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- [00:01]
A
This is Alan Condon with the Beckers CFO and Revenue Cycle Podcast. And today I'm delighted to be joined by Austan Jones, senior vice president and CFO of NKC Health, that's a nonprofit health system in Kansas City, Missouri. Austin. A pleasure to have you on the podcast with us today. Before we get the conversation rolling, I'd love to hand over to you just to hear a little bit more about your background, your experience and of course your role at NKC Health.
- [00:31]
B
Okay, yeah, I'd be glad to and thank you for having me. So my career is fairly short compared to I think some of your other guests, so it's faster to kind of discuss what I've been up to. Before I came here originally I didn't intend to become a healthcare administrator or even a CFO or accountant for that matter. I had my eyes set on the skies and got my pilot's license in high school and wanted to become a commercial airlines pilot. And I found something much less exciting, I guess in accounting when I was in college. And so that's where I ended up. And now the aviation is a long past hobby, but I went the accounting route. My father was a cpa, still is in a public firm there. And so I kind of started out in that track earnings earned a little bit of credibility and a lot of experience in a short time working in a couple CPA firms and ended up in a small physician owned joint venture Surgical Hospital in Amarillo, Texas early on in my career and really just got to learn all there is. It was so fascinating to me in the public accounting world. I had seen so many different industries and by far healthcare was the most complex. And I knew for a fact that leaning into that career, into that industry, I would never get bored, which was always a fear and it's proved to be true. So it was great. I started there surgical hospital for profit like I mentioned, joint venture with physicians which adds a new and interesting dynamic and then kind of parlayed that into an acute care larger hospital down in Houston. So moved across the state, believe it or not, between those two moves, same state but about a 12 hour drive in between. Different climate by far, 3600 foot elevation drop and everything. Big difference. Hospital was different, city was huge. Then within that health system that was part of the Chi Catholic health initiatives at the time, moved up into a more regional role into the central part of Texas and was over critical access. Hospitals had a teaching hospital with Texas A and M University and several other things going on there, ambulance services, all kinds of stuff. But ultimately I ended up here at North Kansas City Hospital at the time most recently becoming NKC Health. We're still getting used to saying it, but I came up here because I was looking for that independent community hospital. It's really a gym in the present day, there's just so few of them. And even since I've come here four years ago, two of the local independent hospitals have been acquired by large systems. So we're kind of the last one standing here. And it has been a great experience and it's just a thriving hospital and health system and I've really enjoyed it.
- [03:39]
A
Yeah, fantastic. Well, you know, I've talked to Quite a few CFOs over the last few months. I think you're definitely the first who made that switch from, I guess, the pursuing a career in the aviary industry to pursuing a career in accounting, healthcare, finance. Certainly a different beast, a different animal, but it sounds like quite a tenured career and some great roles along the way before you landed in your current role, like you said, at the independent hospital, NKC Health. Pleasure to have you on the podcast, Austin, and I'm excited to kind of pick your brains a little bit more. When we think about everything that's happened over the past couple of months, there's challenges. It seems like every, every everywhere we turn in terms of hospital finances or we think about what happened policy level on Capitol Hill. What are the two or three trends that you're paying most attention to today? I'd love to hear from your perspective. NKC Health Independent System recent rebrand what does your market look like? Where are your biggest focuses?
