Fairview tries to break geographic lines in new structure

Fairview Health Services shuffled its leadership structure and trimmed a few dozen jobs earlier this year while transitioning to a new "operating model" — management-speak for a change that aspires to make it easier for patients to get care across the growing health care system.

The new structure at Minneapolis-based Fairview is focused on "service lines" rather than the geographic location of various hospitals and clinics. Part of the goal, Fairview executives said, is to eliminate "unhealthy competition" in which one Fairview hospital might be rewarded for gaining market share at the expense of another Fairview facility.

Such transitions are difficult for health systems to make, but also are the goal as the conglomerates try to provide a consistent patient experience across all operations, said Daniel Zismer, a consultant with Castling Partners in Minneapolis.

"It's huge. It's not easy. And it's as much an art as it is a science," Zismer, said of the switch to a service-line model.

"But at the end of the day, if you can pull it off, it's really the way patients want to consume services."

Minneapolis-based Fairview has been one of Minnesota's largest health systems for many years and it got even bigger in 2017 through its merger with St. Paul-based HealthEast. The deal weighed on Fairview's financial performance last year, when the health system posted operating income of $98.5 million on $5.27 billion in revenue, for a profit margin of 1.9 percent.

Fairview runs 11 hospitals, including University of Minnesota Medical Center in Minneapolis and Fairview Southdale in Edina. The nonprofit organization also includes more than 100 clinics, more than 40 pharmacies, several long-term care facilities and the PreferredOne health plan.

In January, Fairview started rolling out its new operating model. In a related move, the health system laid off 65 workers, closed 70 open positions and reduced hours for about 160 positions. With about 32,000 employees overall, Fairview said the layoffs hit less than a quarter of a percent of the total workforce.

"Anytime you take two organizations, there are going to be impacts," James Hereford, the Fairview chief executive, said in an interview last month. "I would say that these are relatively small."

With the shift in operating model, some Fairview executives took additional leadership roles while five others left during the first quarter. In a January memo announcing the changes, the health system said it would create a new center that Fairview is likening to "air traffic control" for patient care operations.

Asked about the center, Hereford mentioned how there are now more insurance company requirements for caregivers to obtain before providing some services. Doctors might be able to hand some of that work to the new operations center.

"We face a crisis of clinical burnout in this country," Hereford said. "So, the idea in part with this 'air traffic control' — the operations center — is to be able to own some of that burden that we've placed on the providers and remove that, so they can focus more of their time on … care for the patient."

The operations center is just one piece of a much broader set of changes that were explained in January via electronic slides distributed to Fairview employees. The slides depict an assortment of organizational charts and diagrams peppered with words like "horizontals," "verticals" and "seamless integration."

In the document, Fairview said the new model will focus on financial results across the entire health system instead of profit and loss numbers at particular facilities. One slide says service-line leaders will have formal authority over the strategy and operations of services across different physical locations.

"We're really positioning the organization for the future," Hereford said. "We have to continue to organize around our patients, our customers, better aligning around the full continuum of care so we can manage the total cost of care and the value of care more effectively."

It all makes sense, said Zismer, the consultant who is also an emeritus professor in health policy and management at the University of Minnesota. For many years, health systems have gotten bigger via mergers that promised the large networks of hospitals and clinics would provide coordinated care behind one single, consolidated brand.

But it's easier said than done.

"Delivering on that brand promise is very complicated," Zismer said. "It's antithetical to the conventional way that health care has been organized, and the conventionally organized health care systems are very territorial."

Christopher Snowbeck • 612-673-4744 Twitter: @chrissnowbeck