Meeting

CEO Speaker Series with Robert Grossman: Leadership in Healthcare

Thursday, May 23, 2019
A nurse at the newly constructed Kaiser Permanente San Diego Medical Center. Mike Blake/Reuters
Speaker
Robert I. Grossman

Saul J. Farber Dean and Chief Executive Officer, NYU Langone Health

Presider

President, Council on Foreign Relations; @RichardHaass

When Dr. Robert Grossman was named dean and chief executive officer of NYU Langone Health in 2007, the organization faced an operating loss of $120 million. Twelve years later, NYU Langone is a profitable institution with a top-ranked medical school poised to offer free tuition to all students. Please join Robert Grossman as he discusses his business strategy and lessons learned from leading a large healthcare organization.

The CEO Speaker Series is a unique forum for leading global CEOs to share their insights on issues at the center of commerce and foreign policy, and to discuss the changing role of business globally.

HAASS: Well, good morning. Welcome to the Council on Foreign Relations. We are going to show that our agenda is not simply NATO. (Laughter.) We used to describe the course in school about the basic history and philosophy course from NATO to Plato. Today it’s from NATO to platelets. (Laughter.) I’ve not been sitting on that for hours, by the way. I just—(laughter)—I just thought that, as you could tell. Not a lot of thought. 

So this morning we’re fortunate enough to have Dr. Robert Grossman. As we say in my family, he’s a real doctor—(laughter)—none of this Ph.D. stuff. This is—this is the real—he’s the guy you call when you—me, you take a couple of aspirin. He is the Saul J. Farber dean and CEO of NYU Langone Health; and we will get into it, but overseas both the hospital as well as the medical school, which is not, shall we—we’ll see, is always the case. 

You’re a radiologist, though, by training? 

GROSSMAN: Correct, a neuroradiologist. 

HAASS: And is radiology—at the risk of going in a slight detour, should radiologists be worried about artificial intelligence? Because I keep reading that people using AI are better at reading MRIs than the rest and x-rays than people without using AI. 

GROSSMAN: Well, I’m going to answer the question in a slightly different way. The people who—radiologists shouldn’t be afraid of that. Actually, it’s an important tool. It can give you a second reading in mammography. And with AI it’s about the sensitivity and making it—using AI to help screen patients. 

But the people who should be really worried about it are equipment manufacturers because—and this is a little inside baseball—but the way images are formed in MRI or CT has to do with putting data in something called k-space and then doing a mathematical manipulation to get an image. AI enables you to put in data into k-space four to ten times faster than the way it’s currently done. So imaging could be accelerated by 4X to 10X, which would mean you need less scanners. 

HAASS: Does that mean that the next time one would have to go into an MRI it would just take minutes rather than— 

GROSSMAN: Yeah, exactly. 

HAASS: Fantastic. 

GROSSMAN: So that’s—if you want to talk about artificial intelligence with respect to imaging, it’s about accelerating scanning speed as opposed to taking jobs from radiologists. 

HAASS: So more of us can get scanned more often. That’s a—(laughter)— 

GROSSMAN: Or Siemens will sell—Siemens will sell less MRI machines. 

HAASS: OK. Short Siemens in that case. 

GROSSMAN: Right, exactly. (Laughter.) 

HAASS: I’m already in trouble. This is on the record. I will—I will try to conduct myself accordingly. 

I see Bill Haseltine here. I learned about this through the book World Class, and said I would love to have Dr. Grossman here because I got acquainted with what he accomplished and I thought it’s an extraordinary case study—indeed, Harvard Business School beat me to the punch; they wrote about it—in terms of leadership, management, institutional transformation, in a way that far transcends hospitals and medical schools. But I just want to ask Dr. Grossman to set the stage. 

You’ve been there is it thirteen, fourteen years? 

GROSSMAN: Thirteen years is the— 

HAASS: Thirteen years. Talk a little bit about the situation you walked into. Let’s just sort of set the baseline. 

GROSSMAN: Well, NYU had in—so I’ll go back to 1970. So in 1970 the university had an existential moment. At the same time its fortunes were correlated with the fortunes of New York City, and at that time they had to sell off a campus uptown and actually sold an apartment building on Washington Square for the price of now less than one unit in that building. (Laughs.) But they really were trying to save the university. 

And then fast forward to the 1990s, where the specter of managed care was looming and NYU was—had that in the back of their mind, what happened in the 1970s, and they were concerned about the hospital sinking the university, and they did an ill-fated merge with Mt. Sinai. So the merger occurred about 1998, and the de-merger—by 2002 was de-merged. So the lawyers did very well, but— 

HAASS: Can you say—let me interrupt you for a second because it’s so interesting. In business I’ve watched various mergers either succeed or fail. This was a rather quick merger, de-merger. The turnaround time was, like, five years, give or take. Would you say—was it—could you say something about that? I know it’s a detour, but I’m just curious. People, obviously, though it was going to work. Very quickly they had a regret— 

GROSSMAN: Right. 

