Randy Farrow and Dr. Julie Gerndt

July 1, 2014 Daniel Vance

Medical Morphing

Regional provider has become one of Minnesota’s two largest independent, multi-specialty clinics.

The Mankato Clinic isn’t.

To an outsider, the name The Mankato Clinic could sound a bit haughty, maybe bigheaded, as if it thought “The” Mankato Clinic was the only clinic in Mankato good enough to rate as a clinic, similar to what “The” Ohio State University often sounds like to students at other Ohio universities.

Yet it isn’t. The upper management team, which includes Chief Executive Officer Randy Farrow and Chief Medical Officer and Psychiatrist Dr. Julie Gerndt, began charting about six years ago a much more bottom-up, egalitarian course involving patients and providers rather than one top-down, do-as-you’re-told. Also, The Mankato Clinic Foundation, which receives funding mostly from its owner/physicians, has caringly and quietly donated more than $1 million over the last five years to regional causes. Nothing bigheaded about it.

The “Mankato” in The Mankato Clinic isn’t, too. This 98-year-old, physician-owned, 725-employee, multi-specialty clinic with 135 providers has outposts in St. Peter, Lake Crystal, North Mankato, and Mapleton, along with multiple Mankato locations. Nothing solely “Mankato” here.

And finally, the “Clinic” in The Mankato Clinic infers a place where patients go to receive medical treatment, which couldn’t be further from the truth considering The Mankato Clinic has provider teams of geriatric physicians and nurse practitioners going directly into assisted living and memory care facilities.

The name has been branded far too long to change. It has morphed into more.

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What are your responsibilities as CEO, Randy?

To work with all the key stakeholders of the Clinic to create a vision for where we want to go and to help define our mission, values, and culture. Our stakeholders are our patients, board of directors, medical staff, employees, community, employer groups, and insurance companies.

Do you see yourself more as the rudder or the engine at the back of the boat?

I’m more the engine at the back. I’m trying to draw on the knowledge and expertise of all the stakeholder groups to establish a plan to move the Clinic forward. I don’t necessarily have to be the person creating the plan. I’m obviously involved, but we have a lot of really smart people here. I like tapping into their knowledge and expertise.

Have there been instances in which key stakeholders have had completely different ideas about where they wanted the Clinic heading?

Sure, that happens. We’re going through a lot of change now, especially in trying to create more transparency around our clinical quality and patient satisfaction results. For the most part, we have an organization that realizes the need to change, but we also have folks that need to be brought along. Our challenge is creating a pace of change the organization can accept and change that is sustainable. So we try helping the stragglers understand why certain changes are important and how those changes connect to our mission. You don’t always have agreement out of the gate.

It sounds like one of your roles is to sell the direction you have decided on.

I would say that’s a big part of what I do.

Julie, what are your roles as chief medical officer?

My focus is more on the physicians and helping them get engaged in the direction Randy leads, and making sure our patients are up front in everything. The most important thing we talk about is taking care of relationships. When it comes down to it, in the practice of medicine, our top relationship is with our patients. So that’s what we have to protect first and foremost—maintaining the direct relationship between a provider and patient, which includes maintaining their trust in what we do, making sure the care we provide meets current standards, and listening to them. Sometimes their choice (in care) does not line up with current standards. They may have other circumstances in their lives or situations that draw them towards a different choice.

It seems it would be a tightrope walk sometimes. You operate a business and have to move people through, but you also have to relate well to the patient, which takes time. If they don’t feel heard, they may not come back.

(Julie) Providers can know all the latest medical research on a particular health problem, but if they aren’t understanding what the patient wants or needs or their circumstances, they may not be successful. Or if their delivery is poor. Then we haven’t met our mission of serving our patients.

What do you mean by “if their delivery is poor”?

Things like bedside manner, how well they know their patients, and their sensitivity to what their patient is feeling and thinking.

Mankato Clinic is one of Minnesota’s largest physician-owned, multi-specialty groups, with 135 physicians and advanced practice providers. Are you the largest?

(Randy) It’s between us and a similar group in Willmar. Our two really are the last large multi-specialty groups left in Minnesota that haven’t joined or become part of a larger system.

Go into detail about the process of a physician becoming part-owner in Mankato Clinic.

(Julie) It starts with recruitment. When recruiting, we’re looking for well-trained people, with good interpersonal skills, who share our values and a willingness to work within our structure. We look for people with leadership skills or some interest in leading. After they begin working here, at the end of the first year, we look at how the year has gone, and their practice, and the board decides whether to offer shareholder status.