- [04:40]
B
Yeah, that's a great question. And I think you kind of alluded to it earlier and it's probably the top followed topic among other CFOs, that being just governmental impacts, whether it's reimbursement, whether it's engaging with the private sector through Medicare Advantage and managed Medicaid products, whether it's 340B regulations or dish payments, things of that nature are all so impactful for us. You, you know, as with most hospitals, our health system, the largest customer we serve in terms of the negotiation, it occurs with the government. And as you know, they don't really negotiate. They kind of tell you what you're going to get paid and they tell you what the rules are going to be and you have to figure it out from there. And that was one of the biggest things about healthcare. Coming from kind of the public sector and seeing all kinds of different businesses. There's no other Business where. Where you, as a private hospital or operator would interact with the government and they would pay you in a lot of times less than your cost. And so that took a lot of getting used to when I came here. And so as we work through that, really it's something that we have to focus on is how do we continue to serve the mission, knowing that more than half of our customers are covered by these plans run by the government and at the same time, keep the lights on. So that's our biggest focus. Government as it relates to reimbursement, as it relates to regulations, coverage, things of that nature, whether it's at the national or the state or in some cases the local level. Outside of that, another couple that are just important to us, we're following our ability to attract and retain a strong workforce. Our people are our greatest asset. Our P and L shows it, that's our greatest expense. But also where we put our time is most focused on our people. So whether it's getting out of the pandemic level, premium pay burdens that we saw for so many years, or if it's developing vertical growth channels for our staff, we've instituted a medical assistant academy that's yielded a really good result. Lab school, pharmacy school. So building that vertical integration of kind of training up the next generation of staff. Whereas in the past, I think most health systems were maybe a little reactive to the workforce demands. And then, yeah, just looking to see what we're doing as an organization and to say in the present day, when we know we can't be all things to all people, what are we doing and where are we investing that human capital that's best, even if before it was good. So we're having to do that kind of analysis and say, is it good or is it best? And we're really trying to push into those areas that are the best ways to invest human capital. And then lastly, it's access. So I follow that trend of where are we booking out too far? You know, our community expects to get in to see a specialist especially, and get in quickly. And so we're following that. And a lot of that is contingent upon our ability to find and recruit, again, that workforce of specialized providers. So those are probably the three areas. Government, our people and access.
- [08:16]
A
Yeah, yeah, no doubt. Two, three very distinct areas that no doubt a lot of CFOs, no matter what sort of an organization you're working on, for profit, nonprofit, urban, rural, safety net. In terms of the workforce aspect, I think that you kind of sit in an interesting seat in that you did initially start out with a for profit system or at a large nonprofit system. Now of course, in independent hospital, like you said. Now in terms of that vertical integration that you mentioned in terms of your workforce, now is that something that is an easier move to less red tape example to kind of set up those sort of workforce development programs in an independent system as opposed to previous systems that you might have been in on the for profit side, on the large nonprofit side? I'd be curious to hear maybe how different or if at all those changes might be in your current seat.
- [09:10]
B
Oh, that's a great question and something I've reflected on. In fact, I see where having worked in the for profit area and in tightly managed, not for profits. Right. The large systems that have a lot of internal benchmarking that goes on, it gives you as a cfo the ability to affect change a little more and teaches what I think is best practice. At the same time, I think one of the challenges when you're in a really large system and most not for Prof. Or most for profits are and then of course, similar systems to the one I came from, a lot of times some of the challenges are more related to how you are engaging recruits and how you're engaging at the, at the individual level and your flexibility. And so obviously, most really large health systems, they're less flexible on those case by case, instances where you may need to invest a little more into a specific area, they might push across kind of a blanket way that they're going to treat certain things. So I think there's some, there's some positive aspects to it and there's also some shortcomings. You know, one of the things is obviously a really large system may have a better name if you're trying to recruit specialists. Specialists may look at an academic medical center and they may say, you know what, that's where I want to go. We don't have that as much, but we did some recent investments that I can share a little later that have helped us to kind of get a better name in that sense. But yeah, it's, it's been interesting. I would say I enjoy it more having the flexibility to design a more tailored approach to these academies, these specific hiring practices, bonus practices, things of that nature. I like the agility.
- [11:10]
A
Yeah. Yeah. I think it's fascinating to hear and obviously from someone who has kind of seen it from both ends of the spectrum. One quick follow up here before we jump to our next question just on this point, because I think it's so Important, and especially when they're so few. To your point, a couple of hospitals, couple of independent hospitals in your market recently acquired, we're seeing that more and more, it seems, as we see a lot of these financial challenges, ubiquity across the space. But I digress. I think I had a conversation recently with the CFO of TMC Health at Tucson Medical center, also an independent cfo kind of tracked similar to what you had said. And he spent some time on the nonprofit side and the for profit side said that one thing that, that struck me on the independent side was the loyalty that exists maybe between a city, between the patients and their hospital, vice versa. He says that trust, that loyalty is something that they really aim to beat their competitors in their market. Like you said, the big brand names are the banner health, the tenant health. You're not going to beat them on budget, on capital. But trust, loyalty, your patient base, those are certainly some areas you can win. Is that true for you and what other areas would you highlight as how you kind of thrive in a competitive marketplace when there isn't so much consolidation?