HAASS: Buyer’s—merger’s remorse. And I’m just curious, what happened? What’s the lesson there? 

GROSSMAN: Right. Actually, I wrote a paper—it’s in academic medicine—about that. But basically, there are a couple things. 

First of all, the value proposition—so NYU had very little debt but needed a lot of capital to rebuild itself. And it was a—it had a venerable school. It was about 170 years old. Sinai was a new medical school. It had a hospital culture, whereas NYU had a school culture. The value proposition for NYU was that the obligated group—the new obligated bond group would be able to raise enough money to be able to afford a new hospital for NYU. Sinai’s view was that the two institutions combined would have a lot of NIH funding and both—then the combined institution would be a—more luminescent in terms of academic institutions. 

So what happened was that the combined merger, the obligated group didn’t fulfill the need to be able—the ability to be able to build a new hospital through selling bonds. And with any academic institution, you know, each—who’s going to be the chairman? And they never figured that out beforehand. 

And you know, when you do these acquisitions you have to have one culture. You can’t have two cultures. And they never really thought about the future. It was about the present configuration, and they didn’t really sell the value proposition. And again, the cultures were completely different. 

HAASS: I guess I interrupted you. So the de-merger happened I think it was 2002? 

GROSSMAN: De-merger happened around 2002. And so what I confronted, between 2002-2007, the institution was progressively petering out. And what I was confronted was a very byzantine structure post-merger where there were three CFOs, two IT departments, two HR department, school, and a hospital. And when you really analyze that, there was a structural deficit of over $150 million a year. Yeah. And we—in part of that deficit, a significant part were unproductive faculty because there had been no metrics. 

HAASS: Unique to that institution, I want to point out. (Laughter.) 

GROSSMAN: And also there were tremendous capital needs because deprecation had been funded along the way. 

HAASS: OK. And just give us a sense of where you are now. I want to bookend this and then I want to talk a little bit of how we got from there to here. 

GROSSMAN: OK. So the revenue at—in 2007 was about 2.3 billion (dollars), and that was about 1.3 (billion dollars) on the hospital side and about a billion (dollars). And in ten years before—so, say, from 1997 to 2007, the institution, the hospital, had made between zero and $30 million a year. So the most they ever made was $30 million, and you had this structural deficit. 

Now, I want to say the structural deficit, why they didn’t go bankrupt, the structural deficit had been backstopped in the late ’90s and early 2000s by a comet. NYU had the patent rights to a drug called Remicade, and Remicade was providing revenue of about $100 million, which was backstopping the $150 million deficit. And so if—again, the revenue was 2.3 billion (dollars), structural deficit, no metrics and no information. And today we’re at $10 billion revenue, very substantial margin. So very different economics. 

HAASS: So you settled on a mission statement. I think I’ve got it here. Quote: “A world-class, patient-centered, integrated academic medical center.” Talk a little—I have two questions about that, one about why it was so important to you to get a mission statement. Say a little bit also about the process, about how you arrived at that and why that was important. 

GROSSMAN: Right. So the mission statement was very important because we wanted—first of all, it was a question of how to transform a culture which was a very self-satisfied culture and non-metricized. And in order to do that without having a revolution, you had to come up with a vision which the vast majority—not everybody’s going to buy into it—which the majority of people would buy into. And so every word in that mission statement has significant meaning. 

So “world-class” was really about the aspirations of the vast majority of people. Physicians who came to NYU really felt that they wanted to be world class. They wanted to be proud of what they did, and they felt that they had been on the receiving end of that Sinai-NYU merger. They were not happy with it. In fact, the physicians had actually sued the university trustees—they had lost the suit—about when they wanted to merge the schools of medicine. So “world-class” was really important. It was an aspirational goal. 

“Patient-centered” because that is the most important thing for healthcare institutions. They have to be patient-centered. 

“Integrated.” Integration was central to what I wanted to do and how I wanted to restructure the institution. And I always say that function follows structure. If you have a bad structure, no matter how good you are, you’re never going to get it to work properly. So we had to restructure the place. And we were going to make it the most integrated academic medical center, meaning the school and the hospital were integrated. I was both the dean and CEO. Every level at senior administration had two titles. So I eliminated a whole group of administrators, but it created agility. And decision-making was rapid, and that was very important because when an institution is managed to the margin the best way that administrators deal with needs is to kick the can down the road and to have all these administrative processes. And I wanted to be able to have very rapid decision-making. 

“Academic” because we are a research institution. But we had to do real research, and the metric was going to be NIH funding. 

