. I find that to be our job. And I also depend on John Muir to tell us what they're trying to achieve to find value on their side.

Rae Woods (30:31):
What's next for this partnership? You've been at it for several years now. What does the future look like?

George Sauter (30:38):
Well, I do think we have to reset and recalibrate our mutual expectations, given the market dynamics that are quite different today than they were in 2018. A real concrete example is that Optum, the contract puts Optum at large risk for inflation, which we all thought naively so five years ago that inflation was pumping along at 2%, 3%, we're all good. And yeah, all of a sudden it's a very different situation. So we should recalibrate, okay, is that fair? How do we reset that? Similarly, John Muir Health and like many healthcare organizations, we absolutely have to variablize much of all parts of our business so that when we do have swings in volume or we resize our organization that all parts of the organization can resize. And that's something I don't think we built into the relationship. I'd like to see if we could potentially do that moving forward.

Rae Woods (31:45):
Is it correct to say that you're making some of these changes because the two of you are in this for the long haul? I mean, I think you've got a 10-year timeline?

George Sauter (31:53):
Yes.

Chris Pass (31:54):
Yes. 10 year timeline and everything George has said is true. The business has changed so much on the Optum side. It's changed so much on the John Muir side. I'm not going to get into large language models, but what is that going to do for healthcare and how is that going to change how we work together?

Rae Woods (32:12):
And the industry has changed, the world has changed.

Chris Pass (32:16):
You got it.

George Sauter (32:18):
And Rae, one of the really interesting things that we have or really valuable things from a relationship with Optum is we're able to tap into a number of innovations that are funded by an Optum basically private equity arm. And we've gotten early looks at these organizations and we're implementing something now in the generative AI space that I think has the potential to revolutionize how healthcare is supported and really revolutionize the lives of our providers to finally move our physicians away from being the world's most expensive data entry analysts. To actually give them time back to their real calling is to work directly with their patients. And those are the benefits. Those are the side benefits that are really powerful that I'm really excited about for the future.

Rae Woods (33:15):
But it all comes back to setting up the right kind of partnership with the right kind of organization and taking the time to think about what should one organization do, what should the other focus on, and what must we do together? And that is something I'm really excited to see change and evolve as our business changes over the next 10 years, the next 20 years. So thank you both for coming on Radio Advisory.

George Sauter (33:42):
Yeah, Rae, thanks. It was a lot of fun.

Chris Pass (33:46):
Thank you, Rae. Appreciate it.

Rae Woods (33:52):
I hope that you heard all of the things that makes this particular relationship different from a lot of the relationships and partnerships and vendors that we see in healthcare. But if I think about the foundation of the partnership, it has to come back to two organizations with a shared and sacred goal and the willingness to partner and compromise in order to get to that goal. And if you're interested in doing this, remember we are here to help. If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts and leave a rating and a review. Radio Advisory is a production of Advisory Board. This episode was produced by me, Rae Woods, as well as Abby Burns, Kristin Myers, and Atticus Raasch. The episode was edited by Katy Anderson with technical support by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Carson Sisk, Leanne Elston, and Erin Collins. Thanks for listening.