In the Beginning

Ascension emerged at a complicated time in American health care. Organized in 1999, Ascension had sixty-two acute-care hospitals by 2001. That was the year the Institute of Medicine published its eye-opening Crossing the Quality Chasm, which drew attention to disparities in access to quality care in the United States and to the overall mediocrity of care throughout the system, including many unsafe practices.² Quality was the buzzword of the day.

At the same time, Catholic hospitals were also beginning to make an unexpected run on the health-care-delivery market. For-profit hospitals (the number of which increased 46 percent from 2001 to 2011) grabbed the headlines, but Catholic hospitals (the number of which increased 16 percent during that same period) were also making headway. The total number of all other nonprofit hospitals was decreasing, including public hospitals (down 30 percent) and non-Catholic religious hospitals (down 41 percent).³ With its Catholic pedigree and commitment to quality health care for all, Ascension found itself in the sweet spot. Within a year of its founding it had created a tagline that captured the company’s positioning: “Healthcare That Works. Healthcare That Is Safe. Healthcare That Leaves No One Behind, for Life.”

But the fledgling organization had a long way to go. Its future president and CEO, Anthony Tersigni, then serving as Ascension’s COO, envisioned working with his colleagues to create a modern, well-integrated hospital system, but what Ascension actually had was a collection of aging community hospitals. Some were critical-access hospitals—that is, small, government-subsidized, acute-care hospitals located in isolated areas. Others were large city hospitals facing health-care costs rising at twice the rate of inflation. Many had been run by devoted religious women, some for more than a hundred years. These hospitals had no shortage of purpose, but many of them were dying. How to make the transformation to a modern hospital system?

The work fell to a committed team of leaders that included John Doyle, who joined Ascension’s St. Vincent Indiana system in 1996 and later relocated to St. Louis to become chief strategy officer for the newly forming system. Doyle says the first couple of years were daunting, because unlike our Indian exemplars, who mostly built their own hospitals, Ascension had to work with the legacy operations and cultures in the hospitals it had acquired.

“In the beginning, no one knew if we could drive large-scale change through a system or not,” Doyle told us. “What we had was a far-flung organization of sixty-seven hospitals that were still coming to grips with the notion that scale matters, and many weren’t altogether certain that they wanted to be part of a system at all.”⁴

Equally daunting, Doyle didn’t see many examples of effective health-care systems in the United States. What he saw was a lot of waste and inefficiency.

“This country spends a lot of money on health care—$3 trillion a year—and the value really isn’t there, at least on a comparative basis,” says Doyle. “The US spends too much on a per capita basis, and yet many people are excluded. There was a clear understanding that in order for us to fulfill our mission, we had to change things. We had to identify where scale and leverage would make a difference. We had to figure out how to manage what we do well. More fundamentally, we had to figure out in the beginning if there really was potential for something called a ‘health system’ in the United States.” In India, this obstacle did not arise. The health-care market there was underdeveloped, legacy interests were few, and government regulation was light. Narayana, for example, could go from a small cardiac hospital to a full-fledged hospital system in less than ten years. In America, things were different.

Bedsores, Best Practices, and the Bottom Line

Ascension chose a quality initiative for its first exercise in systems management. In 2002, Ascension launched a series of pilot programs whose purpose was twofold: first, to eliminate preventable injuries and deaths, and second, to test the organization’s capacity for system-wide change. “Ascension has been leading with quality since the beginning,” said Dr. David Pryor, the chief clinical officer for Ascension.⁵

“We had to find one brave organization to step up and to say, ‘We’ll take that one on,’” Doyle told us. “We surmised that if we made progress on one of our priorities of action, we could bundle up the learning and move the approach throughout the system, and then we would start behaving more like a system. It is important to note that this inaugural effort was led by the physician staff. Anthony Tersigni set the tone when he made a commitment to the clinical leadership: ‘If you lead,’ he told them, ‘we will follow.’”

