The COVID-19 pandemic has reshaped multiple aspects of hospital operations in short order, from skyrocketing growth in telemedicine to the proliferation of remote work arrangements for administrative staff. As hospitals and health systems look forward to a post-COVID environment, leaders are adjusting their long-term strategies accordingly.
In this interview, Dennis Murphy, President and CEO of Indiana University Health (IU Health), discusses the immediate toll of COVID-19 on his system, and explores how his board and leadership team are already preparing the organization for a rapidly transforming environment.
This interview was conducted on May 22, 2020.
Q: How has COVID-19 impacted your organization’s workforce, operations, and finances?
A: IU Health is a 16-hospital system with everything from major academic hospitals in a metropolitan market, large community hospitals, critical access hospitals, over 2000 employed physicians, a health plan and 400 clinical care sites. We are the only academic health center in the entire state of Indiana.
We've seen a disproportionately large percentage of COVID patients, given their complexity. We’ve treated more than 1,100 COVID-19 patients at IU Health; gratefully, we've only had 115 deaths to date.
Like most systems, telemedicine has been a huge vehicle to provide care for us in this outbreak. We’ve had over 40,000 telemedicine visits specifically related to COVID and a huge set of additional telemedicine visits. Our congestive heart failure team is managing patients remotely, because they didn't want them coming into the environment. It’s the same situation with multiple other specialty patient populations. We wouldn’t have projected achieving this explosion of subspecialty telemedicine in five years—and it’s happened in 90 days.
Regarding financials, we were tracking at about $40 million a week in lost revenue related to elective procedures. Interestingly—and we still can't completely figure out the root cause--our payer mix has actually gotten better. We believe that’s because patients who have not been infected with COVID are deferring care, which is not good for our patient population in the long run.
We are very fortunate to have a really supportive board. We do some pretty regular comparisons to other health systems with similar levels of annual revenue. And our treasury team handles all the normal comparisons regarding operating margin, days cash on hand, and other metrics. IU Health probably ranks in the top two or three of our peer group. We were in a really strong position prior to the pandemic, and our board basically said, "This is a once-in-a-lifetime experience. This is why you have a balance sheet, so you can lean on it."
We have not furloughed or laid off anyone. We worked with our employed physicians, who largely received relative value unit compensation in the past. We came to an agreement that we will pay them as if they have a salary, with the expectation they’ll make up the lost volume over the course of the year. We’ll see where we are at the end of the year.
One of the big issues we have is creating a real sense of security for patients, so they feel it's safe to come back for care. We’re actively working with our state health department. We've also developed our own communications program for this topic, because we've seen a more than 20% reduction in the first third of 2020 for stroke patients and heart attack patients. We firmly believe we haven't magically cured those issues. People are actually experiencing those conditions, and are simply not coming in for treatment.
We have focused on how to use this experience to reinforce our culture. We wanted to really think about employee and physician engagement throughout this crisis. We didn't want anyone to feel a sense of emotional jeopardy, because we needed our staff to not only show up at work, but also to volunteer and do things they normally wouldn't have done.
The really wonderful thing is all of that has played out as we had hoped. If you would have asked me if anyone from our children’s hospital would ever work in the adult ICU six months ago, I would've said, “When pigs fly.” Our staff willingly did it, enjoyed the experience, and were really good at it.
We’re trying to carry forward the notion of using our workforce more flexibly moving forward. I don't think that's as much of a management push-down as it is people saying, "You know, I like that." And some of those individuals have willingly volunteered to do that moving forward.
Q: Have you started to chart out recovery strategies to get the balance sheet back to where it was?
A: We sent a message to folks that this may be a little bit like personal economics. You have income, you have expenses, and then you have life emergencies where you tap into your savings. We're considering our balance sheet like our savings as a corporate entity and communicating to staff that you can't perpetually tap into your savings. You actually have to get back to a sort of alignment between revenue and expenses and go back and rebuild that balance sheet.
I joke with our CFO that I don't need a 1960s CFO. I need a 21st century CFO who's going to help us think about how you change the current model in a way that works for our patients, but also works economically. For instance, how do we leverage virtual health to actually be sustainable financially? How do we think about population health in this model? I think there is a lot of room to innovate financially in this crisis.
Combined, our health plan and our ACO have roughly 200,000 lives at risk, and that has helped us a bit economically. We’ve always thought of it as a hedge, and it has played out that way. It's not proportional, relative to the scale of the rest of our organization, so it doesn't completely hedge against something like COVID, but it does contribute.
I do believe we're going to have to make some tough choices through this, including whether to defer elements of our strategic implementation we had previously planned.
I don't think our strategy changes, but I think our investments will probably be safer and more focused. We've become a little less interested in seeking risk than we would have been a couple months ago.
Q: How has the shift to remote work affected your real estate needs and cost structure?
A: We had a couple of major leases that were due to be renewed over the next several months. We're now re-evaluating whether we're going to renew them. We did set an expectation that we don't want people working remotely as much as we have over these last 90 days. However, if we were to say that people only need to come into the office three days a week, we could theoretically reduce our space needs by 40%. We are giving serious thought on how to execute on that notion.
We're still working through our return-to-work strategy. We actually now have five generations in our workforce, from 20-year-olds to a fairly significant number of people over the age of 70. For instance, are we going to keep everyone over the age of 60 home—at least for a defined period of time—just from a safety standpoint? The same notion applies for younger employees who may be at risk. We are going to put our team safety first.
The space issue is really dramatic on the administrative side. Our origins at IU Health were three hospitals located in downtown Indianapolis—two adult and one pediatric—all within a mile and a half of each other. We were already planning to replace the two adult hospitals with one, and we had expected to see some fairly significant operating savings just from the overhead of those two. Now we’re reassessing what that whole floor plan looks like. Our use of virtual health has forced us to rethink our outpatient space needs.
On the other end of the space spectrum, we’re really thinking about flexibility of beds. We had planned three tiers of beds—ICU, inpatient, and observation beds—and had very different staffing models for each tier. Now we're saying, what would it cost to make sure the vast majority of our beds are ICU-capable when we need it? I think we're going to see some cost savings on the outpatient side, and probably some additional dollar-per-square-foot costs on the inpatient side, just to build in more flexibility.
Q: How do you see your current strategy applying to the post-COVID environment?
A: Our strategy had four very basic tenets. The first was to succeed in destination medicine, given our academic facilities. The second was to use our hospitals to improve population health. In at least two markets, we’re the exclusive healthcare provider; in a third market, we compete with one other hospital. You can sort of encapsulate all the care in those markets, and really think about population health geographies.
The third element is around community health. Like most health systems, we’ve been starting to look outside the four walls of the hospital. Indiana does not do well on any of the broad-based health status metrics and we have real opportunities to address social determinants of health.
There is a business imperative for community health. We're not going to get an Indiana premium because of smoking rates and issues with obesity and infant mortality. We're going to get the same rate everybody else does, and we're going to be at a disadvantage. We need to improve broad-based community health metrics from a business standpoint, or we're going to get crushed on competition.
The fourth dimension is really around a broader impact. How do we partner with other people? How do we carry IU Health's impact to markets where we may not have clinical operations? Within the markets we're in, how do you continue to grow and gain market share?
For us, it is really an opportunistic moment. Our board has said, "If you're going into this strong, use this time to figure out how you advance towards strategies that you couldn't pursue under normal circumstances.” I think that impact variable will be important one for us to think about, because there will be some unique opportunities.