publication date: Mar. 3, 2017

Conversation with The Cancer Letter

Steve Hahn and his plan for rescuing MD Anderson

Steve Hahn didn’t apply for the job of Chief Operating Officer at MD Anderson Cancer Center. In fact, there was no COO job to apply to, and conversations that preceded the announcement of his new role took less than a week.

Hahn, chair of the Department of Radiation Oncology, has been working closely with the Faculty Senate and the administration as they struggled with the Houston institution’s growing operating deficits, the plunging morale, staff cuts, and the logjams created by a precipitous switch to electronic medical record.

How is Hahn, a relative newcomer to MD Anderson, going to rescue his new institution from its years of troubles? In an in-depth interview with The Cancer Letter, Hahn described functioning within a new administrative layer, formally reporting to MD Anderson President Ronald DePinho, but keeping UT System Chancellor William McRaven in the loop.

Occupying an office on the 20th floor of the T. Boone Pickens Building and the penultimate box in the MD Anderson box diagram, Hahn, whose other title is deputy to the president, is now literally the guy everyone reports to.

“Ron has told me, and it’s been put in writing for me, that when he is not here, I act on his behalf, knowing full-well where he wants to go, and his vision, but for the areas of operations, clinical operations internally, financial connection there, and the network, he’s delegated those responsibilities to me,” Hahn said to The Cancer Letter.

Importantly, he is also in charge of representing the administration in the shared governance process, which means interaction with the Faculty Senate.

“The answer to your question would be the folks who would report up to Ron are the same people who would be facing me as well,” Hahn said.

Will there be personnel changes on the 20th floor, which houses the top layer of MD Anderson administration?

Hahn said he is thinking about it. “My job is to make that assessment and make those recommendations. I won’t hold back from doing that if personally I think that’s in the interest of the institution,” Hahn said.

Asked how he was chosen for this role, Hahn said he can only go but what he has been told.

“What I was told was when Ron and the chancellor looked around the organization and talked to folks in various constituencies—administration, faculty, Faculty Senate, and division heads—I was told that my name came up a couple of times, and that they sort of vetted that internally and thought that that would make a good choice—or I would make a good choice… Whatever…,” Hahn said. “Our challenges won’t be solved on the 18th and 20th floors. Our challenges will be solved in collaboration from the 18th and 20th floor with the folks at the front line, but also in leadership positions, Faculty Senate, department chairs, division heads, and our operational administrative team as well.”

Asked to explain how MD Anderson’s financial problems came about, Hahn pointed to the institution’s decision to adopt the Epic system.

“When we did the Epic install, the largest Epic install in the history of Epic—we did a couple things that were sort of the big bang, if you will,” he said. “We did inpatient, we did outpatient, and we did the billing system—all at once. “

The key to resolving MD Anderson’s problem is to provide value.

“I really don’t want the message to the faculty to be: ‘Make money. Make money. Make money.’ I want, ‘What’s best for our patients? What’s best for taking care of them? Let’s be careful about what we spend. Let’s be prudent about the way that we approach our operations so that we can be more efficient, but at the same time deliver high-quality care and be very patient-centric,’” Hahn said.

 

Hahn spoke with Paul Goldberg, editor and publisher of The Cancer Letter.

 

Paul Goldberg:

Can you tell me how you became the chief operating officer of MD Anderson? Did you apply for that job or…, what happened?

Steve Hahn:

Sure, that’s a very funny question Paul. I did not apply for it. Ron approached me about this, and the context was that, given many of his external-facing responsibilities, which are significant, interaction with the legislature, UT System, fundraising, the sort of Washington aspects of the job—NCI, et cetera.

He felt that there was a gap and a need to be filled internally, so internally-facing, in the organization from the president’s office, to manage the clinical-slash-financial aspects of things as well as our network, which as you know extends from our Houston area locations all the way to our international sites and our new UT system collaborations.

He mentioned to me that he wanted to consider me for that, and would I consider such a position? That’s how the conversation started, and subsequently progressed from there.

 

PG:

How long was that in the works?

SH:

Before he contacted me?

 

PG:

Yeah

SH:

I don’t actually know the answer to that question, because I wasn’t part of those conversations, but it was end of January, where that discussion took place, and over a week’s period of time, with discussions that were really three-party discussions between Ron and myself and the folks in UT Austin, we sort of came to an agreement then.

I’m sure you know it was announced on Feb. 3.

 

PG:

Okay, so it was less than a week, and was the [UT System] chancellor [William McRaven] involved?

SH:

Yeah. The chancellor was. The chancellor gave me a call and asked me if I’d be willing to serve the institution, and I told him yes.