The efforts were aimed at eight priorities of action: the safety goals and core measures promulgated by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO, now known as the Joint Commission), preventable mortality, adverse drug events, falls, pressure ulcers, surgical complications, nosocomial infections, and perinatal safety. The initiative required every hospital in the Ascension system to focus on the first three priorities. It then assigned the remaining five priorities to one or two “alpha” sites, where staff developed a set of best practices. Hospitals were encouraged to work with leading organizations like the Institute for Healthcare Improvement (IHI) as they went through their lists.⁶

To determine the best ways to prevent pressure ulcers (bedsores), for example, Ascension worked with experts from IHI and the Wound, Ostomy and Continence Nurses Society (WOCN). Ascension did not have a particular problem with bedsores. At 7.6 percent, its system-wide prevalence was actually a bit below the national average at the time. Rather, Ascension pursued best practices as an exercise in organizational discipline and team building, and to bridge the “quality chasm.” But like our Indian exemplars, Ascension had another motive: cost savings. Bedsores, for example, were expensive, costing US health-care consumers between $2.2 billion and $3.6 billion a year in acute-care settings alone.

Ascension chose as its pressure-ulcer alpha site one of its large hospitals, the 528-bed St. Vincent’s Medical Center (now St. Vincent’s Medical Center Riverside) in Jacksonville, Florida, where the prevalence of pressure ulcers was 5.7 percent, even lower than the system-wide average. The hospital assembled a large, diverse team, including a chief nursing officer, a nurse manager, an educator, a pharmacist, a dietician, two staff nurses, two WOCN registered nurses, a nurse from performance improvement, and a long-term-care nursing educator. That group reviewed available literature on best practices and then met with experts from IHI and WOCN to create a blueprint for change. The outcome was a set of prescribed interventions that were reviewed at weekly meetings attended by nursing directors and managers, clinical-resource coordinators, and unit champions.

The results? The incidence of pressure ulcers at St. Vincent’s dropped 71 percent (to less than one percent) in the seven months from December 2004 to June 2005.⁷ Once success had been demonstrated at the alpha site, the same solution was rolled out to all sixty-seven Ascension acute-care facilities.⁸

“One of the underlying and central lessons learned was that variation was the enemy of quality,” says Doyle. “If our caregivers eliminated variation, performed consistently, we could further improve our ability to deliver outstanding, high-quality, lower-cost care.”

And so it went on down through the checklist, with similar improvements demonstrated for the other seven quality priorities at other alpha sites. Nosocomial (that is, hospital-acquired) infections were cut in half. Birth trauma rates were dropped to or near zero. Falls were reduced by 9.9 percent. By June of 2004, the mortality rate at alpha sites had dropped 21 percent—6 percentage points better than the target and more than three years ahead of schedule. Equally encouraging, said Dr. Pryor, was the speed of implementation across the system.

“In two and a half years we found that together we could accomplish what had been a five-year goal of statistically eliminating preventable injuries and deaths,” he says. “What happened was that when one brave hospital began making progress, its leaders would start talking to the others, and soon Ascension had a viral spread through the organization.”

Cost savings followed soon thereafter, reaffirming an Ascension article of faith. As Rhonda Anderson, the CFO of Ascension’s Healthcare division, put it, “We believe that quality really drives lower costs. The reduction of clinical variation decreases readmission rates and infection rates, which in turn lowers the cost of health care.”⁹ The quality improvements also reduced Ascension’s risk ratings, which brought down the organization’s insurance costs by about $60 million a year.

Cost Innovations, All Systems Go

The success of the quality initiative buoyed the organization, and the associated cost savings came at a good time, as health-care costs were rising again.

“This early success energized us,” Doyle said. “Ascension started to think about how fragmented other aspects of our operations were, like our supply chain and our ability to care for our equipment.”

Having primed the pump with the quality initiative, Ascension began a ten-year effort to transform the hospital system, pursuing strategies of centralization, standardization, and group purchasing that allowed it to streamline operations and maximize economies of scale. By 2014, Ascension’s efforts had made a sizeable dent in the company’s annual $4.5 billion nonpayroll operations budget.

Take purchasing, for example. In a 2010 review of its purchasing strategy, Ascension concluded that it didn’t really have an effective purchasing strategy at all. Most of its hospitals were still buying from their own legacy suppliers, with whom they had little leverage. In food and environmental support services alone, for example, $400 million a year was going to more than a hundred different contracts. It didn’t make sense to Scott Caldwell, CEO of the Resource Group, an Ascension subsidiary that had been created to tackle supply-chain problems like these.