Do they have to buy in?

(Randy) There is a buy in, but it’s more symbolic. You purchase a share of stock for $3,600. What that gives you is the right to have a say in electing the board of directors and voting on significant by-law changes.

When retiring or leaving, providers get back their $3,600. Our arrangement is unlike that of some groups where the stock value changes over time according to corporation assets. Whoever set up our system was wise. For one, we don’t want to create any barriers for physicians wanting to join our group. Most physicians come out of medical school with a lot of debt. If on top of that they had to buy in for up to several hundred thousand dollars, that would hurt our recruitment and make their potential leaving complicated later on in terms of deciding on what their stock was worth.

In terms of recruitment, we look for people that value having some ownership and a say in things. That’s our business model. If we’re going to be successful, we have to have our physicians out front leading. We’re physician led, and the physicians hire business people, like me, to help run the business.

It would seem your clinic would have a recruiting advantage over other healthcare providers in our region because you offer ownership. Do you believe the carrot of ownership helps you recruit a higher quality candidate?

(Randy) It brings in a different type. Some people like the security of joining a larger system, working eight to five, getting a paycheck, and not having to worry about the business aspect. We don’t have the deep pockets of a larger system. When buying into our model, you’re perhaps taking more risk, but the rewards can be there for people who like that path. We’re looking for physicians that want to have a say and that take ownership in our future.

So yours is more of an entrepreneurial model.

(Randy) Yes.

It seems your ownership model would have less turnover.

(Julie) We have very little. The vast majority of physicians stay here and put down community roots. They tend to be a hard-working, ambitious bunch who like having a say in their business. They’re fairly involved in committees. Our leadership is decentralized.

What committees can a physician be on?

(Julie) Finance and budgeting, compensation, electronic health records, quality, and improvement projects. We have team meetings at each of our ten sites. We have not only local ownership, but also local decision-making.

Tell me about your family background, Randy?

I grew up primarily in Rochester. My mom was a nurse and my dad, a Mayo physician for 32 years, had a distinguished career as a pathologist. At college, I had leanings toward medical school, but found, as I took course work, that medicine wasn’t for me. Instead, I went on a business track. After college, I didn’t start out in healthcare and didn’t know then I would later be going into it. After finishing my masters in business administration, I started with a small company as a financial analyst. Eventually, I had an opportunity to get into healthcare with Health One, a predecessor organization to what became Allina Health. I was with Allina almost 20 years.

You had six positions with Allina from 1989-2008 before joining Mankato Clinic. Of the six, which was your favorite and why?

My work at Mille Lacs Health System was very rewarding. It was my first job as an administrator after coming through the financial ranks. I had a good mentor, Tom O’Connor, who suggested I apply for the Mille Lacs Health System job.

What did he see in you?

He realized I had the capability to create relationships and the momentum necessary to move an organization forward. I had people skills. Mille Lacs was struggling. It had a small hospital, an attached nursing home, and three clinics. Financially, it was on a downward spiral. They had just terminated their CFO and CEO. There were morale issues. The board was disillusioned. It was a tall order on my first administrator job for me to figure out how to move things in a positive direction. It wasn’t easy, and I made mistakes, but we built momentum and thought positively about the future. The community supported a major fund-raising venture and we remodeled the hospital and nursing home. When leaving, I felt a sense of accomplishment—that I had done something to make a difference in the community.

What about you, Julie?

I grew up in Manitowoc, a town similar to Mankato. My father was a surgeon in a multi-specialty clinic, much like what Mankato Clinic was 20 years ago. I grew up with him being on call every third night and up at night taking care of patients. I wanted to go to medical school and take care of people, too. When I started as a pre-medical student, women made up about three percent of medical school classes. I’m the oldest of six. Five of us are physicians and the other is a nurse. My mother was a nurse.

Does your family get together on holidays and talk? If so, what’s the conversation like over meals?

We have big family gatherings. Most my siblings are in surgical or surgical-related specialties. I am not. When younger as physicians, we talked shop a lot, and there was a little bit of competition. But now we’re in our late 40s and early 50s and mostly talk about our kids.

