Today, Lloyd Dean is the face of a huge 140 hospital system that has struggled to find its footing since the merger in 2019.
About two decades ago, he led the previous version of CommonSpirit Health through similar challenges. Dean took over at the helm of the Catholic company Healthcare West, which ran out of money after its soaring growth.
Other leaders would cut jobs to stop losses, but Dean brought in a new leadership team and, importantly, a long-term vision so people could see beyond short-term losses, recalled Mary Jo Potter, a member of the Catholic health organization. The Western Search Committee, which selected Dean as CEO back in 2000.
Catholic Healthcare West later became Dignity Health, which in 2019 merged with Catholic Health Initiatives to form CommonSpirit, a giant system currently CEO of Dean, operating in 21 states and generating $ 33 billion in revenue.
“I think Lloyd, after going through this several times, exuded a level of comfort and confidence in the major changes that helped the organization get through these changes,” said Potter, managing director of Healthcare Angels, a Gulf angel investor.
When Dean, 71, announced plans to retire in the summer of 2022 on Tuesday, analysts and others said it made sense given CommonSpirit appears to be more financially stable. It lost hundreds of millions in its first two years as a system, but managed to post an operating margin of 3% in its most recent annualized financial statements.
“He wasted a lot of time,” said Sister Carol Keehan, a former CEO of the Catholic Health Association who has worked closely with Dean over the years. “He paid his dues and I know he won’t do that until he feels the ship is moving better.”
Not only that, the system is halfway towards its goal of cutting costs by $ 2 billion in four years, Dean said in an interview with Modern Healthcare. He said CommonSpirit also hit admission, earnings and payer rates. And this happened during the most difficult periods of the COVID-19 pandemic.
“I think it’s nothing more than,“ Hey, I watched the largest merger we have ever seen in the healthcare industry. I am at that age and in a place where it is time to go into the sunset “and leave the organization in good hands,” said Kevin Holloran, senior director of Fitch Ratings.
If Dean had been 10 years younger, Tom Jella, chairman of the Korn Ferry Health Service, said he would be surprised at his retirement. But given the ages of Dean and Kevin Lofton, the former CommonSpirit co-CEO who retired in 2020, none of these departures came as a surprise, Jella said.
“He, I think, wanted to create one management team and do the consolidation that you are doing in the first 18 months,” Gella said, “so that when the new CEO comes in, there’s a tough integration going on.”
The Chicago-based system’s board of trustees has already begun the process of seeking Dean’s successor.
Whether pandemic or not, several health executives have announced retirements since the beginning of the crisis, which has put an unprecedented strain on hospitals. These include Jim Hinton of Baylor Scott & White, Sarah Crevance of Sutter Health, Dr. Penny Wheeler of Allina Health, and Debbie Austin of Acadia Healthcare.
Much has changed since the beginning of 2020, and a time for a leadership change may come in the coming years, said Susie Desai, senior director of S&P Global Ratings and sector leader for the nonprofit healthcare group.
In the case of CommonSpirit, there is certainly a lot of work to be done, but management has made progress in integration and efficiency gains, Desai said.
“I think a lot of good groundwork and groundwork has been laid to move them forward,” she said, adding that rating agencies such as the S&P always want to understand how this improvement will continue.
Finances are improving
CommonSpirit’s fiscal year 2021, which ended June 30, was its most successful. The nonprofit system recorded an operating profit of $ 998 million on more than $ 33 billion in revenue, representing a 3% margin. However, without federal incentive subsidies, the system’s operating margin would have been only 1%.
This is still a notable improvement over CommonSpirit’s operating loss of $ 602 million in fiscal 2019, its first year as a combined system, with a margin of almost -3%. The system lost $ 550 million in operations in FY2020 – a 2% margin – and would have lost a lot more if it weren’t for $ 826 million in federal stimulus subsidies.
“I think we have met or exceeded the financial goals we set for the organization without exception,” Dean said. “I have to mention that we were able to do this in one of the most difficult conditions this country has ever seen.”
Part of the struggle from the start has been that CHI has suffered hundreds of millions of losses in each of the last few years leading up to the merger, while Dignity has been more stable. Board minutes show that Dignity’s leaders were worried about CHI’s finances.
Dean said the initial CommonSpirit credit ratings reflect this uncertainty. He added that all three rating agencies are currently reviewing CommonSpirit, and he expects the ratings to rise next year.
Not only that, the two systems had different management styles, with Dignity being centralized and CHI being largely led by local markets. Dean said that instead of choosing one, CommonSpirit leaders centralized 15 functions at the national level, while relying on divisional leaders.
“We are a fully integrated organization,” he said. “We’re not just a collection of geographic regions.”
Selected CommonSpirit markets still retain their legacy Dignity and CHI branding. The idea is to take advantage of brand equity systems like CHI St. Luke’s and CHI Franciscan in their respective regions. He views CommonSpirit as the “home of brands.”
“Perhaps one day we will move to a single brand, but this is not currently planned,” he said.
Fitch’s Halloran added that rebranding is a very expensive and time-consuming process. He was working for Henry Ford Health System when it was renamed the system. He said the transition was deliberately gradual.
Commitment to justice
When the search committee at Catholic Healthcare West was considering CEO candidates, Dean was not initially the top candidate because they needed someone with a lot of hospital experience.
Although he came from Advocate Health Care, Dean previously worked for a pharmaceutical company. Prior to that, he was a high school teacher, paralegal and local television presenter.
“But when we met him, we decided he was the leader we needed,” Potter said. “We realized that we wanted to be mistaken in the direction of leadership qualities, and not the traditional characteristics of the resume.”
Since then, Dean has become a well-known name in the healthcare industry, considered by many to be a visionary leader. He made health equity, affordability and access to the fundamentals of his career.
He also became one of the highest paid nonprofit health care leaders in the country, receiving $ 16.7 million in total compensation for the year ended June 30, 2020. In addition, he has held lucrative corporate board positions, including at Navigant. Consulting, McDonald’s Corp. and Wells Fargo & Co.
The mere presence of a black man or woman in leadership positions in health care was even less prevalent in 2000 than it is now, Potter said, and the fact that Dean and Lofton ran large systems for both years opened the door for other minority leaders. …
“I think both of their leaders have helped the entire dynamic of the industry,” she said. “Having such talented, tone-setting leaders just made a big difference to other candidates moving up the ranks.”
Dean said his commitment to diversity and fairness runs throughout his work at CommonSpirit. The system recently teamed up with Morehouse School of Medicine to provide $ 100 million over 10 years to increase the number of black doctors.
Dean also worked with the Obama administration to pass the Affordable Care Act. He said he has made Dignity one of California’s top Medicaid providers.
Dean grew up in Muskegon, Michigan and was the second oldest of nine children. He is a first-generation college graduate with a BA in Sociology and an MA in Educational Management from Western Michigan University at Kalamazoo and an honorary doctorate in Human Writing from the University of San Francisco.
From his early days with the poverty-stricken Catholic West of health care, avoiding the “bloodbath”, to his current work on CommonSpirit, Dean has earned a reputation as an “incredible leader,” Keehan says. He also understands health inequities, she said.
“He is the endless voice of everyone’s dignity and responsibility, which we must always be aggressive in pursuing this,” Keehan said.