So “world-class, patient-centered, integrated academic medical center.” 

HAASS: So you got rid of the Noah’s Ark approach to management— 

GROSSMAN: (Laughs.) 

HAASS: —where you had two of everything and you consolidated. I expect that at least 50 percent of the people involved in that process were less than thrilled. And how did you do it? How did you—did you—because there was, obviously, resistance. So how did you do it? 

GROSSMAN: Right, and I think I’d underscore that point. And I talk about it because, you know, we transformed the culture, totally transformed it, went—became a bleeding-edge, metricized culture where people—we paid people for creating value. And we didn’t have a revolution. And if you think about that and you juxtapose it to what happened, say, at Harvard, where Larry Summers makes a hypothetical and, you know, blows up; or what happened at NYU, where John Sexton decides to put a student housing in Washington Square near where the faculty are and you have a revolution. We—(laughs)—we— 

HAASS: For good reason. (Laughter.) 

GROSSMAN: Right. Right. Not in my neighborhood. (Laughs.) 

But we cut salaries of tenured people. We actually did buyouts, too. We took away laboratory space. We valorized people who were doing good work. And actually, there were consequences of people who weren’t working properly and everybody saw—there was—we created total transparency. And we did that partially by investing—spending a significant—making a significant investment in IT and in an electronic health record. And everybody saw everything, so there was accountability throughout the entire system. And that was also a change in culture. 

HAASS: Now, was that—I mean, to change culture is in some ways the hardest thing any person/leader/manager, whatever you want to call the individual. Say a little bit more about how you did it. I mean, you could do it by getting rid of people who weren’t buying in, but you can’t get rid of everybody. 

GROSSMAN: Right. 

HAASS: So how did you get buy in? I mean, how did you decide what the culture needed to be, and then how did you get buy in? 

GROSSMAN: Right. So the first thing was, you know, two-thirds—if you get two-thirds, that’s a landslide, right? So we tapped into what we thought the majority of people really aspire to, and they wanted to be great. And so we had an aspirational vision. We metricized everybody. And then along the way every time we had an accomplishment we celebrated it so people could feel the momentum going forward. And I think that created a feeling—a good feeling amongst the vast majority of people. And you know, these things are incremental. And if people feel directionally that you’re going in the right—you have the right vector, they’re going to be part of it. They may not agree with everything. 

The other thing I did was I got rid of thirty-one out of thirty-four chairs and I cleaned house in the management. And so— 

HAASS: Did you do that pretty quickly as a— 

GROSSMAN: Yeah. The first day or just—first day. And I didn’t even really—you know, I had never been to business school so I didn’t actually realize what I had done, but I got rid—(laughs)—but I got rid of the president of the hospital, the senior vice president in charge of the School of Medicine, the chief medical officer, the head of HR, the—the chief financial officer had resigned. But the top six administrators in one fell swoop. And years later somebody said, well, they called that Black Wednesday, but I didn’t even appreciate that. And then we changed a lot of the management in terms of the academic chairs. But in the end we brought people on who were really engaged, who wanted to do something, who are energetic and vigorous. And that energy and vigor made an enormous difference. 

HAASS: You raised something that I was going to come to in a few minutes, but I’ll come to it now, because you said you didn’t go to business school. I assume you did not go to the Yale or Kennedy School of Management. 

GROSSMAN: Correct. 

HAASS: OK. So what’s interesting to me: here you are, you’re trained as a medical doctor, and presumably you were pretty good at that because you became the chair of the department and all that, yet your real impact is in what we’re talking about here as a—someone who transformed these two institutions, essentially, into one and made it—to use your expression—world class. It’s a very different skillset from being a good radiologist to doing what you’ve done. I’m just curious, did it—was NYU and you just lucky that you happened to—(laughter)—have it in the kind of “who knew” department? Did—(laughter)—did you take correspondence classes at night? (Laughter.) I’m just curious which is—because, and we were talking about it before, when you promote people often the skills that made them really good to get your attention—you know, in the government you’d say they’re a really good action officer, but then when you promote them they’re not necessarily good at leading and managing, because the skills that got them successful in their initial jobs aren’t—not only are they not the skills that often lead to success, they can actually be barriers to it because they’re so good they can’t let go, they micromanage, all these things. So I’m just curious, how did you essentially manage your own evolution here? 

GROSSMAN: Yeah. Well, I always tell people I’m the least introspective person you know, so I’m not going to be able to do a really good job here. 

