When it comes to running a 23-hospital health system, Michael Warden believes too many decision-makers can spoil the broth. So when his organization merged with another to form Banner Health, Warden was fully on board with the goal of implementing a centralized governance model. However, he knew that this meant getting separate departments to communicate more effectively, and finding a way to combine budgets. In this interview, he talks about what it was like to walk into a merger, why it’s critical for CIOs to take control of the budget, the system Banner has for evaluating new ideas, how the organization is working to facilitate data exchange with physicians, and his clinical application strategy.
- About Banner Health
- How Banner moved from two organizations to one, highly centralized health system
- “We run a very strict operating company model”
- Walking into a merger
- The costs of centralized model
- “As long as it’s us versus them, you’ve got a problem”
- Gathering the purse strings
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A discussion at one point between the leaders of the two organizations led to a conversation of, ‘Gee, I wonder if we shouldn’t just throw our lot in together and form one corporation and start working together instead of beating up on each separately.’
In the long run, you really can’t be very efficient unless you settle in on one of those models and then put your head down and really go for it. And I think the leadership of the merged organization could see that that centralized model was where they wanted to head.
As long as you’re going into a meeting and saying, ‘Well, we do this and you do that,’ you have a problem. The minute you start thinking of the whole company as ‘we’; the minute you start taking responsibility for your whole destiny and your whole current situation, the better off you are.
So you’ve got to really get control of the dollars. And then you’ve got to start putting together a centralized plan that tells everybody — all of your customers across the organization — where you intend to go and what time frame do you intend to get there.
When I talk to anybody at Banner, any employee at a high level, a department level, or a low level, I almost always will say, ‘Don’t forget, I work for you. The reason I’m here is to provide products and services to support what you do in your healthcare system.’ I want them to know that even though sometimes I’m telling them ‘no,’ it’s because I’m working hard on their behalf to make something happen.
Guerra: Good morning, Michael. Thanks for joining me to talk about your work at Banner Health.
Warden: Good morning, Anthony. I’m glad to join you.
Guerra: Now, you have sizable organization, although I have to say I did interview Michael O’Rourke from Catholic Health Initiatives a week or two ago who has 76 hospitals, so you’re probably a CIO of the largest health system when you’re in a room — expect when he’s in the room. But sizable at 23 hospitals, so tell us a little bit more detail about the different components of the organization so we get a lay of the land.
Warden: Banner Health is an organization that was formed in 1999 as a merger of the former Samaritan Health System, headquartered in Phoenix, Ariz., and the former Lutheran Health System out of Fargo, N.D. Both of those systems were pretty decent sized systems, each operating in their own kind of geographic territory. When we folded the two organizations together, it actually, overnight, became one of the larger health systems in the United States. But I would have to tell you that it was an organization that was, maybe, drifting. Both organizations had very high values but weren’t quite as focused as they needed to be to move into the future.
So in the past 13 years now, Banner has become a very highly centrally directed organization. When you think about Banner Health, the way I think about it at least, it’s more like one organization. It’s more like one hospital with 23 separate campuses. There is only one board of directors for Banner Health. There is one small senior management team that runs the organization. There is only a single finance division, a single information technology division, a single legal division and so forth. We’re very, very highly centrally directed.
From an IT standpoint, as the chief information officer of Banner, every Banner health information technology and biomedical engineering staffer across all of the organization reports directly up to me. So we don’t have this federated model. We don’t run what’s typically considered to be a holding company model. We run a very strict operating company model at Banner, which makes us a little different than a lot of the other larger health care organizations.
Guerra: Just out of curiosity, you started in 1998 and said the merger happened in 1999. Did you know the merger was going to happen? Were you brought on to help with bringing these two together?
Warden: No, actually no one knew I don’t think in 1998. The merger happened as a result of a discussion between the leaders of the two organizations. I guess a way to put it would be that the Samaritan organization was headquartered here in Phoenix, Ariz., and was largely centered here in Phoenix, while the Lutheran organization was headquartered in Fargo, N.D. However, the Lutheran system did have a couple of hospitals here in the Phoenix area, and the two organizations found themselves competing head to head on many occasions for business here in the valley. A discussion at one point between the leaders of the two organizations led to a conversation of, ‘Gee, I wonder if we shouldn’t just throw our lot in together and form one corporation and start working together instead of beating up on each separately.’ Literally, the merger came together very quickly.