 

PG:

Okay, so the offer really came from the chancellor?

SH:

Well, I mean, I think, technically, the offer came from Ron, because Ron’s the first person who approached me. I think my understanding is that Ron asked the chancellor to contact me to give further backup that this was something that UT Austin was also very interested in.

That’s how I understood that this went, and that’s where my discussions went forward.

 

PG:

Did they explain why you are the COO as opposed to someone else … What do you think happened? What lead to it?

SH:

I’ll just give you the straight shot as to what I was told.

They felt that this was something that needed to be filled on a relatively quick basis, that this was a new position that was created.

They were cognizant of the fact that we were in a financial crisis, if you will, and that we had to move in a certain direction. I can tell you my philosophy about this, but it’s basically the direction of value-based healthcare.

We had to consider significant changes in the institution to move in that direction, given the changes in healthcare. There was some urgency to move on that, because of that issue, and so that was sort of the context of the situation, and what I was told was when Ron and the chancellor looked around the organization and talked to folks in various constituencies—administration, faculty, Faculty Senate, and division heads—I was told that my name came up a couple of times, and that they sort of vetted that internally and thought that that would make a good choice—or I would make a good choice… Whatever…

 

PG:

I guess I should probably just ask directly. Do you report to [MD Anderson President] Ron [DePinho] or do you report to the chancellor?

SH:

I report to Ron.

 

PG:

Are there constant communications with the chancellor? How does that work?

SH:

Everybody’s aware of this. One of the things that was put in my domain and this role is to make sure that there was constant communication with the UT System.

I set up regular calls, which I’ll actually start this week, Paul, with the UT System, just to give them updates on what’s going on in the institution from an internally-facing perspective.

It’s like anything in big complex organizations. More communication is probably better, and I mean, as you probably know, lots of information gets disseminated. To have a consistent messenger about what’s going on that is, in fact, consistent with what is actually going on is a good thing.

I’m really happy to play that role, both internally and also externally-facing to UT System.

 

PG:

My many friends on the faculty have very nice things to say about you.

SH:

You know what? I have to tell you, this was a dream job when I took the division head job two years ago, because I’d been at Penn for 18 years, and I have such admiration for this institution and what it does for our patients, and I have, again, I mean, I love this place, and I love the faculty, and I love the staff.

I have said many times that you will never find a place—and, Paul I think you and I mentioned this when we talked before—where people are so committed to our mission of curing cancer and taking care of cancer patients—and it’s infectious and you cannot buy that commitment.

You can’t pay people to do that. It’s just not possible. Why not come to a place like this and do your best to try to forward the mission? To me, it’s just the bottom line. It’s all about what the institution needs to do that mission.

 

PG:

Where is your office? Are you on the 20th floor? [The 20th floor of the T. Boone Pickens Building is the location of the administrative offices.]

SH:

I do have an office on the 20th floor. Ron has asked me to keep my role as a division head. It’s a little bit of a challenge.

We’re putting a structure in place in the division, because I’m really sensitive to the fact that I came here to do that job, and I really want the division and our patient care mission and our safety and quality mission to be taken care of, so we’re putting in a structure there, and I’ve kept some sort of temporary quarters there, so that I can go up and down and meet with those leaders and make sure that things are being taken care of there.

We have terrific people in the division of radiation oncology, and I’m confident that when that structure goes in place things will be taken care of. I do feel an obligation to that division, to my division, if you will, and to our patients.

I’m going to continue to see patients, and I just want to make sure that folks are taken care of there.

 

PG:

Are you transitioning out of that job, or do you think you’re going to be able to keep both jobs?

SH:

Again, I think … What I spoke to Ron and the chancellor about is that I’d like the opportunity to reassess in three and six months.

I’m glad, again, in the future to have another conversation with you about that when that reassessment takes place. I doubt it’s of huge interest to people, but I’m really glad to have that conversation, and we’ll see how both the COO job and things are going in the division, and then make a decision at that point.

Again, I really think we should do what’s best for the institution and our patients, and although I love the Division of Radiation Oncology, truly love that job, and love those folks, if the right thing is for me to be elsewhere, then that’s the right decision to make, and we’ll start a search for the division head of radiation oncology.

If the right thing for me to do is to move back, I’d be very happy to do that.

 

PG:

Do you see making personnel changes on the 20th floor, the senior personnel?

SH:

I’m just getting my feet wet in this.

You know, it’s not a secret that we have our challenges. We have our challenges around decision-making, and, just like any big organization, we have our challenges around governance.

