Jerry Crest & Doug Wood

Photo by Kris Kathmann

With his sinewy hands touching together at the fingertips, Dr. Doug Wood, president at Immanuel St. Joseph’s- Mayo Health System, and cardiologist, tried clearing up some of the confusion about recent changes in healthcare. But it seemed, to this writer at least, a futile task. A state-of-the-art knowledge of healthcare, like that of computer technology, often lasts only a few months before becoming outdated.

An example of this change is Wood himself, who was promoted days after our interview to the Vice Chair position at Mayo’s Department of Internal Medicine. He will be leaving ISJ once a replacement is named.

In this interview, Wood, along with Jerry Crest, executive vice president at Immanuel St. Joseph’s, explained the buyout of ISJ, Mayo’s relationship with area clinics, rising healthcare costs, HMOs, and ISJ and Mayo expansion plans. What better people to bring us up to speed: their employer, Mayo Health System, owns Immanuel St. Joseph’s Hospital in Mankato, clinics in Wells, Madelia, Fairmont, Waterville, and Truman, and 60 other facilities in Minnesota, Iowa, and Wisconsin. It also has a management services agreement with Fairmont Community Hospital.

With all of healthcare’s zigs and zags, sure, we thought we’d help straighten the road for you. But that’s not the only reason why Wood, Crest and Arntson appear here. Worker-hungry businesses have been fishing for ways to lure employees to southern Minnesota for years, and we thought we’d give you a fresh worm for your hook. Whether Mayo or non-Mayo, the hospitals and clinics in southern Minnesota offer some of the finest healthcare in the nation – a fact businesses should trumpet loudly in every out-of-state recruitment interview.

CONNECT: Whose idea was it for Mayo to purchase Immanuel St. Joseph’s Hospital in 1996 – Mayo’s or ISJ’s?

CREST: It was Immanuel St. Joseph’s. We thought being part of Mayo Health System would make sense for the sake of developing services in this community.

CONNECT: What drove the decision?

CREST: Area employers wanted expanded services here in Mankato, but we were limited to what we could do for them. Our assessment was that we needed a large partner like Mayo in order to expand services. We surveyed the region, and learned that if they had to leave Mankato for healthcare, two-thirds of all people would choose Rochester over any other place. If we were going to choose a partner, why not choose the one two-thirds would rather have?

CONNECT: Jerry handles administration. What are your responsibilities, Doug?

WOOD: Mine extend beyond Mankato because I also have responsibilities for Waseca and Springfield. In addition to some administration, like Jerry has, I have clinical care responsibilities. I see patients in Mankato and Springfield, and in Rochester.

CONNECT: Does the Rochester Board of Governors have final say on issues in Mankato, or does the local hospital board of directors in Mankato have final say?

WOOD: Mayo Health System is somewhat unique in the United States for how it governs. Over the last eight years U.S. healthcare has been characterized by the development of what some people would call “integrated delivery systems.” In reality, much of the time, those systems have been hospital-based, where a hospital will acquire a large number of physician practices around it. The hospital then decides everything from the hospital.

Mayo Health System, on the other hand, believes healthcare is largely a local phenomenon. There are certain “reserve powers” Mayo Rochester holds, but outside of those reserve powers, ISJ is responsible for the rest. To that extent, the local board maintains authority on decisions that aren’t reserved for Rochester. The local ISJ board meets every two months as a board, but within the board are two important committees: Finance and Facilities, and Clinical Services and Quality. Board members are split up between those two committees, and they meet more frequently.

CONNECT: Doug, give me an example of a reserve power. Would going into debt be one?

WOOD: An expenditure of more than $300,000 in capital would be a reserve power. Another would be approving the hire of a new physician.

CONNECT: You’ve spent a lot of money here helping people maintain healthy life-styles. Why? And how much?