But what I would say—(laughter)—was the first thing—I could tell you one insight. So at the Harvard Business School—I had never been to a business school until they invited me for this case study that they did. So I’m sitting up in this amphitheater and they’re discussing the case, and I’m listening to the business students, and they’re so conservative. They’ve saying, well, I’m not sure we would have let go of five people, and I wouldn’t do this, I’d give them six months, and all this. And I’m thinking to myself, Jesus, if I had gone to business school I wouldn’t have done anything. (Laughter.) So that was—that was the first insight. 

And then what caught Ken Langone’s eye was when I came up in radiology in—I had come from Penn, and the Radiology Department at NYU was also not in very good shape. And in radiology, equipment is really important. And it’s important not only clinically, but it’s also important for research. And somebody—I said—I was trying to think how am I going to move the department forward where the institution doesn’t have two nickels to rub together, but I didn’t even realize they didn’t have two nickels to rub together at the time. But what happened was I said to Ken Langone and the dean at the time, I said—well, somebody came to me and said, well, we have a special relationship with Siemens. And I said, well, what’s the special relationship? They said, well, we’re a show site for this one piece of equipment they had. And for that—I said, well, what do you get for that? And he said, well, we get pulse sequences. Pulse sequences are the software that drive magnetic resonance scanners. I said: Let me get this right; you’re a show site and you get pulse sequences? So I thought it was a very asymmetric relationship. 

And I said to Ken Langone and the dean, well, why don’t we see how much a show site on First Avenue in the middle of Manhattan is worth, and let’s do a single-vendor deal for all of radiology and bake off Siemens versus General Electric? And in that bakeoff—and the good news is they let me do it. We got $100 million. So that caught Ken Langone’s eye. (Laughter.) Even though he was a board member of General Electric; Siemens got the deal. (Laughter.) And he appropriately recused himself, obviously. Then he had to explain why—to Jack Welch why we chose Siemens over General Electric—(laughter)—and he—I don’t think he needed a phone to hear Jack on the other. (Laughter.) 

But the bottom line was that I think I was a creative person. And I was also—you know, radiology is about seeing a big picture, but also seeing—being able to discern patterns out of ambiguity. And maybe some of that skillset was good in management. 

HAASS: You mentioned Ken Langone. Talk a little bit about whether you could have done this without Ken and the board. And your sense now—because you’re staff at the end of the day, and—something I feel acutely. (Laughter.) As Bill Clinton might say, I feel your pain. 

GROSSMAN: Right. 

HAASS: And the relationship with the board, and why it worked in this case. Because, you know, when you read about it, it clearly was a partnership. 

GROSSMAN: It was definitely a partnership. And you know, he is a larger than life person, really an incredible person and a fantastic board chair. And the one of the things that’s very important with boards and with chairmen are when you’re actually trying to transform a culture everybody’s trying to go around you because you’re moving their cheese. And Ken was totally steadfast and committed to everything we wanted to do, and also he was a hell of a fundraiser. 

HAASS: Did you actually sit down with him and say here’s where I want to take it, and just want to make sure, boss, you agree? 

GROSSMAN: Absolutely. And actually, Marty Lipton was also right there because he was head of the university. So to be able to transform a culture you have to prevent end runs, and both Marty and Ken didn’t tolerate it. And as soon as people saw that right early on, that was the end of it. So everybody was aligned in order to perform the transformation. 

HAASS: One of the anecdotes that caught my eye in the book, it was the thing about the elevators. And I liked it because it’s—you tell the story because I think it’s—it sends a message about management and sometimes how specifics and, if you will, small things can allow you to do big things. 

GROSSMAN: Right. So the Tisch Hospital was originally constructed with less than optimal lift capacity. And you know, it was constructed in the 1960s and it actually was—it was envisioned as a private hospital initially. And so, as we got busier, the lift capacity became more onerous, and it was onerous on the physicians and the staff. And the metaphor there was in order to use the elevator you had to go down to go up, because when the elevator—the elevator was going up it was completely full. And that had actually an impact on patient care because a lot of people didn’t want to go see the—it was very difficult to see consults, and going to lunch was difficult, and you had all these workarounds in the hospital that were suboptimal. 

So I said we’re going to put—install elevators, and it was one of the most important and earliest things we did. And we just constructed a hall elevator bank outside the hospital, and that totally changed the workflow and totally changed the mood of the institution, that for fifty years people were going crazy about elevators. And in one fell swoop everything worked. 

HAASS: We may not do that here at the Council on Foreign Relations—(laughter)—but it’s tempting. It’s tempting. I’m just going to ask one or two more things and then I want to open it up. 

To what extent are you part of the healthcare conversation? Because you’re—obviously, you’re an important component, I know, both in the educational side and the healthcare delivery side as a hospital. To what extent are you affected by the larger debate? To what extent are you a participant in the larger debate about reform? 

GROSSMAN: We’re affected. I think it’s very hard to be a legitimate participant, just the way the politics are. The politics are very, very complicated. But I’ll tell you one important metric, and I think this is critical to understanding healthcare for the underserved. 

