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Essentia CEO seeks to address health costs, disparities

Dr. David Herman, CEO of Essentia Health and a Duluth opthalmologist, checks the pressure of patient Tara Eineichner’s eyes recently. Herman, an International Falls native, took over as CEO in January 2015. (Bob King / rking@duluthnews.com)1 / 2
Dr. David Herman, CEO of Essentia Health. (Bob King / rking@duluthnews.com)2 / 2

Dr. David Herman pointed to a multicolored graphic on the Smart Board in his spacious corner office in Essentia Health’s Miller-Dwan Building, with windows on two sides facing north and east.

The graphic, part of the St. Louis County Health Status Report prepared by the county’s Public Health and Human Services Department in 2010, shows a map of Duluth, with sections mostly identified by ZIP code.

Colored bright red, “Zone D” combines ZIP codes 55802 — downtown, the lower Central HIllside and Park Point — and 55806 — from Lake Avenue west through Observation Hill and Lincoln Park.

An accompanying chart shows the life expectancy for people living in Zone D: 73-74.5 years.

He pointed to the adjacent 55812 ZIP code.

“So I can stand here and look toward London Road, and their life expectancy is 83-85,” he said. “So — 10-year-difference in life expectancy in one community. … Isn’t that amazing? And unless you see it, you don’t recognize that right where you live there’s tremendous opportunities” to bring positive change to the health of the city’s neighborhoods.

An ophthalmologist, Herman is an International Falls native who took over as CEO for Essentia Health and its hospitals and clinics in Minnesota, Wisconsin, North Dakota and Idaho in January 2015. During a recent hourlong interview, he used the word “opportunity” frequently, preferring it to “challenge” or “problem.”

He also used the word “fun” more often than one might expect from the chief executive of a health system that stretches across four states and employs 14,000.

About his choice of majors when he was attending the University of Illinois, Herman said he “found out that the people in physiology seemed to be having more fun than the people in engineering. And if it’s not fun, I’m not coming anymore.”

A youthful-looking 58 with a sly sense of humor and a ready laugh, Herman has made an impression on his counterpart at Duluth’s other hospital.

“He’s a very, very nice man,” said John Strange, CEO of St. Luke’s. “Very smart. He seems dedicated to patients and his employees. He seems like he really, really wants to do a good job for the people of the region.”

In addition to crossing paths with Herman at various social and hospital association functions, the two executives meet quarterly, Strange said. It continues a practice Strange and Herman’s predecessor, Dr. Peter Person, had carried out since 1996.

“It’s good for the two health systems to touch bases,” Strange said.

Terry Hill, senior adviser for rural health leadership at the Duluth-based National Rural Health Resource Center, said he hasn’t yet met Herman but was impressed by an article Herman wrote for Business North.

Herman’s writing indicates he’s on board with the transition of health systems from fees paid for services to being focused more on the overall health of the population they serve, Hill said.

“I was taken by his comments on the importance of … not just treating disease and injuries, but prevention and wellness as well,” Hill said. “He understands the evolution of the health care system. … He recognizes that we’re moving into this era of transparency.”

In the interview with the News Tribune, Herman talked about why he continues to practice as an ophthalmologist, what he sees as the future for Essentia, and the cost of health care, among other topics. What follows is a condensed transcript of that interview.

Q: Why do you continue to work as an ophthalmologist?

A: I love it. I love what I do as the CEO, but I also love the patient care. And I spent a lot of time learning it, and I still learn something every day from my patients and my colleagues. I think that perspective from the CEO side helps me to be a better physician, and I think that physician experience with my patients helps me to be a better CEO.

Q: Are patients ever taken aback to know that it’s the CEO who’s seeing them?

A: Every now and then. Some people say, “How many days do you practice?” I tell them I practice two half-days a month. They say, “Well, you must not be working very hard.” And I say, “Well, maybe not at this, but I have this other part-time job.”

