Healthcare Needs a Turnaround: Q&A with Anthony Spezia, CEO of Covenant Health

Anthony Spezia, president and CEO of Knoxville, Tenn.-based Covenant Health, discusses the man who made the biggest impression on him, his leadership style, the problems he sees in the healthcare reform law, the Medicare wage index, his state's Medicaid program, and the challenges he forecasts for healthcare in the future.

Anthony Spezia has led Knoxville, Tenn.-based Covenant Health as president and CEO since 2000, four years after the system formed from the consolidation of two local networks.

During his tenure, the health system has substantially expanded its service area in Tennessee. Today, the nonprofit Covenant Health includes nine acute-care hospitals, along with numerous outpatient clinics and specialty services, and affiliated physician practices. The health system's mission focuses on making quality healthcare accessible to local communities. The system reports investing more than a billion dollars in Tennessee communities since 2000, by opening new hospitals, expanding services and bringing advanced technology to the region. In 2012, Covenant Health also contributed more than $156 million in charity and uncompensated care.

Mr. Spezia's leadership style and perspective on healthcare matters is one shaped by years outside of the industry. For the first 20 years of his career, Mr. SpeTony Spezia 2013 2zia wasn't involved in the healthcare industry. He started his career as an auditor and consultant for Arthur Andersen & Co. He also served for nine years as a senior executive with a major coal and energy company headquartered in Detroit. Immediately prior to joining Covenant Health, he owned and operated a consulting business specializing in business start-ups and turnarounds.  

The St. Louis native took some time to discuss the man who made the biggest impression on him, his leadership style, the problems he sees in the healthcare reform law, the Medicare wage index, his state's Medicaid program, and the challenges he forecasts for healthcare in the future.

Question: Can you tell me about some of the people who have most influenced you?

Anthony Spezia: My dad is the person who grounded me, in terms of someone who had a lot of disadvantages and never complained. He was a waiter in St. Louis and was a disabled WWII veteran. He developed some very serious illnesses when he was still a young father with six children at home. He demonstrated a strong work ethic, instilled values and created a focus on education. I have two brothers who are physicians. He was a great inspiration to me in terms of never forgetting where you come from.

Q: How would people describe you as a boss?

AS: I've had essentially four different business careers. For the first 20 years, I wasn't in healthcare at all, and I may be the only health system CEO in the country that has never run an acute-care hospital. One thing you learn from diverse business experiences is that the larger the organization you work for, the more you need to be able to balance interests, take input, build a strong staff and delegate, and finally, develop and implement a sound strategy. Success is built around that and around the culture you set, as opposed to the technical knowledge you might have.

I'm a strong believer that you lead people by example, by modeling the behavior you expect in terms of commitment, values and ethics. You don't ever forget that everybody who works in your organization has a job that is just as important to them and their family as the people who happen to be in the C-suite. Their job security is also very important to them, but they have less control over their security and work environment.

One way to get in trouble with me is by saying, "I'll solve the problem by reducing head count." That indicates a management mistake was made by creating a staffing level you didn't need to have for the long-term. We don't ever view reduction of employees as a solution to our problems. We need to look to our employees as the solution to our problems. Don't hire someone and then think you'll fix the budget by going in the other direction.

What I've tried to create is an executive leadership team that makes decisions in the best interests of the entire organization. All components of our organization that have initiatives, a capital initiative or any other kind, meet with the executive leadership team — those responsible for operations, finance and human resources.

That's another thing that differentiates Covenant from most healthcare systems: The chief HR executive has the same title, status and input in the organization as the COO and CFO. Let's face it, 50 percent of our costs and all of our performance is based on people. They're a critical piece of our organization.

Q: What about the Patient Protection and Affordable Care Act do you find most problematic?

AS: The best way to reform and make changes in your organization is to move very quickly, but incrementally. You implement change where you can predict the outcome, and then move to the next stage. The PPACA dreamed about a global solution to healthcare coverage with no clue about how to get from A to B. My problem with the PPACA is that it was not incremental reform. The consequences were not anticipated, and even those that could have been anticipated were not identified.

Q: And you're also in an interesting position, given Tennessee's politics and reimbursement levels.

AS: Eastern Tennessee is certainly one of the five lowest paid markets in the entire nation. Of course, this starts with very low Medicare reimbursement. We have a wage index of .74. There are some cases for which we are paid $40,000 less than some hospitals in California for the same procedure or surgery based on a supposed labor rate differential. The Medicare wage index essentially rewards higher costs and punishes efficient hospitals.