So in 2016—’15-’16—we took over a failing hospital in Brooklyn called Lutheran Hospital, and it’s in Sunset Park. It has the highest concentration of Medicaid in the United States. And you—the first thing that I saw were the administrators were overpaid, weren’t doing anything. They were managing it to the margin and saying—and their metrics, their quality metrics, were excused because they took care of the community. And I said to them and I said to their board, rich people—poor people deserve the same care as rich people, and we were going to transform Lutheran Hospital. And there were all these young, great physicians at NYU, and we brought them over to Lutheran. We swapped out the whole administration. We did a full asset merger, so we were—their metrics were going to be our metrics. And if they—if they didn’t get it right, we were going to get hurt by their metrics. We installed a(n) electronic health record in the federally qualified health centers, which they never had. And we installed all of our financial software and electronic health record, and we totally transformed Lutheran. 

It’s now NYU Langone Brooklyn. It has exactly the same metrics as NYU in Manhattan. And in spite of having the highest concentration of Medicaid patients in the United States, we made a little profit. So that is an incredible success story that nobody talks about, and it’s about getting the right people on the bus, effective management, implementation of the electronic health record and other IT programs. And it’s an amazing, amazing success story. 

HAASS: Bob, you’ve mentioned IT and metrics several times. Say a little bit about why that’s so important. 

GROSSMAN: Well, I said when I—in 2007, when I started, I asked all these questions. And I was trying to understand how to think about the institution as a business and how to understand what the drivers were. And they said—(laughs)—they gave me all these binders. There were like twenty binders, and you couldn’t read them, and there was no effective way of understanding what was going on. And I felt—I had this sinking feeling that I was going to fail because I couldn’t—I didn’t have the appropriate understanding. And I said this is like flying a 747 without any controls, and that’s the way a lot of hospitals are run. 

And what I did was I said we’re going to build an information system and whatever money we have we’re investing it in IT. And we did invest it, and it was—and then it proved—it gave us enormous leverage in how we did things going forward. So IT is critical to healthcare. 

The electronic health record is really critical, despite what older doctors think. It’s essential. And if you go to a doctor who doesn’t have an electronic health record I think you should switch. 

HAASS: So there. 

GROSSMAN: How’s that? (Laughter.) 

HAASS: OK. As you could see, I could keep going but I won’t, though I may chime in here and there with a few issues I didn’t get to. We’ve got microphones. Again, it’s on the record. And just identify yourselves and ask Dr. Grossman. 

I see Mitch Rosenthal in the back. Sir, you get the first question as a fellow doctor, doctor to doctor. 

GROSSMAN: OK. Good. 

HAASS: Mitch, use the microphone, though. 

Q: Thank you very much. 

I’m the founder of Phoenix House and built a large organization, and I am taken with your brilliant moves—business moves throughout the system. But the question is, how did you articulate your views and values for patient care? Doctor—not a doctor—Michael Dowling, who runs Northwell, every Monday has all the new employees assembled at the Lake Success auditorium and talks to them personally about what he thinks is important in patient care. 

GROSSMAN: Well, that’s—yeah. So talk is cheap—(laughter)—and I think that you have to really be able for everybody to see metrics, and look how they’re doing, and reward and celebrate where patient care is and how important it is down to the level of where—the lowest level of the hospital: housekeeping, supply chain, transportation, et cetera. 

So what did we do? So every month I write something called an in-touch, which talks our basic values. And that goes out, and I’ve been doing it for thirteen years, and actually it gets—is viral and people— 

HAASS: Dangerous thing in a hospital. 

GROSSMAN: Yeah, right. (Laughs.) Exactly. (Laughter.) 

So that’s number one. 

Number two, I think it is about deeds, not talk. And you know, what our—what happens on a floor. So if everybody sees an infection rate and you know that the infection rate in one floor is different than another, well, that’s very important. Or length of stay, or before-noon discharge, or food, or this—whatever, all of these different metrics that you have to manage to and everybody is held accountable at all levels of the organization. 

What we did initially which I think was important, we went around, and I personally went to every department and all the—and all the corporate as well, and we made the case. And we said, you know, if we don’t change the way we are, we’re not going to be able to continue. And I also said what was holding us together was the Remicade drug revenue, and we had a Vioxx event or a legitimate competitor we’d be out of business. And actually, if we had had Hurricane Sandy in 2007, we would have been out of business. 