When I first came to Mankato, my husband (a dentist) and I were both starting our practices. I was looking for a psychiatry practice where I could share a call because I knew I wanted to have kids. So I joined the Psychiatric Clinic of Mankato, and had a wonderful mentor there, Delmar Eggert. We shared patients with physicians at Mankato Clinic, and former (Mankato Clinic) CEO Roger Greenwald was a supporter of our practice as I gained more experience and took on more leadership responsibilities. In 2001, we decided to merge our clinic into Mankato Clinic. I worked as a Mankato Clinic division chair for a year before deciding the boardroom was where I wanted to be. I was one of the first women on the board, the first female chair of the board, and was board chair when Randy was recruited.

(Randy) She was a big reason I came here.

(Julie) We had our eye on building transparency and a culture that wasn’t fear-based, a culture that could put the interest of medical practice and patient care first. We got what we were looking for in Randy.

What impressed you with Randy, then and now?

(Julie) He’s wonderful in creating relationships. He reads people well and brings people together for successful, creative solutions. He relates to physicians in a way that generates trust. Our culture here is different than before. Randy, I haven’t said all this in front of you before. (Laughter.) But I have said it behind your back. (Laughter.)

What do you love about psychiatry?

I love listening to stories and hearing about patient’s lives. I love having a positive impact on the quality of their lives and on what they can accomplish. As a medical student, I first was interested in neurology, but when going through the psychiatry rotation, figured out I could have a greater impact if I practiced psychiatry.

Mankato Clinic has a pediatric center coming, the Mankato Clinic Children’s Health Center. What went into the process of going forward with that center?

(Randy) As part of our strategic planning process a year ago, we looked at our strengths. We’ve always been strong in pediatrics and women’s health. We were out of space at our main clinic. We realized if we moved pediatrics (to another site) and created a center there geared toward kids, we could build on our strong pediatric program. It also would benefit the community.

Gillette Children’s Specialty Healthcare will be a tenant and bring in more specialized pediatric sub-specialists. We’re also partnering with Pediatric Therapy Services. In terms of Gillette, some of their patients have to drive to the Twin Cities to access their services. Those services will be available here now. The new pediatrics building will be unique. For many kids, seeing the doctor isn’t fun, but this will be fun. We’ll have nature scenes of kids doing healthy activities, for instance, in order to promote both health and wellness, and line up with our mission and vision.

(Julie) Integrated with that will be child psychiatry and psychology services.

Ecumen Pathstone in Mankato has a new program in which their residents are being weaned off some anti-psychotic medication. Are you familiar with the program?

(Julie) The move to try to take our older patients and frail elderly off atypical anti-psychotic medications was a mandated change led by the State of Minnesota. It makes good sense based on medical information and the risks of the drugs. Some of my patients have had lifelong mental illnesses, and will need to stay on their medications because it would cause them misery if they don’t. I am familiar with the program and very supportive.

But when you mention Ecumen, we’ve made a commitment, not only to serve the younger members of our community, but also our frail elderly patients in assisted living facilities. We have a new program called Bluestone Vista@Mankato Clinic, which provides primary care services on site. We’re making it possible for people to get their imaging studies and labs at their assisted living facilities, so they don’t have to go out in winter cold to see their doctors. We’re addressing chronic illness and new acute problems on site and helping them avoid the hospital. We just started in February.

Who are you partnering with?

(Randy) Ecumen Pathstone, Oak Terrace, Primrose, Laurel’s Edge, Keystone, Cottagewood Senior community, Ecumen Country Neighbors in Lake Crystal and Mapleton, Heritage Place—Mapleton, Monarch Meadows, Pheasants Ridge, Sterling House, Waters Edge, and Autumn Grace. We have our care team in place, including Dr. Tom Brennan, who joined us in June, and a nurse practitioner and a team coordinator. It’s a model that fits the patient-centered medical home concept of getting to know the residents, their families, and staff, and working as a team in a more proactive approach to care.

(Julie) One key component is we’re using technology to support communication between the team and patient family members.

Due to the Affordable Care Act (Obamacare), your number of patients should be rising the next couple of years. Yet the ACA didn’t address increasing the number of physicians to meet growing demand. Right now, a shortage of psychiatrists exists, for example. Something has to give. What’s going to happen?

(Julie) We will continue to recruit physicians. But we also will have to build care team models to fill gaps. I anticipate we will have more nurse practitioners and physicians’ assistants, and will make sure we have physician expertise available to all patients. To successfully recruit physicians, we have to have an organization attractive to physicians.

(Randy) We believe the new people with coverage will start accessing healthcare differently. For example, rather than waiting for a condition to get out of control and showing up in the emergency room, we hope the new people will begin establishing a relationship with one of our primary care teams and getting care to prevent more serious acute issues. I don’t know how big the (physician demand increase) will affect this market because we don’t have a high uninsured rate. We’re thinking the bigger increase in demand will occur on the front end in terms of primary care and preventive medicine.