WOOD: We do more than help people maintain healthy life-styles. We also help people with chronic disease to live more productive lives. Total expenditures for these activities are $800,000 a year. Our board and Rochester both have a strong commitment to this program. Our reason is quite simple: Mayo Health System, as one of its principles, values the diversity of its staff and community. Our goal is to improve the communities in which we live and work. From that perspective, the $800,000 is an investment in the community. As the sole hospital in Mankato, there’s a lot for us to accomplish. And we try to accomplish it by leveraging the work of other groups in the Mankato area.

CREST: A good example of leveraging is our medication assistance program. About two years ago, there was a lot of discussion in the community when one couple divorced to make themselves eligible for medical assistance, and particularly for a specific medication. About that time, we teamed up with many churches, who asked their members if they’d donate towards a medication assistance program. ISJ contributed expertise to help the individuals. Drug companies and physician offices contributed drugs. In the end we had a multifaceted plan that assisted some people in buying their drugs; giving others sample drugs; and with those who had chronic illness, we helped them fill out the necessary forms, which were then submitted to drug companies for medication. We leveraged the resources.

CONNECT: What’s going on with the Hospital’s expansion plans?

WOOD: Most importantly we’re increasing the number of physicians to provide services that we haven’t had before in Mankato or the region. In the last year we developed a regional radiology program that provides timely and accurate radiology interpretations for physicians in communities around us. Interpretations used to take up to three days for some small communities. Now that service is provided in a day at the latest. We have been successful in recruiting additional physicians. We will soon have two general surgeons who have added certifications in surgical critical care. We’ve never had that service here before.

We’ve been successful in identifying candidates for other positions. Because we are interviewing these people along with Rochester Mayo, the quality of the people we’ll receive here will be striking. Our goal is to fill in many of the gaps that have been open for too long.

Ultimately we’ll need to add space. We have a facilities plan. At the moment we are working through discussions with physicians about their space needs. We don’t know yet the size of the new building or how it will situate on the campus.

CONNECT: When these specialists are brought in to the new clinic Mayo is building here, will they be given exclusive hospital access?

CREST: Oh, no.

CONNECT: Will other area doctors be locked out?

WOOD: This is an open-staff hospital, for the most part. There would have to be a demonstrable need or reason to make an exclusivity contract. The only closed-staff department right now is emergency medicine. We want board-eligible or board-certified emergency physicians, and in order to bring them in and maintain them, we couldn’t allow others in.

CONNECT: What about Mayo bringing pediatric or family practice doctors to Mankato?

WOOD: Pediatrics is well-served in Mankato and North Mankato. What we can add is some specialists with pediatric capabilities. For instance, a pulmonologist – a lung specialist – may be expert in treating adults as well as children. As far as primary care, our hope is that clinics already in the area will continue to be successful in attracting additional primary care physicians. Primary care is the strength of those clinics. Our goal is to provide the clinics with the highest quality of service in order to help them recruit and maintain primary care physicians.

CREST: When we look at primary care, we’re focused more on the region rather than Mankato. We have affiliations with Springfield, Waseca, Madelia – those are all primary care sites. Our focus is on developing those sites further. All three have been successful in adding one additional physician.

WOOD: North Ridge Family Medicine Clinic has been successful in attracting physicians to North Mankato. St. Peter will have new physicians this summer. We’ve had wonderful discussions with both of them about how we can support their practice, to the extent of hospital privileges and staff.

CONNECT: Did Mayo ever try to buy a clinic in Mankato?

WOOD: There has been some discussion in the past with a provider in the region. But Mankato Clinic, in particular, has made its decision about which direction it would like to go. Their decision was to strengthen their relationship with Blue Cross and Blue Shield.

Mankato is somewhat unusual in the Mayo Health System. Most of the time, we begin a relationship with the town’s physician practice rather than its hospital. There are things about Mankato that required us to take a different approach. In particular, we have to be able to provide resources to support all the providers in Mankato, whether that’s Mankato Clinic, or North Ridge Family Medicine Clinic, or Orthopaedic and Fracture Clinic. Or even the independent physicians in the area that come here to see patients.

CONNECT: Health insurance premiums for most small businesses have risen dramatically over the past year. Why?

CREST: It’s not because of the charges here, but the cost of technology, newly available services and medication. Some services are available now that didn’t exist ten years ago. Medication costs have been rising at a very fast clip.