Guerra: Did your job become much different than you thought it was going to be because of the merger?
Warden: Absolutely. I left Memorial Hermann in Houston, Texas, to come out here to Phoenix. I was coming to an organization that was about the same size, but at the time, my personal opinion was that the Samaritan organization was way behind the curve on the year 2000 conversions that needed to be made. And they were running a kind of light clinical implementation, where in Houston we had been much more intensely focused on clinical systems. So I actually thought coming out here, this was going to be an interesting experiment to see if the things we had done in Houston were repeatable, and to see if we couldn’t pull this Samaritan organization kind of up into the future.
So literally, within a year of my joining the organization here, all of the sudden we were merged and we were twice as big. And after the merger, actually, there was a CIO at the Lutheran System and me here in Phoenix, and for almost a year, we drifted ahead as two separate CIOs running our own pieces of the business, which was very frustrating as you can imagine, until a decision was finally made to fold that together.
Guerra: Oftentimes, when that happens, one CIO no longer has a job after a very short period of time. Was that something that was concerning you at that time?
Warden: Well, actually we were doing some pretty good work at Samaritan, and although that was a possibility, I didn’t think it was very likely. The CIO of the Lutheran system and I were communicating on a regular basis. I have a ton of respect for him and still do, and we were trying to figure out how to make the whole thing work.
It finally came down to it that it was pretty clear that one of us was going to end up running the IT organization for the whole company, and when I was selected for that role, he decided to move on. Funny story, when the CEO of the company called me to let me know that I had been selected, I was actually standing in line at Disneyland with my daughter waiting to get on the Space Mountain ride if you can believe that. It was just hilarious.
Guerra: I guess you couldn’t say, ‘I’m going to Disneyland,’ like if you went to the Super Bowl. You were already there.
Warden: Yeah, I was there, from that moment on. And in a way it worked out pretty well, because we had a year. If you think it out, we had a year to kind of get to know each other and to get to know the organization. So when I was named the CIO of the merged company, I knew a fair amount about what was going on in the Lutheran side of the organization. And it was easier to try to begin to assimilate the two halves of the company.
Guerra: What do you think they saw in your skills set that said, ‘this guy can do what we need him to do?’
Warden: Well I think it would be kind of presumptuous of me to pretend to know all of that, but I had worked in a large healthcare organization that had standardized and focused on a centralized model of health information technology. We had been very successful at the deploying systems on time and within budget. And I think that track record was beginning to show at the Samaritan organization. I know the Lutheran organization was struggling. They had a model that they claimed was a kind of three‑legged model. They were centralized, regionalized, and localized, and to me, what that said is they weren’t any of the three. They were trying real hard to please everybody. They were great people working very hard to do that, but in the long run, you really can’t be very efficient unless you settle in on one of those models and then put your head down and really go for it. And I think the leadership of the merged organization could see that that centralized model was where they wanted to head.
Guerra: So you’ve got the centralized model going. When you’re not trying to be everything to everyone, often there are certain things you can’t do. They may be the things that you say, ‘all right we’re going to live with this.’ Are there any things about the centralized model that you give up?
Warden: I guess what you give up is you give up a lot of local autonomy. But you have to remember that here at Banner, that’s not such a problem in IT, because we’ve also centralized our finance, our human resources, our legal department, marketing, and so on, and because of that, the company has kind of grown up around this centralized model. So I’d say IT was right at the forefront of trying to centralize and standardize what we were doing. But it was obviously an emerging trend at Banner and one that was pretty quickly recognized as being successful.
What else do people give up? Well, they give up the idea that there’s a lot of bright people throughout a large organization and everybody has their own ideas and everybody likes to do their own things. There’s a discipline required and it takes a while for people to kind of come around to that understanding. But once you do and once you try to make provisions for people who have good ideas to get those ideas input into the central system and then acted upon if they’re good ideas or ignored if they’re not good ideas, it sort of begins to work.
Guerra: Yeah, it sounds like a place a lot of people would like to go but it’s very hard to break out of the regionalized model, like you said. Everyone has their own way of doing things and they think that’s the way they need to do them. For whatever reason it’s different here, so it must be a difficult transition and maybe humbling. Any advice on how you get over that initial hump and how you break those log jams if you want to move to a centralized model?