What is your sales pitch to recruit physicians fresh out of medical school to Mankato?

(Randy) Many like that we’re multi-specialty. They get a chance to meet their colleagues here. They know the people they refer to and can pick up the telephone or walk down the hallway (to consult). We have seasoned physicians here to mentor younger ones, which can be a selling point to physicians just out of residency.

(Julie) I hear from people in the community that a different sort of attitude and culture now exists at Mankato Clinic. The physicians feel they are making a difference, and have a nice balance between autonomy and being part of a well-functioning system. They have opportunities to grow professionally. So if a young physician has opportunities to grow professionally and has a reasonable amount of autonomy, and is successful, and does meaningful work—meaning he or she has relationships with patients that matter—that physician will likely stay.

You’re familiar with the business model at New Ulm Medical Center. Why haven’t many other groups adopted their model?

(Randy) They have a model in which the hospital is part of a larger, nonprofit system that works with an independent clinic group. The physicians are integrated into the medical center, which results in patient continuity of care. The physicians take advantage of the many good resources in that system. It’s a nice model, but doesn’t always work. You have to have a hospital willing to work with the physician group. If you don’t, then it likely wouldn’t work.

Randy, with you I see a man who worked for Allina Health 19 years. I also see an independent hospital in St. Peter that used to be managed by Allina and if they were to affiliate again probably would do so with them. Allina Health already has a presence in this region at New Ulm Medical Center. I also see Mankato Clinic as one of the last two big independent physician groups in Minnesota that hasn’t merged with a larger system. I put all those pieces together and wonder of the possibility of anything happening between Mankato Clinic and Allina Health?

(Randy) There are always possibilities. I think people were a bit nervous when I first came here because I had a strong Allina background and some thought I might be trying to steer us that direction. We look at our independence every year in meetings, and discuss whether our business model is sustainable or do we need to affiliate because of everything changing in healthcare. At this point, we have a model that works. We value independence. As of now, I don’t see us losing it. But do we want to partner with the hospital in St. Peter on certain things? Absolutely. We’re in discussions with them to figure out how we can support them. We also have a clinic in St. Peter. We’re always looking for partnering opportunities. But do we want to sell out? No. Do we want to merge? No.

Describe your relationship with Orthopaedic & Fracture Clinic?

(Randy) Historically, it has been strong. There were strained relations when we hired our own orthopedic surgeon in the mid-’90s. But then we had a joint vision to build a surgery center together at Wickersham Campus, where we’ve been 50-50 partners. We’re both independent, and have wanted to create opportunities to work together and not compete.

Several states have enacted medical malpractice liability limits. For example, in Texas, I believe, the limit is $250,000. Other states have higher amounts. What’s your take?

(Randy) Selfishly speaking, we would like to see caps. We know of one physician group in the Twin Cities that didn’t have adequate coverage and had a judgment against them of about $20 million. They were forced into bankruptcy and eventually merged into one of the larger systems that became part of Allina Health. As an independent group, we’re nervous about risk and we take out a lot of insurance. It adds to our costs. Our malpractice rates compared to many other states are fairly reasonable, though. There are some states where physicians have left because they couldn’t economically sustain a practice due to high rates.

As for electronic medical records, what safeguards do you have in place to insure a patient’s records aren’t seen by unauthorized personnel or tampered with by hackers?

(Julie) We have an elaborate safety plan that is reviewed annually. We have strict federal rules to follow internally and cues within the electronic health records to remind everyone of the rules.

Back in the old days, when records were kept on paper, it would have been easier for someone to just open up a paper folder and look over a patient’s records.

And if someone opened up paper, we had no way of knowing who did it. Electronically, if going into a file, you leave a footprint that lets others know you were there.

(Randy) Another thing we’ve done is put encryption into our laptops, so if someone stole one, it would be virtually impossible for them to get in to any records. In fact, we can remotely initiate a self-destruct kill command on a laptop, like with Mission Impossible.

When you first come into work, what is your number one priority?

(Randy) Coffee, initially. Dark coffee, with lots of caffeine. (Laughter.) Seriously, it’s always on my mind that we’re moving in the right direction fast enough. What keeps me up at night are the unknowns, such as what’s happening with healthcare reform. We have mid-term elections coming. Will that change things? We’re focused on patients to improve their health and experience here, and are mindful of making care more affordable. We have to let the chips fall where they may on things we can’t control.