“In our industry, a significant percentage of hospitals end the year with zero profit from operations while many vendors are making between 10–20 percent net profit,” Caldwell has said.¹⁰ “[This] creates a dynamic where the sellers of products and services, in terms of sheer financial size after years of double-digit profits, are significantly larger than the hospitals buying from them.”

Caldwell calculated that Ascension could save between 10 percent and 15 percent a year by aggregating all of those contracts and negotiating from the strength of the combined operation. And he was right. Over the next two years, the Resource Group so convincingly earned its keep that Ascension decided to let it offer its purchasing expertise to all comers. In 2017, the Resource Group was overseeing a supply hub in Singapore and sourcing widely in Europe, and had become the second-largest health-care supply-chain-management company in the United States, with 2,500 participants. The savings to Ascension in supplies alone totaled $896 million a year: $676 million in supplies and $220 million in other nonpayroll expenses.

Ascension also began centralizing functions such as human resources, payroll, travel services, and finance under the Ascension Ministry Service Center in Indianapolis. “One Ascension,” they called the new strategy, but the integration was easier said than done. For example, it took more than four years to move Ascension’s then 131-hospital network to a single inventory-management system that used scannable bar codes.¹¹

Ascension pursued efficiencies like these in every corner of its operations, leveraging its expertise as well as its national influence. For example, it convened doctors’ councils to evaluate the quality of available surgical implants, and then leveraged its size to purchase the devices at the best price. It also pursued process innovations that resulted in cost savings.

Another interesting example was Ascension’s approach to equipment maintenance. Ascension expanded an in-house service group at one of its hospitals into a full-service maintenance company called TriMedx, which then offered its services to all of Ascension’s member hospitals, making it possible to increase the useful lives of the hospital group’s medical devices and machines. TriMedx was so successful that Ascension spun it off as an independent for-profit enterprise, which in 2017 had 1,800 clients in twenty-eight states.

From the Indian perspective, Ascension’s cost-cutting measures hardly seem radical, more like Business 101. But in the context of legacy American health-care systems, they were steps in the right direction—aimed at fairly obvious, low-stakes areas in which significant amounts of money could nonetheless be saved. Doyle noted that by 2017 Ascension’s cost structure, relative to that of other health-care organizations, ranged from very competitive to near the top of the class.

“Ascension’s supply costs are 16 percent of total revenues,” Doyle told us. “That includes pharmaceuticals, even with the runaway inflation and aggressive pricing in the pharmaceutical industry. And our biomedical costs [i.e., equipment costs] are among the best in the country.”

Serving the Poor and the Uninsured

As in the Indian cases, Ascension’s cost-saving measures supported in very concrete ways the organization’s mission to serve the poor. From its inception, Ascension spent about 3 percent of its revenues on direct charity care, a figure that was about average for the industry and which pretty much covered the need. But by 2009, just as health-care costs were rising for hospitals, insurance costs were skyrocketing for patients, to the point of unaffordability. In that year, the percentage of uninsured in the United States reached 15.7 percent, or nearly fifty million people.

The Affordable Care Act of 2010 helped drop the uninsured rate to 9.1 percent by 2015, but it also contributed to a 67 percent rise in deductibles during the same period. According to the Kaiser Family Foundation, more than half of all workers with individual coverage in 2016 had a deductible of at least $1,000. Workers in small firms actually fared worse. Overall, the percentage of workers in high-deductible plans had jumped to 29 percent from 20 percent two years earlier.¹²

The health-care landscape was looking more like that of India every day, and at Ascension, the consequences were plain to see. “We were finding that people would forgo care because they couldn’t afford the deductible,” Rhonda Anderson told us. “But providing care for the poor and the vulnerable is a common good. We have an obligation to carry out and sustain our mission in ways that do not perpetuate the marginalization of the poor.”