- [12:30]
B
Oh, absolutely. I have never been at a health system with greater tenure than here at NKC Health. And I think it's because it has that independent spirit. We still do things like company barbecues and a Christmas dinner and a Thanksgiving dinner and you know, big employee appreciation celebrations that are here on campus. We do trunk or treat where the staff bring their kids. These are things that a small critical access hospital might do. But typically hospitals that are almost a billion dollars in revenue a year don't do those things. And I think it develops a culture that's unique and we hear it from our patients with the physicians as well, we're much more physician centric. The chief executive of our system is a former neurosurgeon of 31 years here at this health system. And so it brings a tremendous amount of focus on understanding how we interact with our providers and empower them to really be the asset that our community needs. Not only that being kind of a quasi governmental hospital, our board of trustees is made up of members of the community. Whereas in a for profit or in a really large not for profit, it might be a handful of bankers and lawyers and business owners and those are really valuable members of the board, but having this unique subset of, of citizens of our community, we have a really unique board that focuses on the right things.
- [14:07]
A
So fascinating to get your perspective and I think so, so important is particularly in this day and age, to your point, like you said, we are Seeing so much consolidation and unfortunately, maybe a fewer of these independent hospitals in the current environment, but certainly so important to see the benefits, the advantages from a workforce perspective, also from a patient and community perspective as well. Austin, we've talked about some of that already. We've talked about some of the challenges, some of the trends that you're facing. What are you most excited about? When you think about the future of NKC Health, the future of healthcare, what really kind of gets you going?
- [14:44]
B
Well, I think there's a number of things, but just from a macro perspective, growth overall, since I got here in 2021, NKC Health has had 40% growth in net patient service revenue. So that's just encouraging in itself. That excites me. We're growing in the outpatient area. We're the second largest inpatient hospital in the entire city, second only to the University of Kansas Health system, which is a much bigger hospital, but ours is the second largest. A lot of people don't realize it. Our emergency room is by far the busiest. We did 83,000 emergency room visits last year. I think the closest competitor was around 65. And so we've seen just tremendous growth in the outpatient. And that gives us encouragement for a number of reasons. Number one, we're kind of maxed out on the inpatient side. We run around 80% capacity, which is great. It's where you want to be, gives you the ability to flex up whenever those seasons like January come around and everyone gets sick and comes in the hospital. But 80% is a good amount to keep things running efficiently and offset overhead. But our outpatient area is just growing tremendously. We've invested in our cancer center. We've invested in interventional radiology and cardiology, outpatient imaging, rehab and lab. And then we've actually done an investment that most people are divesting and that is in labor delivery services. It's typically a loss leader, but it's something our community needed. And again, we're so community focused that I think we have our collective, from the board of trustees down to the front line, our focus is truly on the community. And we heard them saying, we need these services. And so we've put heavy investments into these areas, and it's returned dividends. And so that growth alone is really exciting. In addition to that, we heard our community also saying, hey, we see you've got a cancer center. We want the best cancer care. And so we went out and we formed an affiliation with the Mayo Clinic Care Network. We're the newest member to it. To my knowledge. And that gives us instant access to that world class expertise for our patients here in town. If they need a really complex procedure, it's a six hour drive to Rochester. But everything stays here. The testing, the consults, everything stays here. So it's just a tremendous opportunity for our community to have access to that, but be able to stay here. So those things, not only that, as you mentioned before, the MKC Health, for the longest time, 65 years, you had North Kansas City Hospital. Great brand recognition, great name, incredible support from the community of that brand. We had Meritas Health, which was the brand that encompassed our physician enterprise for about 30 years. And only 26% of our community realized that Meritas Health was a wholly owned subsidiary of the hospital. And so we put those together and we've had tremendous support. So that's been good to see.
- [18:00]
A
Yeah, I mean, fantastic. No doubt in such a challenging time. No doubt. A lot to be excited about at nkc with the Mayo Clinic Specialty Care Network Partnership outpatient growing tremendously, as you said. And did you say, I believe, 40% growth in net patient service revenue and that's in the nearly four years that you've been at nkc? Am I getting that right?