Q: You’ve been CEO for a little more than a year. What has surprised you?

A: I don’t know if I’ve had many surprises. I anticipated when I came here that people did great work here every day and there was great opportunity for that. So that has not been a surprise. If there has been a bit of a surprise, it’s that I don’t know if this region understands the great medical care they can get here in this region. There aren’t very many communities like Duluth that have the diversity of medical care and the level of medical care that people can get here. I think people kind of take it for granted.

Q: For a while, Essentia seemed to be in expansion mode, but that appears to have slowed in the past year or so. What do you see as the future for Essentia?

A: I think there’ll be more consolidation in health care in general. I think there’s a tremendous amount of infrastructure that’s required to provide health care, much more than there was even 15 years ago. And having the ability to share that infrastructure for many health care systems and for many smaller hospitals and clinics provides their ability to continue to provide great care. So I think there will continue to be consolidation, and we’ll continue to get larger, I would imagine. But there’s a life cycle to everything. Our focus right now is to become a very, very tight system, with the consolidation and the partnerships that we formed over the previous five to 10 years.

Q: What do you mean by “very, very tight system”?

A: We now have our electronic health record across all of our facilities, and we’re spreading that out to facilities that we partner with, facilities that we don’t own, to help knit together that care. We are working together diligently to make sure that every place that we provide service, that that service is uniform and high-quality. Our goal right now is to become the health care provider of choice and the employer of choice. And so we’re focusing on that rather than on getting bigger.

Q: What are your concerns about health care costs, and what can be done about them?

A: I graduated from medical school 32 years ago this year. And I can remember conversations as far back as the 1990s, when we were spending 12 percent of the gross domestic product on health care and saying this is not sustainable. And now we’re in 2016 (and) we’re spending about 18 percent of gross domestic product on health care — over $9,000 for every man, woman and child in the United States. And that’s money that could otherwise be spent on education, infrastructure, job creation. I don’t think we have the resources long-term as a country to wait until people get ill before we apply our knowledge as a country, as a community, as a health care provider.

It’s much better for everybody to be healthy than to have great health care.

And so I believe our path to competitiveness, our path to better, more stable communities, healthier communities, growing and prosperous communities, is through better health.

And those of us at Essentia Health can’t wait until someone walks into our office or into our emergency rooms or into our hospitals. We have to build those partnerships. I believe health should be part of the policy of every community in America. And we’re willing to work and make investments in those communities to help pave the way.

Q: With the aging of the population, there’s still going to be a lot of people needing that medical care.

A: There will. There’s a lot of things that we can work with our community members to help them age independently and age in a more healthy manner. If you’re 85 years old and you can maintain your balance and your flexibility, your likelihood of a fall is much less.

Q: Are there other practical, specific ideas you have as to how we can invest in the health of our communities?

A: There are several different things that we’re doing that invest in the health in our communities. We give about 450,000 hours of teaching at our campuses across our footprint to the health care providers of the future, whether they’re nurses or physicians or radiography techs, physical therapists. So that’s an investment in the future. We provide grants from our foundation to communities for health reasons. In our central region around Brainerd, we’re part of the coalition called Crow Wing Energized, where we pulled together members of the community and talked about how do we make our communities healthier. The focus of their work last year and this year is on diabetes within the community. How do we help people lose weight? How do we help people more carefully watch their blood sugar?

Q: Do you have any thoughts on prescription drug prices?

A: Our fastest-growing part of our budget this last year has been in prescription drug costs. They all have terrific benefit, but are they affordable? And so we’re working very, very hard, number one, to make sure we’re utilizing those medications correctly. Number two, how do we help our patients adhere to their treatment plans so they’re using the medications effectively? There’s nothing worse that I can think of then spending the money on the medication and not taking it effectively so you can’t get the benefit of it. And then making sure that our patients are aware of the other choices. Diabetes is a good example. Some of the new diabetic drugs, although very, very effective, are very, very expensive, and have side effects. Now, if I could help Mr. Johnson lose 60 pounds so he doesn’t need that medication, that’s a much better outcome for all of us, except perhaps for the drug company.