Ascension’s solution was to waive insurance deductibles and unpaid bills at all of its hospitals for patients earning less than 250 percent of the poverty level, and provide some level of financial support to patients earning up to 400 percent of the poverty level. The new policy added to Ascension’s costs of providing relief to the poor.¹³ Ascension also used cost savings to support a wide range of “community outreach” programs, such as free health-screening events in many of its communities. Ascension’s outreach funds, which totaled about $500 million in 2016, supported everything from clothing drives to housing initiatives. In Detroit, its St. John Providence Hospital launched a program to improve job retention and eliminate health-care inequalities. In Mobile, Ascension’s Providence Hospital partnered with a local food bank and supported community gardens. And in Baltimore, Saint Agnes Hospital began building a mixed-use community with living space for grandparents raising grandchildren.

“We are always looking for ways to improve the quality of life in our communities,” Anderson says. “Our mission goes back hundreds of years: providing care for the poor and the vulnerable. It’s part of Catholic social teaching.”

The Passage to India

In 2009, John Doyle finally found the full-blown health-care model that Ascension was looking for, and he didn’t find it in the United States. He found it in India.

Ascension’s president and CEO, Anthony Tersigni, had recently returned from a business trip to Grand Cayman with some interesting news: an Indian health-care company called Narayana Health was planning to build a medical complex on the Caribbean island, about 450 miles from Miami. The Indian group was calling it Health City Cayman Islands (HCCI), and was talking about building a hospital, a medical school, and assisted-living facilities. Care was going to be first-rate, and prices would be a fraction of those charged in American hospitals. Tersigni asked Doyle and his team to find out more about it.

Doyle tracked down Narayana’s founder and chairman, Devi Shetty (see chapter 4). Not surprisingly, Doyle and Shetty hit it off right away.

“We bonded based on the values of our organizations,” Doyle remembers. “Both organizations have concern for the poor and vulnerable, and we both feel compelled to make services available to people in need regardless of their ability to pay, understanding the obvious difficulties of providing health care for all in a high-cost environment.”

Shetty invited Doyle to come to India to see what Narayana had done there. “It was a life-changing experience,” said Doyle, who at the time was serving as Ascension’s general manager for transformation services. “It affirmed what Ascension’s leaders had been saying for years—that if you want to see new forms of innovation, you need to talk to new people. If you keep talking to the same people, you’ll keep getting the same answers. Similarly, if you want to find solutions, you have to look in places where there are extreme challenges. Places like India. As an organization, we had been pushing ourselves to be in places that are not usual for us, to find new people to collaborate with and new ideas that might work for us.”

Shetty and Doyle immediately began sharing innovations. Narayana signed on with TriMedx, Ascension’s medical-equipment-servicing company, and Ascension began testing iKare, Narayana’s bedside clinical decision-support software. Ascension began sending physicians and administrators on trips to Bangalore, where Narayana had an open-door practice-sharing policy, to see what practices could be brought back to the United States. And in 2012, Narayana and Ascension signed a partnership agreement to build Health City Cayman Islands.

The partnership called for a $40 million equity investment split between Ascension and Narayana. For Ascension, it was a big opportunity to partner with and learn from a reputable health-care provider. The learning came fast. Accustomed to hospital construction costs in the United States, which then ranged from $1 to $2 million per bed, Ascension was interested to learn that Narayana expected to build a 104-bed hospital on Grand Cayman, an island with no native building materials, at only $700,000 per bed. Ascension spent about $1 billion on buildings each year and was looking for lessons in capex frugality, so the organization sent its building-management team to Cayman to watch and learn from the building operation there, starting from the ground up.

“That hospital building is the very model of efficiency,” Doyle says. “Built to purpose, highly functional, and bright, it feels like a healing environment, and it does what it’s supposed to do at half the cost we would pay here in the US. Dr. Shetty would say, ‘John, we start every project as if we’re poor and we’re broke—because we are!’ And every time he says that, I’m chagrined, because at Ascension we start every project like the $20 billion company that we are, and [encounter] all of the complexities that that implies. What Narayana offers is a mirror for an organization like Ascension.”

Over the following few years, Ascension institutionalized the reverse-innovation process, assigning a full-time staff person to oversee the transfer of knowledge and sending more than a hundred people—doctors, administrators, and support staff—to Bangalore and Grand Cayman to see the Indian operation firsthand. By 2017, openness to new ideas, even foreign ideas, was becoming part of Ascension’s DNA and leadership training.

“We hunger for innovation,” Doyle told us. “We know we have to transform, and we believe ideas come from all kinds of places. When you see how people are being cared for at Narayana and having great outcomes, it opens your mind to another set of possibilities.”