I think these are areas that the faculty and the staff expect to be addressed so that we can become as effective as possible. To the extent that sometime in the future personnel changes, wherever that happens to be, need to take place, because that’s the right thing for the institution, we have to have the courage to talk about those and decide.

Ultimately, that’s the president’s decision, not my decision. But my job is to make that assessment and make those recommendations. I won’t hold back from doing that, Paul, if personally I think that’s in the interest of the institution.

 

PG:

These are folks that report to you, right? Because there’s nobody, really who doesn’t. Is there anyone who doesn’t? Everybody reports to you?

SH:

Yeah. Ron has told me, and it’s been put in writing for me, that when he is not here, I act on his behalf, knowing full-well where he wants to go, and his vision, but for the areas of operations, clinical operations internally, financial connection there, and the network, he’s delegated those responsibilities to me.

The answer to your question would be the folks who would report up to Ron are the same people who would be facing me as well.

 

PG:

I see. They just kind of go through you, which means that governance is a work in progress. Is that a fair way of saying it?

SH:

That is so fair. You know what? Paul, nothing’s perfect in the world. I’m a cancer doctor, for goodness sake; right?

We all know that, but it is a work in progress, and I’m really interested in making sure that we make the right decisions, that we move forward on decision-making and governance, but I also want to make sure that in the process of doing that that we take care of all the people in the institution: staff, faculty, even up to the 18th and 20th floors, so to me that does require more than just a week to sort of make assessments and decisions about things, because I think the institution deserves better than sort of rushing into things.

I guess it depends on what sort of perspective you have; right? One could argue that maybe this isn’t rushing, but from my perspective in this job, I feel like it needs a little bit of time to make those assessments.

 

PG:

How do you see the shared governance with the faculty continuing to function?

SH:

That’s another area that Ron has asked me to sort of assume for the present, and I am very enthusiastic about it.

There is a subcommittee of the shared governance that is now quite active that has proposed a mechanism for agenda-setting.

I think it’s a great idea. Ron has approved moving forward with that, and I will provide the president’s office blessing of the agenda, and we’re going to move forward with confidential, but open discussions, where people are not afraid to discuss how they feel and we get a true vetting of these topics, and I have to tell you the collaboration with my division head colleagues, so Marshall Hicks [head of the Division of Diagnostic Imaging], and Steve Swisher [head of the Division of Surgery], and David Tweardy [head of the Division of Internal Medicine], and with Julie Izzo [chair of the MD Anderson Faculty Senate], and Osama Muwlawi [a Faculty Senate member who sits on the shared governance committee and serves as the chief of the Nuclear Medicine Physics Section], and Tadd Pullin [senior vice president, institutional advancement].

I count them among sort of—I’m sorry about the military expression—but sort of soldiers in arms in our mission. We’re right next to each other.

I think we all feel the same way about being up-front with each other and transparent about the issues and all the risks and benefits of decisions, but I said this as I’ve got around the organization the last two weeks: Our challenges won’t be solved on the 18th and 20th floors. Our challenges will be solved in collaboration from the 18th and 20th floor with the folks at the front line, but also in leadership positions, Faculty Senate, department chairs, division heads, and our operational administrative team as well.

It is only through that partnership that we move forward. I know it sounds like mom-and-apple-pie, but it really is true, and to folks who have felt like they haven’t had a voice and haven’t been heard, I think it’s really important that we listen and that we engage and that we allow and we enable and we multiply all the good efforts that people have on the ground at this institution, because it’s a huge strength of ours.

Shame on us if we don’t use that for the good of our mission.

 

PG:

The chancellor has been saying that without the faculty being on board you’re sunk. We keep using these naval terms here. Right?

SH:

I think what I just said is exactly along those same lines. I hope I communicated it well. I am probably not as eloquent as the chancellor.

It’s really important and you see this time and time again, and you have 20,000 employees, many thousands of faculty, 1,200, 1,400, depending on how you count, and the bottom line is it’s a big constituency who have passion and a stake in our mission, and what a shame if we don’t rally those people for the mission in a positive way and get them engaged.

 

PG:

What are your plans for dealing with the financial problems, which I guess if we’ve been talking about it, I might as well just ask it directly.

SH:

Oh, yeah. You bet.

It’s no secret around the country that lots of institutions are facing financial pressures, and you probably know and report about them more than I could even list them, but—

 

PG:

Wait… I’m going to have to interrupt you, because I don’t think any of the big cancer centers are having the problems you’re having. Memorial is in the black. Fred Hutch is in the black. I just went through sort of a list of them, just to see, but nobody’s really in the red.

