How Kenn McFarland formed a new vision for Mission Hospital

Kenn McFarland

Kenn McFarland, president and CEO, Mission Hospital

Even before he became president and CEO at Mission Hospital, Kenn McFarland knew a change was coming. Health care reform was on the doorstep and it was going to find its way inside, one way or another.

“The new health care environment was taking shape, whether you call it Obamacare or just the country responding to health care taking up so much of our gross domestic product,” McFarland says. “You might call it the riding of two horses, moving from this one horse at a gallop to this other horse that has yet to catch up.”

McFarland had been the chief financial officer at Mission Hospital for nearly 13 years prior to taking over as the interim CEO in May 2011. By November, he had made enough of an impression on the hospital’s board and trustees to receive the position on a permanent basis. With more than a decade of experience as a high-ranking hospital official, he was well qualified to take the reins and help forge the hospital’s future path.

But just because McFarland was experienced doesn’t mean the task was any easier. As part of the national health care reform plan, hospitals around the country were under pressure to transition from fixers to preventers, to medical professionals concerned not just with curing ailments but with managing the preventative medicine and lifestyle choices of their patients.

It was a drastic change in direction for a hospital staff of more than 2,400, used to operating in a specific way. Until that point, preventative medicine largely took place outside of a clinical environment, overseen by nutritionists, physical therapists and other specialists. Now, the staff at Mission Hospital would need to tear down the silos and work hand-in-hand with those specialists.

“We had to do a 180 and embrace this new business model,” McFarland says. “We have this wonderful, successful business model that we had been enjoying, but the old model celebrated a fee-for-service reimbursement. The more you did at a hospital, the more money you made. This new model will have us managing whole populations of people, keeping them healthy and out of the hospital. That is a transformational shift. It’s very taxing, you have to build a compelling argument for that platform and get people to follow that model. That would be, I’d say, one of the most challenging things that any CEO would be facing right now, especially in our health care environment.”

Develop a transition plan

In the case of Mission Hospital — and all the hospitals that comprise St. Joseph Health System — building a compelling argument for change began with locking the door and throwing away the key.

The entire health system set up a series of cascading strategy meetings, with the first meetings pulling together the CEOs from all hospitals and medical centers in the system.

“We basically locked ourselves with our board members and physician leaders, and spent a couple days together,” McFarland says. “We told ourselves, ‘OK, we know how we got here, we know how we got to be successful to this point. We know there is uncertainty in the future.’ We had guided conversations to help construct a plan in which we wouldn’t be victims of the future, but rather we would help shape the future.

“That is exactly what we did. We locked ourselves up and started crafting dimensions of performance, and from there, we started to engage everyone else and cascade it.”

The CEOs came up with three desired outcomes, intentionally throwing the ball a little too far downfield in an effort to force everyone in the organization to reach for the goals.

“The outcomes are fairly audacious. First, we want perfect care. Second, we want all of our encounters with each other, with doctors, with patients and with families, to be sacred. Third, we want all of our communities around all of our hospitals to be in the top decile in terms of their own health — their own weight management, their own dietary consumption, their own mental, physical and spiritual health.”

With the goals set, McFarland returned to Mission Hospital and began working with his leadership team to construct processes that would enable all employees to achieve the organization goals, given a willingness to work hard and stretch their capabilities.

“We built a set of enablers that would allow the work to happen,” McFarland says. “The set of enablers would allow for the fulfillment of the strategy, would show us what would be necessary to allow the strategy to work and be successful, and help us to satisfy our mission and outcomes — the things we are striving for.

“So when you think of the process, first we had to articulate those strategies, then we had to fashion those enablers that will allow those strategies to be achieved. Then thirdly, we had to show everybody how we are going to do this together, and get everybody to pull their bow strings back, aiming their arrives for those three core outcomes that we want to achieve.”

Aim your arrows

From cruising altitude, the concept seems like something everyone should agree with: Change a health care outfit from one that focuses primarily on treatment and healing to one that focuses on preventative medicine and lifestyle management, in an effort to reduce the treatment and healing that needs to occur.

But concept and practice are two different things, and to bridge the gap from the former to the latter, you need to build a compelling argument for why the change needs to happen, then package it in a way that relates to many different employees in many different disciplines, then roll it out in a manner that provides maximum coverage.

For a work force that had been highly successful under the old model, it’s not as easy as giving a speech and changing everyone’s mind.

“I had to paint a picture that showed where the new model would take us,” McFarland says. “I had to show everyone the new order of things and how it would be all about managing whole populations, whole communities and their health, and driving less emphasis on the hospital and the acute care setting. I had to show how if we want to be relevant and viable well into the future, it was necessary for us to partner with other caregivers in the community, partner with everyone from wellness and fitness centers to ambulatory care, diagnostics, recovery and rehab, outpatient rehab, inpatient rehab, long-term care facilities and the hospital setting. We had to be nimble in how we managed whole populations through the whole care process, not just the acute care side.”