And I’ll be honest, when we work closely with pharmaceutical providers, they’re willing to help people get off the medications as well.

Q: Could you talk about the approach of area providers to opioids?

A: We recognize that there are dangers to opioids that we didn’t recognize before and that we’re part of the problem in the opioids that we prescribe, and we have to be part of the solution to that as well. And I’m very proud of the way that the providers in the communities that we serve, regardless of their employment or affiliation, are working together on the common goal to reduce the danger that we have with it right now and to reduce the likelihood of addictions and the health effects in the future.

Q: How would you describe your leadership style?

A: I think I am fairly transparent. I’m approachable. I believe that we have 14,000 leaders in Essentia Health, and if we provide them the tools and invite them to lead along with us, they will. So our goals are that we identify the leadership ability in each one of us and then leverage that. My proudest moments are when I can watch the people around me use their responsibility and their accountability to succeed and make really positive differences in the communities that we serve.

I also think it’s one of my roles to share the opportunities that we have to get better, the challenges that we have to better serve our communities, but then I also have the great privilege of sharing the great things that happen here all the time.

Q: When are you going to make parking in the Essentia ramps free?

A: They are almost free. It’s $2 a day. I wouldn’t want people parking in our parking ramps rather than using the meters just because they were free.

I would rather have fewer parking ramps. I’d rather have more green space and fewer parking ramps. But we serve a rural area. If we were in New York City, it would be easy to take the subway or take a cab to get here.

It’s $20,000 per parking space to build a parking ramp. And the maintenance on a parking ramp is incredibly expensive as well. So the amount that we charge does not in any way defer the cost of that parking ramp. It’s certainly not a revenue center for us here. Part of the reason we charge $2 is we want people to know there’s a value to having that.

Q: Do you have anything to add?

A: I think we’re all very fortunate to live where we live. We have tremendous schools, tremendous neighbors, tremendous opportunities here. I’ll tell you what bothers me is when people say it’s only Duluth. It’s not only Duluth. I just spent a few days in San Francisco with the American Board of Ophthalmology. And San Francisco is like Duluth, but you can’t get around in San Francisco.

(Regarding disparities) How do we help the people who are in Zone D do as well as the people in the 55812 ZIP code? And it’s not about building another clinic. It’s about better education to prepare for the jobs that are there to make sure they can make a living wage. If we want to make health better in the United States there’s a lot of work we can do here on the Essentia Health campus to be better and less expensive and more affordable and safer and higher quality — no question. But there’s a lot of stuff we can do as communities to make it better as well.

Dr. David Herman

As CEO of Essentia Health, Dr. David Herman oversees 68 clinics, 15 hospitals and 14,000 employees who care for patients in Minnesota, Wisconsin, North Dakota and Idaho.

Before coming to Essentia in January 2015, he was CEO of Vidant Health in eastern North Carolina. An ophthalmologist, he has served at the National Eye Institute in Bethesda, Md., and practiced and taught at the Mayo Clinic in Rochester, Minn., from 1988-2011. 

He earned his medical degree at the Mayo Medical School and completed his residency in ophthalmology at the Mayo School of Graduate Medical Education. He earned his undergraduate degree at the University of Illinois.

But Herman attaches a great deal of importance to his first two years of college — at Rainy River Community College in his hometown of International Falls.

“Phenomenal education,” Herman said of the two-year school. “I went from Rainy River Community College to the University of Illinois to upper-level classes there and did not miss a step. … As a matter of fact, I tutored math my second semester of my junior year from the calculus and differential equations that I learned at Rainy River Community College.”

He’s an unabashed booster of community colleges.

“It’s the best deal in the world,” Herman said.

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