SH:

Yeah, and I guess I wasn’t … Sorry, Paul. I wasn’t specifically talking about being in the red, because, certainly that is an issue. Losing $405 million dollars over the last 11 months—that is a huge issue, and you’re right.

I guess what I meant was the factors that put pressures on academic health systems, they were true at Penn, where I was before, and I think there was recently an article in the Harvard Business Review about Cleveland Clinic.

A lot of people are facing those pressures. I’ll just give you my perspective on the issues here, and I’m going to tell you what I’ve told the faculty and the staff when I met with them.

When we did the Epic install, the largest Epic install in the history of Epic—we did a couple things that were sort of the big bang, if you will. We did inpatient, we did outpatient, and we did the billing system—all at once.

Some folks staged that. We decided not to.

The pain associated with an Epic install is real for many places for a variety of reasons. It’s just a new way of doing things, but the virtuous part of Epic is that it uncovers processes that have been in place for years that need to be revised—that maybe you weren’t aware of need to be revised.

When I was at Penn and we did the Epic install that was very true. We sort of found things that we were like, “Oh. We need to do things a different way,” and Epic gives you that opportunity. It’s not just Epic, but an electronic medical record does. It uncovered processes that, sort of situations, that we had to get better.

How we account for deductions from gross revenue? Literally how we do things like bring a patient through the door, do financial clearance, see them in the clinic, what a doctor versus a nurse versus an MA does in the clinic? In radiation oncology, what a therapist does versus a dosimetrist?

All of those issues and processes become exposed.

It slows you down, because you have to reassess how you do things, and you become less efficient and anybody who’s done the big bang of Epic, I think, has realized that that makes you slow down and inefficient.

We just did it, I think, in a more dramatic fashion.

What we are playing catch-up on now is how do we address those and fix those. In answer to your question of how are we going to address those, we have to look at a couple of things:

What are we doing from a process point of view on all those areas I just talked about that are inefficient and affect how we might care for patients? Because in the literature as well as I think other folks’ experiences with this is that there is a relationship with processes that need to be fixed, efficiency, and this concept of value.

If you fix those processes, you can actually make it more efficient. You get more patient satisfaction, more provider satisfaction, you make the care less costly, and you provide greater value. What we want to do is move in that direction, and there’s components of that that can be addressed specifically, but at the same time make sure that we still maintain the high quality of care that we deliver.

Thankfully, our faculty and staff won’t let us do otherwise. That’s a really good thing. That’s a wall that we will never cross, because folks won’t put up with that.

We have to figure out what’s the right way, within MD Anderson and the culture of our faculty and staff, to move forward in a way that helps us change some of our processes to become more efficient and less costly, and I think that will also have a positive effect in our networks, insurers, how we face and treat insurers on the government side.

I think all those issues have come to face us as an institution, and you can argue about the rightness or wrongness of a big bang Epic install, but it did allow us to look at these things.

The great news is there is a lot of interest, by the faculty in particular, but also the staff, to ask where are we seeing these inefficiencies, where are we seeing these challenges that we have to address?

I asked faculty and staff to send me emails, when you see things about charge capture, that inefficient processes, where there might be waits. We’re trying to collect those and address those not just at the 18th and 20th floor, but throughout the organization.

Is it going to happen in two weeks? No.

This is a long-term project, and, Paul, I think we’re thinking one to two to three to five years to get to that value proposition.

I’m convinced we have the quality side of things. That I’m convinced about in terms of the labor of care, but it’s the other side of the equation that is counting in the current environment.

Sorry for the longwinded answer.

 

PG:

What are the targets now in terms of financials? There was a point where I was told early on this year that you will end the year in the black. I don’t think anybody’s saying that. Now the word is that it’s going to be in the black for months, during, by the end of the year. How much do you expect to lose? How long can this go on? What are your thoughts on the projections?

SH:

We set a budget, you probably know this, of a positive margin at the end of the year of $25 million. As you know—our financials are public record—so we had a very good January, and our current negative margin variance was reduced substantially, because of our positive margin in the month of January.

Some of that, as you know, is due to the Medicare true-up that we have, but, in fact, if you took that away, we still had a positive operating margin, I think around, and you can check these numbers, Paul, and sorry, but I think around $26 million dollars was left if you took away the Medicare. Something in that range. I took a great deal of hope from that.

We reduced our operating loss year to date from $169.4 million to $77.3 million. It’s a good-news story. Medicare was about $63.4 million of that, so the positive variance we still accounted for was somewhere around a $28.7 million.