WOOD: The two largest factors are technology and medication. Hospital charges and fees have been rising at a very low rate. Over the last several years we’ve averaged about five percent or less in annual increases. Physician fees in the region have also been relatively steady.

The Office of the Actuary at Health Care Finance Administration published an analysis of the contributing factors to the increase in healthcare premiums. Health Affairs, a respected health policy journal, did the same last December. What is striking is that since 1960, when adjusted for inflation, consumer out-of-pocket spending is at the lowest it has ever been right now.

However, the factors that have contributed most to the recent increase in premiums haven’t been hospital, physician or nursing home spending, but drugs. Since 1994, the annual increase in costs to health plans for prescription drugs has been double-digit. This year the rise is predicted to be 16 percent.

CREST: There are drugs available today that weren’t available just a few years ago. Dr. Wood, could you describe changes occurring in cardiology?

WOOD: That’s one of the reasons the price of drugs has risen, because we now have a large number of drugs of a totally different class than we’ve had before. Many of these drugs provide substantial benefit. For instance, go back ten years. If you were diagnosed with heart failure you’d likely be dead within a year. Now there are two new classes of drugs that have been developed for heart failure which increase your likelihood for survival. That one year has risen to five years. Go back to just 1993 and the likelihood you would die in a hospital after a heart attack was about ten percent. Now, with a combination of new drugs and new interventions, the likelihood has dropped to four percent. Drugs are expensive, but they have produced a measurable return on investment if measured from the human standpoint. People are living longer and better lives.

CONNECT: HMOs often are vilified in the press. What’s bad about them, and what’s right?

WOOD: The concern most people have about their HMOs is similar to the concern they have about their insurance companies: somebody else is making the decisions about their coverage and healthcare. It’s not the patient, and to a certain degree, not the physician making the decisions. A third party is in-between. The loss of patient and physician independence are the factors causing most people a great deal of unhappiness with their coverage.

Some HMOs are extremely good, and some are very restrictive and make bad decisions. Just like there are extremely good insurance companies, and some that are very restrictive. Healthcare is an expensive part of American life. Our society will have to make some very difficult decisions about how much of our resources will be spent on healthcare. If we spend more resources on healthcare, we’re going to have less to spend on other things.

One success HMOs had was in successfully managing care – not just in managing dollars, but in improving services and reducing unnecessary procedures. The good HMOs have done a very good job at that. In some areas you can compare HMOs and fee-for-service medicine and show where HMOs are doing the kinds of preventive care that need to be done.

Though HMOs are significantly maligned, there are still a lot of people who are happy with them. Part of the reason is that people like some of the choices they have with their HMO. If you look at Medicare options, and if you’re a senior with an HMO, you have a certain amount of benefits that you don’t get with conventional medical plans.

CREST: In Minnesota, you don’t find the same visceral reaction to HMOs that you find on the East Coast, or in southern California. One reason for that is because HMOs have been around in Minnesota, in one form or another, since the 1970s. We grew into them gradually. Physicians here are practicing a smarter brand of medicine, and a more cost-effective brand, without compromising quality of care.

Another thing people like about their HMOs is that they’re predictable. You know your cost will be X number of dollars per month or that your employer will be paying it You know you’ll have very low out-of-pocket costs. You don’t have to fill out a lot of papers either because HMOs take care of that for you.

With Medicare, if you’re a senior in Miami, Florida, you can find an HMO that will cost you nothing. They have an added drug, eyeglass, and sometimes a hearing benefit. But if you’re a senior in Mankato you’ll receive none of those benefits because the amount of money paid by Medicare for that HMO here is half of that for Miami. It’s an unequal benefit.

CONNECT: How much net profit did the Hospital bring in last year?

CREST: $5.8 million. In the 15-month period leading up to that we invested in excess of $5 million in radiology alone, and $1.5 for the cardiac catheter laboratory. With that lab, just recently, we completed the first angioplasty in Mankato history. A team in Rochester was following the operation along with a doctor here in Mankato through a live video camera. All of the x-ray images that our doctor here was seeing, patient data, voice and a video channel were going to Rochester in real time.