(Julie) Another challenge is recruiting people with a strong sense of direction, who tend to be entrepreneurial, hard-working, hard-driving. Keeping them going in the same direction and focused on the same goals is a challenge.

River’s Edge Hospital and Clinic is sending physicians on site to a manufacturer, LeSueur Inc. They’ve helped reduce LeSueur’s healthcare costs. Have you considered offering partnerships like theirs with businesses?

(Randy) Absolutely. We have a strong occupational health program and have established contracts with a number of larger employers. We’ve been meeting with employers to talk about changes in healthcare and their risks in terms of providing insurance and what can we do to partner with them in a more comprehensive way to lower their costs. We’ve talked about on site clinics to achieve savings.

What’s keeping some of those relationships with businesses from developing further?

(Randy) It’s all new to them and they’re nervous about how their employees will react because the employees are used to the current system. An employee, for example, may already have a primary care physician and may not like switching to a different one on site, even if the business is providing financial incentives for the employee to see the new physician.

What systems do you have in place to receive input from stakeholders?

(Julie) Over the last three years, we began including patients in our decision-making process. We ask them what they want. We have an advisory committee. We started this new system a year ago with a pediatric advisory group for our children’s health center and expanded it to include a broader spectrum patient group. Our communications director finds people over the whole spectrum, including parents of children with special needs, older patients with chronic illness, and caregivers of older patients. We seek people who aren’t afraid to speak their mind.

Do you talk to each person separately or in a group? For example, if I were an 85-year-old senior and there were physicians at the table, I might be hesitant to speak.

(Julie) The people we pick are all pretty vocal. (Laughter.) They feed off each other. The questions vary depending on the project. We’ve lately been asking them questions about how they define access. The conversation is dominated by them, not providers. The physicians are there mostly to observe.

Julie, when you have been in the room, what has surprised you?

That seniors are using technology—not with the same intensity as our teens, but they want access to their providers through email and chats, too. We’re trying to design systems that match what we hear.

Anything else?

(Randy) I’m still relatively new, but the Clinic itself has been around nearly 100 years. Mankato Clinic has a very good group of people that has come together. The times are uncertain, but we have hung together, grown, responded, and evolved. We want to be here another 100 years for the area, and keep working hard to provide high-quality service.

And if you’re hiring entrepreneurial-style physicians, you seem well positioned for uncertain times.

(Julie) I came here because Mankato was similar to the community I grew up in. I began working here because Mankato Clinic had a group of physicians I wanted to be associated with. We’re involved in the community. We raise our families here, and belong here, and we stay. When you live in the community, the people you take care of are your neighbors and friends.

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What They Offer

Begun in 1916, The Mankato Clinic is a physician-owned, multi-specialty practice clinic offering the following specialties: Allergy; breast health imaging center; cardiovascular medicine; dermatology; diabetes and nutrition education center; diagnostic imaging; doula services; ear, nose, and throat/facial plastic surgery; eye care center, family practice, foot and ankle; gastroenterology, Health Care Home at The Mankato Clinic; internal medicine; laboratory, laser refractive eye surgery; fertility program; nephrology; nuclear medicine; obstetrics and gynecology; occupational medicine; oncology/hematology; optical center; pediatrics; plastic and reconstructive surgery; psychiatry and psychology; pulmonary medicine; sleep center; surgery, including colon and rectal; urgent care; urology; and wound and ostomy care.

Getting to know you: Randy Farrow

Chief Executive Officer

Born: December 7, 1960, Shaw Air Force Base, South Carolina.

Education: John Marshall High (Rochester) ‘79, Gustavus Adolphus ‘83; Colorado
University ‘85, MBA.

Involvement: Mankato Area Foundation, current chair; Mankato Clinic Foundation, member; American Medical Group
Association, member, CEO committee; and Mankato YMCA, building capital committee.

Getting to know you: Dr. Julie Gerndt

Chief Medical Officer and Psychiatrist

Education: Lincoln High School ‘75
(Manitowoc, Wisconsin), University of Iowa Medical School ‘83.

Involvement: First Presbyterian Church (Mankato), stewardship committee; Minnesota Psychiatric Society, member; Minnesota Medical Association, member; American Medical Association, member; American Medical Group Association, member, chief medical officer committee.

The Essentials

The Mankato Clinic

Web: mankatoclinic.com

Telephone: 507-625-1811