When I became CEO of Covenant, our Medicare wage index was .92, which was probably about right based on the cost of living in our region. The cost of living in Knoxville relative to the nation has not changed in the past 13 years. However, our wage index has dropped nearly 20 percent to .74 because we've driven our costs down and are thus paid less; while others have increased their costs and are rewarded with higher payments. This reimbursement system by Medicare is a very bad secret — it is not widely known or understood about how hospitals are paid and how much this contributes to the growth in healthcare costs.

Because we're [more than] 40 percent of market share in region, our low costs impact all the hospitals in our MSA. That's why hospitals in our market have gone through multiple changes in ownership — there is one hospital in Knoxville that's not even 12 years old and it's just seen its fourth ownership change. We also had a major tertiary hospital close in our market several years ago. A number of community hospitals have joined our system as the only way to stay open. There are numerous hospital closures and cutbacks in Georgia, Alabama and other areas near us who are also near the bottom of the Medicare wage index list. Some of these closures are hospitals with appropriate cost levels that can't withstand the unjustifiably low Medicare reimbursement.

Q: What are your thoughts on the stalemate situation with a Medicaid expansion in Tennessee?

AS: TennCare is one of the lowest-paying Medicaid programs in the country. It pays our hospitals less than two-thirds of what Medicare does, and our Medicare is already near the lowest. If you're already at the bottom and your Medicaid is two-thirds of Medicare, then TennCare becomes an extraordinarily low payer. This has a major negative impact on hospitals all across Tennessee.

It was, of course, a political decision to not expand Medicaid. All the major newspapers and all of the chambers of commerce across the state endorsed Medicaid expansion in Tennessee. The people who have prevented expansion were some of the politicians in Nashville who basically made a decision to set parameters around the expansion: "We're not saying no, we just want to do it the Tennessee way."

It's unlikely the "Tennessee way" will ever be approved. We're no closer to Medicaid expansion today than we were a year ago and this decision is contributing to significant hospital problems in Tennessee.

I have said publicly that Medicaid expansion is not about whether you support the PPACA or you don't. If you're for the PPACA, you ought to be for expansion. If you're against it, you ought to be for expansion because the only way the Act will change is if it's unaffordable for the nation. Not doing the expansion has saved tens of billions for the federal government, mostly from GOP states that chose to essentially reduce the federal deficit at the expense of their citizens.

Q: If you were to sit down with one of your grandchildren and explain the U.S. healthcare system to them, from scratch, what would you identify as its three biggest problems?

AS: The system your parents and grandparents have enjoyed will not be there for you. You need to think very strongly about how you will provide for the healthcare needs of your family. If you are going to rely on a government healthcare program 20 years from now, you probably won't like the healthcare system made available to you.

One of the worst things about the PPACA, in my view, is that it will create a strongly tiered healthcare system in the country. We don't have people dying of untreated cancer in the United States. Steve Jobs, former CEO of Apple, had a liver transplant at a leading medical center in Memphis. There was a woman with limited resources who worked here in Knoxville about the same time who also had to have a liver transplant. Her physician got her to the same hospital in Memphis. She went to the top of the list and received a transplant.

Steve Jobs and the woman got the same care from the same physicians in the same care system. She's still alive and doing well today. The fact is that's not going to happen in the healthcare world of the future. That lady would go without a liver transplant. We're creating a tiered system where people who have money will always get the care they need. People in the middle class — if they're willing to spend their retirement accounts — might be able to get costly care, and those who don't have such resources will just have to accept a lower standard of care.

The system that we currently have is going to force people to forego care. We're seeing it already with the high deductible plans. Hospitals will have to collect these deductibles and the people buying those plans can't afford that. They can't afford to pay 40 percent of their healthcare costs. We're just on the tipping point now of seeing many people struggling with accessing care because they can't afford it.

Q: You've been with Covenant for quite a while now. Have you ever experienced burnout at any point in you career?

AS: I'm very fortunate for the opportunity to work in healthcare and make a difference. When you're given a blessing, I don't feel it is a burden or something that should involve burnout. It's an opportunity, and I will be passionate about this for as long as I work. It's the way I'm built. It's the way my dad was. How can one not be passionate about the challenges and the opportunities presented in the world of healthcare and the importance of the work to the communities we serve?

More Q&As With Hospital and Health System CEOs:
Women at the Wheel: Q&A With the Female Leadership Team of Grand View Hospital
A Balancing Act: Q&A With University of Missouri Health Care CEO and COO Mitch Wasden
Better Than Last Week: Q&A with Dr. Vivian Lee, CEO of University of Utah Health Care


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