The $5.8 million in profits are there to plow back into healthcare. We’re also investing in new facilities in Waseca and Springfield for physician practice, which also incorporates a family practice residency.

CONNECT: Do you have control over the profits locally?

WOOD: We’re part of the Mayo Foundation. But in the perspective of budgets, one expectation of Mayo Health System is that we’re responsible for planning and executing our own financial affairs, such that we are self-sufficient. That means we will be able to generate the necessary income internally to replace facilities and capital equipment. Now if it turns out we need extra money for a radiology project, then we place that amount in the budget, tell Rochester what we need to do and how, and we receive it if our business plan makes sense.

CREST: The most important steps in this process occur here in Mankato. Before we send a proposal to Mayo Rochester our management team first wrestles with it. That’s the toughest test. Then we send it to the local board of directors. If it passes there then it’s sent to Mayo Rochester.

CONNECT: With Mayo bringing new physicians into Mankato, and given Fairmont Hospital is Mayo-managed, I’d imagine people there may be able to travel to Mankato for some types of care rather than Rochester.

CREST: That’s true. But one thing you have to recognize: we stress patient choice. So while the patient may have a shorter drive, they still have the choice of going to Rochester. We honor their request.

CONNECT: Anything else to add?

WOOD: One characteristic of Mayo has been to increase patient choice in healthcare. We don’t draw everything into Rochester at the expense of other sites. If there is a need in Mankato, and if we can do it here rather than Rochester, we do it. And if there’s a need in Waseca or Springfield, and we can do it there rather than Mankato, we do it. We will increase our resources on a local basis to give patients more choice.

CREST: Our emphasis is on providing service as close to the patient as possible. For example, our board decided over a year ago to invest over $400,000 in technology that would provide radiology services on a demand basis to Springfield, Sleepy Eye, St. James and Madelia. They are tied into us on-line. They can take an x-ray this afternoon and send it to us over the phone line. The radiologist here will interpret it, and send back the interpretation the same day. That technology insures that the patient in Springfield is getting high-quality service. Before, a radiologist would go to Springfield twice a week, which meant up to a three-day delay.

Along that vein we’ve added other services. The addition of angioplasty capabilities is an example. The family practice residency program, where we’re affiliated with Waseca and the University of Minnesota, is producing more physicians for Greater Minnesota. In one area after another, our emphasis is on delivering care as close to the patient as possible, but always doing it in a very high-quality fashion. Investment in technology is a very acceptable investment.

Doug Wood, M.D. Biography

Born: June 24, 1951, Columbia, Mo.

Education: B.A. Carleton College, 1973; M.D. University of Missouri-Columbia School of Medicine, 1977.

Current Occupation: President, CEO, and Chair, Board of Directors, of Immanuel St. Joseph’s­Mayo Health System, Waseca Medical Center and Springfield Medical Center. Also Vice-Chair, Dept. of Internal Medicine, Mayo Clinic, Rochester.

Other Affiliations: Consultant in Cardiovascular Diseases and Health Services Evaluation, Mayo Clinic; Associate Professor of Medicine and Health Services Research, Mayo Graduate School of Medicine.

Jerry Crest Biography

Born: July 23, 1941, Minneapolis, Minn.

Current Occupation: Executive Vice President, Immanuel St. Joseph’s­Mayo Health System.

Education: BSB University of Minnesota, 1963; Masters in Hospital and Health Care Administration, University of Minnesota, 1968.

Former Positions: President, Immanuel St. Joseph’s­Mayo Health System; Administrator, Douglas County Hospital (Alexandria); Executive Vice President, Lakes Area Health Services (Alexandria); CEO, West Central Linen Service (Fergus Falls).

Current Affiliations: Valley Industrial Development Corporation, Board of Directors. American College of Healthcare Executives­Fellow.

Awards: Mankato Area Chamber and Convention Bureau Business Hall of Fame, 1998.

©1999 Connect Business Magazine