Ambitious goals can help your team members draw a line from the present state of the organization to how everything will look, feel and operate once your vision is achieved. But it’s not enough to just tie your organizations future to a broad statement such as “We want to be the best in our industry.” You have to tie the organization’s future to the numbers. You have to be able to show your staff hard data that relates directly to the progress they’re making in relation to the goals you’ve set.

At Mission Hospital, McFarland held up cost per discharge as a key metric. He showed the hospital’s employees how lower the cost per discharge would have the long-term effect of helping to re-focus the hospital on preventative care.

“I communicated to our team that we are a great hospital and we make a lot of money,” McFarland says. “We are one of the top performing hospitals in the country. But we are able to do that because we operate in a very affluent area. Under this new model, where the focus is going to be on the continuum of care and population management, we are going to have to reduce our costs. We are just not going to get the reimbursement that we used to.”

With an average cost of $8,500 per discharge, McFarland set a goal of getting the hospital’s average cost per discharge down to $7,000. He and his leadership team utilized lean management practices and elements of Six Sigma to give employees a method by which to reach the goal.

“That’s huge, and we’re not going to get there simply by cutting a bunch of people,” he says. “We are going to look at our culture, we are going to look at our leadership, and if you are not on board, you are not part of the team. If you are not willing and you do not have the courage, this is not the place to be.”

Assess your staff

As part of assessing the organization’s capabilities, McFarland and his leadership team had to assess the capabilities of the staff, and as part of that, whether the skills sets of certain employees could transition into the new future of the organization, either in the employee’s current role or in another role.

“The skills that make you successful today might not be the skills that make you successful tomorrow,” McFarland says. “So there were some tough conversations in terms of who was going to be along for the ride and who would have the agility to adapt.”

McFarland knew he had to run a more efficient organization, and the people who performed functions in departments that the leadership team deemed inefficient would have to adapt to new or modified roles or, in some cases, depart the organization.

One of the most prominent cases of streamlining involved the departments who manage the hospital’s revenue cycle.

“Throughout the whole process of managing our revenue cycle — and you are talking about starting with the time of admission, patient registration, getting all of their information, discharging them, sending out a bill, collecting on that bill, writing them off and managing the whole medical record along the process — we have approximately 1,200 to 1,400 employees across our health system performing that work,” McFarland says. “Said another way, that is one in 20 employees across the system managing the revenue cycle. That’s one in 20 employees not providing bedside care and not helping the patient experience. We looked at that and asked how we could improve performance.”

With a goal of paring down the revenue cycle management to between 700 and 900 employees, McFarland and the CEOs of all St. Joseph health facilities brought their revenue cycle leadership together for a brainstorming session centered on discovering and implementing best practices. The CEOs used the improvement of the revenue cycle management as a jumping-off point for creating a system of what McFarland calls “value imperatives.” The imperatives are aimed at increasing efficiency in the organization and aligning the skill sets of employees to promote that efficiency.

“We put our revenue cycle leaders in a room for five days and said ‘If you had a blank canvas, how would you design this work?’ McFarland says. “We called that a value imperative, and set about creating a series of value imperatives. We did one around the clinical setting of our emergency rooms, how we can better take out waste, inefficiency and leverage evidence-based medicine. We also did that for how we treat stroke patients; we’re doing it for sepsis, our laboratories and our whole material management department.

“You have to take the process small pieces at a time, leverage the people who actually do the work and allow them to redesign the work, and as leaders, you have to get out of the way to ensure that they can do what is needed to affect those changes. To use the old expression about eating an elephant, you’re just trying to do it one bite at a time.”

How to reach: Mission Hospital, (949) 364-1400 or  

The McFarland file

Education: Bachelor’s degree from California State Polytechnic University, Pomona; MBA from the University of California, Irvine.

History: Chief financial officer at Mission Hospital 1998-2011; interim CEO May-November 2011: Installed as CEO on a permanent basis in November 2011.

What is the best business lesson you’ve learned?

When I was a young CPA in my first career, I was pretty naïve and green. One time, one of the partners at the firm I was working for pulled me aside and told me to never be afraid to make a decision. Many people in business are afraid of making decisions and struggle to pull the trigger. It’s not that you should be afraid of being the leader with a philosophy of “ready, shoot, aim,” but that you should be the leader who is always at the ready and aiming. If you are aiming and shoot, and you miss, admit it and be direct. If it wasn’t the right decision, admit it, don’t be afraid to show vulnerability, and allow yourself to drink in the collective wisdom of the people on your team. Use that wisdom to help you move forward. That advice has helped me on a number of occasions over the course of my career.

What is your definition of success?

It is so simple to talk about cash flow and operating margins. But what I believe is if at night I can put my head on the pillow and sleep well, that particular day I showed up, listened and brought energy. I brought my compassion, vision and ethics to the table. I let my yes mean yes and my no mean no. And if I reflect on my day and find things I didn’t do as well as I would have liked, I will aim to do better tomorrow. That will make each day a learning opportunity, and will help me continue to grow and develop as a leader.