Warden: I suppose there are a couple of things that we did and that others could do. First of all, you’ve got to start talking to everybody. You’ve got to get large groups of the people you’re trying to get to join the standardized model together in the same room at the same time talking to each other. You’ve really got to begin to know each other a little bit. As long as it’s us and them; as long as you’re going into a meeting and saying, ‘Well, we do this and you do that,’ you have a problem. The minute you start thinking of the whole company as ‘we’; the minute you start taking responsibility for your whole destiny and your whole current situation — whether you had anything to do with some of the details or not — the better off you are.
I had realized this pretty early on because Memorial Hermann in Houston had been a growing organization and we were purchasing hospitals and organizations were joining the corporation, and the minute you realize that once somebody joined, their problems became your problems overnight, and you had to start thinking of those as well. ‘We did this the wrong way’ or ‘we need to fix this.’ The quicker you get to that ‘we’ point of view, the better off you are. So it’s lots of meetings, lots of people getting to know each other and trying to fold the organization together so you’ve got people reporting in to single leaders that report up to you, the sooner the better.
The second thing you can do is you need to fold all the budgets together. You cut off a lot of the extraneous possibilities by just having a central budget so that people can’t go spend the money in separate directions — they have to come together. So I started off here at Samaritan and then when we merged with Lutheran, I was signing everything. No matter what we purchased, all the way down to PC, I was looking at everything and signing everything. That was the only way to cut off the old habits of people buying things that weren’t appropriate and buying computers that were off-standard, and buying software that wasn’t corporately approved.
So you’ve got to really get control of the dollars. And then you’ve got to start putting together a centralized plan that tells everybody — all of your customers across the organization — where you intend to go and what time frame do you intend to get there. So by doing those kind of things that are pretty basic and pretty straightforward — by doing them intensely, the ‘us and them idea’ and the off plan problems, they actually go away relatively quickly.
Guerra: I think that’s great practical advice about the budgeting. You have to take away the ability for things to get purchased. But I would imagine that might be resented, at least at the beginning. It’s sort of collecting everybody’s wallet; it’s disempowering although necessary. Is that a tough pill to swallow sometimes for the people who are used to running their own budgets?
Warden: Well, nobody particularly likes that. I don’t particularly like to have to go get approval for the things that are outside my approval authority either, but I do it because it’s the right thing to do. So as you pull all the budgets together and get signature authority over everything, you go to purchasing and you tell purchasing you’re not to purchase anything that has any hint of information technology in it — no computers, no software, no services unless they have my signature on it. Then you go to legal and you tell legal, I don’t want you to process any contract, any agreement, or any consulting arrangement approval that doesn’t have my signature on it. They’re all to come to me.
So any time, even today, if a hospital goes out and tries to purchase something or sign an agreement for some software, it all ends up on my desk. It gets caught through these filters in legal and purchasing. And then what I have to do is I have to go talk to the people who are doing those things that are outside of plan and remind them of our standardization and talk to them about why we don’t want to make exceptions. And occasionally, you make an exception. Life is full of realities and sometimes the reality is you do want to make an exception, but not very often.
The last thing I’d say is, while you’re tightening up these rules and processes, you do have to keep getting the groups together pretty often and reminding them where you’re going and why this is a good idea. It still takes a lot of communication.
Guerra: Does it still happen that things will pop up and be forwarded to you from legal or purchasing and you say, ‘Come on, are they still trying to go around me here?’
Warden: Yeah, on a regular basis. Now I won’t say daily anymore, because we’re so entrenched in this process across the whole corporation not just from information technology. We’re an organization with 35,000 to 37,000 employees; there’s a certain amount of turnover and the turnover happens not just at the housekeeping or the nursing or the laboratory level, it happens up in management as well. And so occasionally you’ll get people who think it’s okay. They come from a different healthcare system, they operate in a different way, and they think they have the authority occasionally to approve things that they really don’t have that authority for. And so those get trapped in legal and/or in purchasing and referred to me, and usually I go have a conversation and we try to work it out.
Keep in mind here, I have a little mantra that I use. When I talk to anybody at Banner, any employee at a high level, a department level, or a low level, I almost always will say, ‘Don’t forget, I work for you. The reason I’m here is to provide products and services to support what you do in your healthcare system.’ I want them to know that even though sometimes I’m telling them ‘no,’ it’s because I’m working hard on their behalf to make something happen that what they’re asking me to do would get in the way of.