- [18:25]
B
That's right.
- [18:27]
A
What do you attribute that substantial 40% growth in nearly four years? Is that a wide variety of things or what does that down to?
- [18:36]
B
Yeah, I think there's a few things and I think one of the leading reasons why is not attributable to my leadership. And I'll tell you why. When I came here, it was during the thick of the pandemic and our hospital did some things a little bit different. They first off didn't lay off anyone at all or furlough anyone, and it cost us dearly. They dipped deep into their reserves, deep into, to make sure they took care of their team members. And I admired that. When I was interviewing, they told me this and I thought, wow, the CFO was probably losing his mind because it was just such a costly move. But they saw it as an investment. They saw it as a 65 years they'd been in business and a lot of these employees had been there for 30, 40 years. And they said, we're not going to abandon you at this time. And in the same way that they kept their employees, when all that volume came back months later, we were ready for it. Not only that, we did see throughout a lot of hospitals, and you're even seeing it now, where they realize, hey, we're losing money on the inpatient side. Why don't we just close down a unit or two, shrink the size of our hospital? So if you look at the stats, a number of hospitals actually have capacity. When you look at their staffed beds versus their licensed beds, we staff all of our license beds. That's costly. You're having to pay premium pay to get that sometimes when there's a shortage of nursing. But what that did was that ensured our community that they were going to have somewhere to go by doing that, by opening up our emergency room, which has grown tremendously. We used to be 60,000 visits a year when I first got here. We're now 83 and growing. What it's done is it ensured a commitment to the community that they then responded and it's created inertia and it's created more of a, of a hub for our community. So I think that's it. I think it truly has caused us to grow just being there. Right. Just investing in those services, even sometimes when they're not going to yield a lot of financial results.
- [20:58]
A
Yeah, yeah, fantastic. Investing not just in the services, but also continuing to invest in the workforce that no doubt serve the community and the hospital, the health system for so long. Certainly so commendable and absolutely love that nugget of information. So thank you for sharing, Austin. It's been a fascinating conversation so far. Last question before I let you go. You've talked about this a little bit already in terms of some of the areas that are growing outpatient oncology, I believe. But would you mind kind of diving one bit deeper? I think when you look ahead 12 months, 24 months, is there one or two, maybe key areas that you're really looking to hone in on and grow?
- [21:34]
B
Oh, absolutely. Yeah. We've, we've kind of found the areas that are growing organically. We found areas where we just do really well, specific service lines, where we've invested in world class surgeons or physicians. And so we're doubling down on those efforts. We're expanding in certain areas. We've invested tens of millions in capital in certain areas. And so, yeah, we have probably five or six service lines. We can't grow much more on the inpatient side, but we're always here for the community and we're seeing more stuff shift to the outpatient. Just over the last year, we've gone from 56% of our business being outpatient to 61. So the move is happening. And so we are just trying to build to keep up with it, to hire to keep up with it. And so the next 12 to 24 months. We're focused on growth primarily, and then secondarily we've had a lot of improvement in areas like labor management. I was just reporting out to the board. We were at June 30, fiscal year end, and I reported to my board board with a smile on my face because in one year we reduced premium pay by 70%. So that is such a wind in our sails as we look for, you know, stronger margins to start building the balance sheet or reinvesting in the community. So that's really what we're doing is just, you know, you're blocking and tackling will never go away. We've always got to get more efficient. We'll use technology where we can. We're never going to be on the cutting edge of technology as a small system, but we look to our partners like Mayo Clinic and say what works and what doesn't. What can we spend our time on? And we found some neat solutions there. But really going back to the basics, right. Just serving the community and really just focusing on efficiencies internally. Yeah.
- [23:34]
A
I mean, fascinating, I think certainly a lot to be proud of, a lot to be excited about. It sounds like in terms of that growth. Outpatient Austin, absolute pleasure. Thank you so much for taking the time out of your busy schedule. Thoroughly, thoroughly enjoyed this podcast and I look forward to catching up with you again down the line.
- [23:52]
B
Likewise, Alan. Thanks for having me on and I look forward to hearing more from other leaders. It's been great, Sam.