So it wasn’t—it isn’t about—talk is important, but it’s really about the deeds and about how you manage and you manage to excellence. So every one of our metrics has a definition and also an expectation, and it’s throughout the entire institution in all three missions: in education, in research, and in clinical care. So we—in research we look at indirect dollars per square foot and we manage the square footage. In clinical medicine there are a whole host of different metrics. And again, everybody sees everything. So in the Department of Surgery, everybody who’s doing the same procedure sees the length of stay, the infection rate, complications, mortality, morbidity. Just to make a point, if you look at—we have the lowest mortality in the United States, by far. 

HAASS: Do you have the ability just—you have data transparency—mortality, length of stay, infection rates, what have you, incidence of this or that—throughout your institution. Do you also—in this world, do you have access to comparable statistics from the hospital down the street that’s not part of your system? 

GROSSMAN: We don’t. And again, New York is blessed; it has a lot of really great hospitals. And for me, I would say we run our race and everybody else does what they want. But other organizations, obviously, like Leapfrog, which uses objective data, Medicare data, looks at hospitals—so we’re the only A-rated hospital in New York, and that’s just the objective data from Medicare. And we were last year the only five-star CMS-rated hospital. And in Vizient, which is the group of about a hundred and twenty academic medical centers, over the last ten years we’ve been number one, number two, or number three in inpatient and ambulatory outcomes. 

HAASS: Is it too soon—you mentioned the school—to ask about or measure the impact of Ken Langone’s generosity in terms of tuition-free for your— 

GROSSMAN: (Laughs.) 

HAASS: Are you seeing a redistribution of specialties? Are you seeing a different nature of an applicant class? I’m just curious. Too soon, or are you seeing signs already of a difference? 

GROSSMAN: Well, I’ll tell you what we see. So we always said before we did this tuition-free thing our class was—our statistics were we had actually the highest metrics in the United States. So our average was at that time 3.93 and the equivalent of eight hundred on the College Board. So that was the class before we did this, so you’re not going to get much better. 

And we have a relatively small class of about a hundred. So the applicant pool went from a little over six thousand to almost nine thousand, so that increased. But what was fascinating, the underrepresented minorities doubled and the number of those who self-designate as African American students went up by over 2X. 

HAASS: Fantastic. That is enlightened philanthropy. 

Yes, sir. 

Q: Thank you for the talk and the opportunity to ask a question. Emmanuel d’Harcourt from Vital Strategies, and I’m a pediatrician by training. 

My question is regarding the costs per capita, which are about double for healthcare in the U.S., as you know, compared to most other advanced industrialized countries. So I was wondering where that sits on your hierarchy of issues and whether you see NYU as having a role in addressing it. 

GROSSMAN: Yeah, I—so I don’t—I think it’s—you know, sometimes that’s a headline and a lot of politicians utilize that headline. I think it’s very complicated about costs. And I was mentioning to Richard, so, patients come into hospitals and every hospital has complications. Make no mistake about it. And the key to outcome is recognizing the complications and treating them. Now, if you think about it that way—and having a successful outcome, of course. 

If you think about it that way, hospitals that are successful at treating complications are going to have high costs because you have to diagnose the complication and you got to treat it, right? And so that involves MRI scans, CT. The cheapest thing is not recognizing the complication and having a death. You don’t spend any money. Your cost structure is significantly lower. So to look at cost alone I don’t think is exactly the way to do it, particularly when you compare the American systems and other systems. 

And again, it’s complicated because in the American system what’s—our social gradients are imputed into the cost. So we have a society that’s a violent society; that’s imputed into the cost. And we have a lot more poor people who have diabetes and chronic conditions, and all those costs are imputed into healthcare. But they’re not—they’re harder to really manage in healthcare. 

And the second thing is that I think, you know, costs are also about what’s best for patients. So if you think about it, in the United States you can get an MRI scan. Now, a lot of people say that adds cost, but the truth is before you had MRI you did exploratory surgery. And so I think that we don’t—we focus on value. 

And I’ll give you one more example, if I—if I may. So we looked at—there’s an insurance company which will remain nameless, and there were two cohorts. One cohort utilized NYU and one cohort didn’t. And I don’t know—one thing I don’t know, I assume they’re economically similar cohorts because they have the same insurance company. I can’t prove that. But what I know is our total costs were much lower than the total costs of the non-NYU. But the—if you look at individual costs, the people who used NYU had more—used more specialists than the non-NYU group, but we had shorter length of stays, less hospitalizations, and less emergency room visits. So how you really ascertain—compare apples and apples is very different. But we’re focused on value. 

HAASS: Yes, ma’am. 

Q: It’s on? Oh, great. Thanks so much for the opportunity and for your remarks. My name is Marion Boteju, and I’m chief of staff for Catholic Charities for the Archdiocese of New York. 

And you commented that, you know, when you moved over and were working with Lutheran about the importance of making sure that the poor and the rich had the same level of care. So I was wondering whether you could offer some commentary on opportunities for—opportunities and obstacles that the hospital systems face in terms of working with other community-based nonprofits in addressing healthcare needs, whether it’s social determinants of health or actual acuity of care. 