We have been holding the line on expenses, and we expect to continue to see the benefit of expense reduction moving forward.

In fact, we haven’t seen the full force of our expense reduction that we’ve been going through. In February, so far, it looks like our clinical activity has been holding as well.

Only time will tell, but the message, and I think the truth of this, is that we have to continue to pay attention to allowing the patients who are appropriate to come to MD Anderson to come through the door, to do the appropriate assessment.

I really don’t want the message to the faculty to be: “Make money. Make money. Make money.” I want, “What’s best for our patients? What’s best for taking care of them? Let’s be careful about what we spend. Let’s be prudent about the way that we approach our operations so that we can be more efficient, but at the same time deliver high-quality care and be very patient-centric,” and I’m convinced if we make it easy for the patients who are appropriate to come through the door to come to MD Anderson that we will continue to have positive operating margins.

I don’t have a crystal ball about February, March, April, but I think it’s trending in the right direction.

 

PG:

You may actually end up with the year in the black?

SH:

We could. We could. Steve Hahn’s not making that prediction. That’s for sure, Paul, but I’m encouraged by what we’re seeing.

Listen, I’m glad to have an ongoing conversation with you about this.

 

PG:

In terms of cuts, which projects do you see staying and which of them might be going away? Which parts of MD Anderson need to be rethought?

SH:

The one mistake I am not going to make is making that a top-down decision, and my good friend and colleague Julie Izzo says this all the time, and that has to be a shared governance recommendation to the president.

I think what we have to say is the following: What is sort of sacred that we can’t touch? That is delivering high quality care to our patients and our mission to cure cancer. That has to be our relentless focus moving forward.

Everything else that surrounds that, and even some components that go into that from an efficiency point of view, in my opinion is on the table. We ought to have a discussion about what are those things that we need to perform the mission I just described, and what are the things that aren’t necessary?

Paul, I’m convinced that over the next couple of months, when we have these discussions, when we uncover more of the processes that we need to change, it’s going to become very apparent to us what we need and what we don’t need.

My guess is it’s going to be extremely non-controversial about what programs need to get to be cut, because I’m seeing people rally around the fact that we can’t spend money on things that don’t help us with our core mission.

 

PG:

I wouldn’t presume to suggest any cuts, but what about something like the Moon Shots, or Institute for Applied Cancer Science—drug discovery?

SH:

Again, I think, everything needs to be discussed. You might have seen the chancellor’s comments regarding innovation and high-risk/high-reward. I’m not suggesting that that should be the mission.

What I’m suggesting is that there may be areas that we, as shared governance, are going to recommend to Ron that we continue to look at as an investment in our future, so that we can continue our mission of curing cancer.

I think, again, we need total engagement and total transparency around what’s being spent where.

We need everyone to have a voice around it and we need to have that discussion and not just I want to be secretive, but we have to be able to have an open discussion behind closed doors as a shared governance. That includes Faculty Senate, administration, and division heads, department heads. We have to have that conversation, and then we have to decide what are our priorities and what are we going to spend money on.

It might be that Program X, we decide that the juice isn’t worth the squeeze, that we really shouldn’t be putting money into that. But I think it’s premature for suddenly me to say that and I don’t want to dictate that to the institution.

I want this, again, to be a shared governance approach, and the way that the system’s set up that we all agreed upon, is that shared governance will make a recommendation to Ron.

 

PG:

When you say make a recommendation to Ron are you saying just Ron or are you saying also the chancellor? Are there any recommendations that don’t go to both of them?

SH:

The responsibility for the institution solely resides with Ron.

The chancellor has made that clear. It’s the way, I don’t know if it’s in statute or not, but that’s sort of what’s in our shared governance compact, and everybody agrees to that. Faculty senate, not that I speak for them, but we’ve all said this over and over again. Everybody knows those are the rules of the road and the chancellor has not deviated, to my knowledge from that sort of decision making.

 

PG:

But you’re keeping him informed? You go to both of them? Right?

SH:

Yeah. Of course. That’s part of the job, my new job, is to actually keep that information flowing. That’s correct, Paul.

 

PG:

Okay. What’s the most difficult part of the job?

SH:

Seriously? Finding enough time in the day to get it all done.

I’ll tell you what, and I mean this. I sound like such a corny, but I’m a Northeast guy, for goodness sake. I love this place, and I’ll burn a lot of energy trying to make this place the best it can be–in conjunction with my colleagues.

That’s the toughest part, honestly.

 

PG:

I can totally believe it.

SH:

My colleagues here have been so great in terms of voicing their support for moving forward, and I want to give those colleagues a voice is the bottom line.

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