Chasing Value

Like the Indian exemplars, Ascension was an enterprise with a social heart and a business brain, and it was making its way toward value-based health care. Having laid the foundation in 2001, Tersigni and Ascension were ready to undertake new experiments to realize the vision of transforming US health care.

“We know that many of our communities struggle with the rising cost of health care,” Anderson told us, “so we have to be on the cutting edge of new and inventive ways to manage the health-care dollar while providing quality care.”

In 2015, Patricia Maryland, then Ascension’s president of health-care operations and chief operating officer, led an initiative to identify “value-creation opportunities” to maximize economies of scale and improve quality of care. Maryland asked hospitals in several different markets to come up with a list of best practices in six areas of operation: facilities, clinical-process reliability, revenue cycle, physician-enterprise optimization, labor optimization, and IT optimization. The idea was to standardize those operations across the system and save the company $5.2 billion over five years.

Like Ascension’s earlier quality initiatives, this value-creation effort exceeded targets, saving $78 million more than expected in the first year. Encouraged, Maryland expanded the scope of the initiative to five more, patient-centered areas: physician’s practice, behavioral health, cardiology, oncology, and orthopedics.¹⁴ Maryland’s work was fast-tracked, and in July 2017 she was promoted to CEO of Ascension Healthcare.

This value orientation reflected the priority of Ascension’s president, Anthony Tersigni. Long a proponent of affordable, high-quality, and accessible health care, Tersigni advocated for continued access to such care after the 2016 elections, taking his case directly to the transition team of incoming President Donald Trump. Chief among his proposals for bipartisan action was the goal to “accelerate the transformation of the health system from one that rewards volume to one that rewards value, which is necessary for reducing our system’s unsustainable costs.”¹⁵ That same year, as the company was looking hard at various bundled-pricing options, Tersigni announced a goal of having 75 percent of Ascension’s business operating under value-based payment arrangements by 2020.

As Tersigni took an increasingly public role in the American health-care debate, Ascension continued to make its health-care solutions available to other health systems through traditional information sharing in the press and at professional events, and through its many for-profit subsidiaries (such as the Resource Group) and spin-offs (such as TriMedx). Ascension also ramped up the work of its venture-capital subsidiary, Ascension Ventures, which in 2016 managed more than $800 million for a group of fifteen limited partners, all nonprofit health networks committed to providing care for the poor and vulnerable. The fund invested in biomedical and health-care-delivery companies, mostly startups, and shared the portfolio’s research and innovations across the fund’s partner base. The portfolio included such companies as ISTO Technologies, which used bone-regeneration technologies to rebuild aging knees and spines; Neurolutions, which developed brain-controlled devices to help stroke victims; and Atigeo, a big-data analytics company.

“Early on, the idea of a venture-capital fund inside a faith-based organization drew a lot of skepticism,” said Doyle, who helped launch Ascension Ventures and who today is the president and CEO of Ascension Holdings and Ascension Holdings International. “But today Ascension Ventures is in the fourth funding and it currently demonstrates excellent performance on the financial side. The fund stimulates innovations that we think are important to the future. We see trends and solutions before others do, and we share them with our partners. Any initial skepticism has been replaced by enthusiasm, because it really does bring value to the organization.”

“Matt Hermann, managing director of Ascension Ventures, under the leadership of Tony Speranzo, Ascension’s chief financial officer, has created an incredible asset for our organization, partners, and health care more broadly to foster true innovation and development of new solutions for the future,” said Tersigni.¹⁶

Still, like the four Sisters of Charity who struck out for Missouri in 1828, Ascension remains dedicated to Christ’s call to a healing ministry that serves the poor and vulnerable, all and everywhere. A prayer, a wagon, a venture-capital fund—whatever it takes.

There is good evidence that Ascension has not let the good sisters down. In 2016, the Vatican asked Tersigni, who was the president of the International Confederation of Catholic Health Care Institutions, to help organize an International Conference on Global Health Disparities in 2017 at the Vatican. Tersigni considered this whole-new-world request, and humbly accepted the call.

In the next chapter, we turn to the challenge of improving quality, and how innovative thinking reinvented practices in a hospital called Iora Health.