GROSSMAN: Right. So the way—I think what we’ve done, part of it is through the disrupt—actually, the distressed hospital fund that the state—New York state received a waiver of, what, nine billion (dollars) something—I don’t—I don’t know the exact amount—to try to transform healthcare in the underserved community. So we do—we do work with community organizations. A lot of our care is through the federally-qualified health centers. 

Now, one of the things that we did which was different is we transformed the IT of our federally-qualified health centers. You know, underserved people have cellphones, and the cellphone is a huge aid to managing their care. And we have less no-shows at our—at our federally-qualified health centers, and we are able to manage a lot of the chronic diseases better. So we employed IT along with federally-qualified health centers to try to improve the quality, and that actually has had an impact on emergency room visits and hospitalization. So that’s—that was our secret. But it was really about the IT and transforming the federally-qualified health centers. 

HAASS: Sir. 

Q: Yes. My name is Gordon Litwin. I chair Hackensack Meridian Health. And my question is, you’ve now—and thank you very much for your insightful remarks. 

You’ve now grown to a $10 billion organization, and you recently acquired a hospital in Brooklyn which was struggling and you made it a success. Give us your thoughts on optimum size and the problems that you incur as you take on such obligations. And you get the drift of my question. 

GROSSMAN: Right. So our goal was not to become the biggest. I wasn’t interested in that at all. Our goal was always about quality. And what it turned out in Brooklyn, we had a significant number of patients coming to us from Brooklyn, so we thought we would use one—we could acquire one site in Brooklyn. And ditto in Long Island, where we’re going to do a full asset merger of Winthrop Hospital. 

And part of it is we want the care to be local to the community as—and I don’t want hospital beds. So we’re different than other institutions. I want the care to be at ambulatory care centers. I want it to be local. 

So in 2007 part of our strategy was to build out our ambulatory network. And I think in 2007 there was one or two other sites in the New York metropolitan area. Today we have 330 sites in the New York metropolitan area, and that’s enabled us to deliver ambulatory care locally. 

But I really—hospitals are difficult to run because of the cost structure. So they’re a necessity, but you don’t need a lot of hospitals. Now, in terms of—so that’s inpatient services. 

But in terms of ambulatory services, we plan on continually expanding. The thing that we have done, I think versus other institutions, is create the infrastructure to support a large health system. And the infrastructure involves having an incredibly robust information network, everybody seeing everything, and managing one set of management tools. 

HAASS: And you even have one now in Florida. 

GROSSMAN: We have one in Florida. It’s all the same. So if you’re an NYU patient in Florida, if you’re an NYU patient on the island, everybody sees everything. 

You don’t have to—and one thing—so for those of you—so IT, the cost of IT could be monstrous, but the real costs are in the interfaces and managing interfaces. And actually, from radiology I knew that way before anybody else. (Laughs.) And so when you—so you want to eliminate interfaces. Actually, the costs—the number of interfaces scale as the square of the number of systems. So if you have four—it’s the square minus the number of systems, divided by two. But if you—so if you have four different nodes, you need six interfaces. And so the trick in managing your costs is to have as few interfaces as possible, and that’s what we did, and we did that early. 

HAASS: Mr. Paulson. 

Q: Oh, thank you. 

GROSSMAN: Hi, John. 

Q: Let me add to my congratulations on the incredible job you did in a relatively short amount of time—ten years, a total reinvention of the system. 

My question is a big one, because in New York City, with the tremendous role you play, we also have the New York City Health and Hospitals system. And they’ve gone, you know, the opposite way. You know, I looked up their financial results recently and I could only get the first half of ’17, but the first half of ’17 they lost seven hundred fifty million (dollars). And they’ve gone the opposite way: a large number of hospitals, few ambulatory cares, and lots of lawsuits—tremendous lawsuits over very low-quality care. You’ve demonstrated the ability to take over the Lutheran, which has even more difficult metrics than New York City Health and Hospitals. What can you—I mean, I know it’s not in the purview of NYU, but what can we do to reform our city’s hospital system? And is there an opportunity for NYU Langone to take them over? Because as you take them over—(laughter)—if you take them over—and by the way, in terms of size, they’re six-and-a-half billion (dollars) in revenues. You’re ten (billion dollars). So it’s something that’s manageable. But if we take—(laughter)—if you take them over, it can result in instead of funding a billion and a half (dollars), two billion (dollars) a year into decrepit facilities with no metrics, poor-quality care, we can totally reverse that for New Yorkers. Thank you. 

GROSSMAN: (Laughs.) Yeah, a very easy question to answer. (Laughter.) Not. Well, we actually provide all the professional services for Bellevue, and we do it as part of our mission. 

You know, it’s a very difficult question because it’s more of a political question, actually, than a health question, to be honest, because you have all these union jobs which the state and the city and the federal government are supporting, and what you’re asking is to right-size the system and to move it from—make it efficient and move it from inpatient to ambulatory, decrease the size. And that’s really the courage of the politicians to fight the vested interests to make it—to improve it. We have the technical ability to do it. And if somebody said to me tomorrow we’re going to give you Bellevue Hospital, I would run it. I wouldn’t have any problem. And you know, we’d make it much smaller. We could use the other parts of the land there—(laughs)—for different, more—other things. But I don’t—I— 

HAASS: A nine-hole golf course? 

GROSSMAN: (Laughs.) I think the issue is courage on the part of the political system to really transform it. 

And just to make a point, if you remember Frank Rizzo, so he got pissed off at University of Pennsylvania because one of the chairmen’s wives at that time led the “recall Rizzo” campaign. And one day, after the “recall Rizzo” campaign work, he shut down Philadelphia General Hospital, the only general hospital in all of Philadelphia. The next day he bulldozed the whole area and the patients went elsewhere. And there’s no health and hospital system in Philadelphia, but it functions OK. 

HAASS: Bill? (Laughs.) 

Q: Bill Haseltine. 

I had the privilege of studying NYU Langone for three years. 

GROSSMAN: And he did a fantastic job, really. If you haven’t read his book, it is worth reading. Really fantastic. 

HAASS: I’ll hold it up. 

Q: Thank you very much. 

The point I was going to make in answer to Mr. Paulson’s comment is I wrote a manual on how to do this based on a deep study of what you guys have done. So if anybody wants to reform the New York public hospital system, they have a manual to describe exactly how you did it. 

GROSSMAN: OK. 

Q: And that was why I wrote the book. I wrote the book so that people could replicate your—the fantastic job that you’ve done. 

I also want to thank everybody who was involved in sharing a lot of their time, including the lady sitting to my left— 

GROSSMAN: Lisa. 

Q: —Lisa Greiner, who had to get all their permissions. So thank you very much. 

GROSSMAN: Thank you. 

HAASS: Yes, ma’am. 

Q: Thanks. I’m Mary Pearl. I’m the dean of Macaulay Honors College, and we’re sending two of our students into your next year’s incoming class at medical school. 

GROSSMAN: Oh, wow. 

Q: I didn’t realize what an achievement that was. (Laughter.) 

But my question is, you talked about access and how important that is. What innovations do you see in medical education in coming years? 

GROSSMAN: Right. So what we’re doing, actually, is we’ve redone our whole anatomy class so there are no more dissections. And I think it adds—it’s actually going to transform the way anatomy is taught. We use virtual reality and these plastic models from—actually, out of real cadavers so that the—and a lot of the imaging. So that’s one innovation that’s huge. 

The second innovation which I think was really important is we have a three-year M.D. program. And this is another one of my pet peeves. So medicine—so the Flexner Report in 1905 or something like that decided medical school should be four years, and nothing has changed. And the fourth years, we believe, in many cases is a way for medical schools to get tuition, and the students then audition at other programs. And so we started a three-year program. We have a curriculum for the 21st century. About 30 percent of our class have done this. Actually, my wife is the—Elizabeth Cohen has done a great job. She’s the advisor for the three-year program. But you start—you can apply in college, in the first year or in the second year, save a year. You get right into a residency program, so you don’t have to go through all the auditioning and everything like that. 

And actually, so I think this is our fourth class that’s graduated, and we see the results. The number of (cheap ?) residents coming out of the three-year program is huge, and now there are about forty medical schools who are doing this or interested. So that—and we did that before we did tuition-free because we thought, again, we were student-centered, and the students really, the—the debt burden is enormous on students and parents. And the second burden is the time burden. The time—the training time has gotten almost egregious. If it takes eight years to train a particular surgical subspecialty, it’s almost unsustainable. So to save a year is huge. 

HAASS: If I had known when I was younger that I could have become a doctor without dissection—(laughter)—those of us who don’t much like the whole blood thing, this could have been career— 

GROSSMAN: There you go. 

HAASS: —career-changing. 

It’s nine o’clock. We don’t have a lot of principles here, but we do have one about starting and ending things on time. Again, I just wanted to—again, not our typical fare, but thank you for spending the morning with us. Thank you all. 

And again, I think what Dr. Grossman has accomplished really is extraordinary, and as Bill and others suggested is a model. You’ve been there for thirteen years. We wish you a long and healthy tenure there, sir. But thank you very much. 

GROSSMAN: Thank you very much. (Applause.) 

(END) 

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