Froedtert ThedaCare’s Perspective on Strategic Integration

Transcript

CHAD MULVANY

On today's episode of Achieving Health, I've got the latest policy and legislative updates from Washington, D.C., for the week of September 1st, 2025. Then I'll be joined by special guests from Wisconsin-based health system Froedtert ThedaCare Health. My guests are Scott Hawig, chief financial administrative officer, and David Olson, chief business development officer. They'll share insights from their experience helping lead the recent integration of Froedtert Health and ThedaCare into one combined system. Stay tuned for a fantastic conversation.

ANNOUNCER

This is Achieving Health, a podcast from Forvis Mazars, where we delve into the topics that matter most to healthcare organizations across the continuum of care. Our goal is to help you navigate the dynamic healthcare landscape and achieve health at your organization. Here's your host, Chad Mulvaney.

CHAD MULVANY

Welcome to Achieving Health. I'm Chad Mulvaney, director in the healthcare practice at Forvis Mazars. Thank you for joining me. I'd like to start with a quick reminder about our OBBBA Tuesday webinar series, happening every other Tuesday through November 4th. We just hosted the first session, which provides an overview of the impact of H.R. 1, also known as the One Big Beautiful Bill Act, and explores how providers can prepare.

Our next session will focus on understanding the financial impact of the bill and communicating that impact with key stakeholders, including the board, staff, and community. We'll have a link in the show notes where you can register for the series and view past sessions. I hope you'll join us for these insightful conversations. We'll begin today with our Washington Watch segment, where I share updates on the most recent actions of federal policymakers and their anticipated impact on healthcare providers and payers.

Today's Washington Watch reflects information as of noon Eastern Time on Friday, August 29th, 2025. My comments are based on what's being reported by the D.C. trade press. At the time of the conversation, mixed with a lot of judgment about where things may go based on my experience in D.C., so today's remarks reflect information as of this moment and will change. While we're gearing up for Congress to come back from the August recess and then have to immediately jump into Fed fiscal 2026 budgeting, things are still a little slow.

As far as our agenda is concerned, first, we'll cover the Statutory Pay-As-You-Go sequester. The Congressional Budget Office recently sent a letter to congressional leaders from the Democratic Party suggesting that the One Big Beautiful Bill Act, also known as H.R. 1, will trigger the mandatory S-PAYGO sequester. While it's technically the Office of Management and Budget who makes this call, this is something that we will need to monitor and hopefully Congress will address when it gets back from recess.

Next, we'll talk about Medicare dual status hospitals. The House Ways and Means Committee issued a press release this week expressing concern about urban hospitals that have obtained rural status. While this has long been an issue of interest for House Ways and Means, the press release in question was triggered by an Arnold Ventures funded study tracking the growth of dual Medicare status hospitals.

We'll also cover CMS’ new draft cost report forms to collect Medicare Advantage data. As you'll recall in the 2026 Outpatient Perspective Payment System rule, CMS is proposed to require hospitals to report on their Medicare cost reports the median of their negotiated Medicare Advantage rates for each MSDRG for all MA plans. This data would come from the most recent version of the hospital's price transparency machine readable file, and create a new reporting burden for hospitals if finalized.

From there, we'll talk about the HRSA 340B rebate model and new FAQs that were recently issued on August 18th. HRSA issues these FAQs to provide clarity on a number of issues related to the proposed rebate model, and we'll run through a couple of them that I think are particularly interesting and illuminating. And then, finally, we'll talk about health insurance exchange premiums.

An analysis by the Kaiser Family Foundation and Peterson Institute of 312 insurers rate filings for the ACA marketplace plans in 2026 show a median increase of 18%. That's the largest jump since 2018. And we'll talk through what's driving those increases. All right, diving in. So, for Statutory PAYGO, in a recent letter to Congress, the Congressional Budget Office finds that H.R. 1 or the OBBBA, would lead to $536 billion in cuts to Medicare and billions more to other programs over the next decade, unless Congress takes action to prevent the automatic reductions either later this year or early next.

If the cuts are allowed to go into effect within 14 days after the end of the current session of Congress, the OMB would have to begin cutting federal expenditures. The cuts to Medicare are limited to 4%, but they still net out to an estimated $45 billion in fiscal 2026 alone, and another half billion or so, or more, over the next 10 years.

For perspective on the scale of the cut, CMS’ proposal to accelerate the recruitment of OPPS overpayments related to the impermissible 340B separately payable Part B drug policy is estimated to be $1 billion, actually, $1.1 billion, in calendar year 2026. Also, to give similar scale from the same rule, the proposal to implement site-neutral payments for drug administration services is expected to shave $280 million off of hospital payments, so this would be orders of magnitude bigger and a significant cut to Medicare payments for both inpatient, outpatient, and Medicare Advantage.

The reason why some are unaware of the S-PAYGO cut is that Congress has never actually allowed them to go into effect. They've always, and normally at the last minute, quote unquote, “wiped the PAYGO scorecard clean.” And while I suspect they'll do so again, I am less certain than I've been in prior years. And again, as I mentioned earlier, it's important to remember that if the cuts go into effect, they apply to all Medicare payments, including those to MA plans.

And so, for providers that are contracted with MA plans based on the pricer, the plan will likely try to pass that rate cut through. Moving on to the House Ways and Means, House Ways and Means issued a press release this week expressing concern about urban hospitals that have obtained rural hospital status. The press release states, quote unquote, “using the so-called dual-classification scheme, hundreds of sophisticated urban hospitals have gamed Medicare's wage index to get financial benefits of being urban facilities, while at the same time posing as rural hospitals to receive the significant benefits Congress intended for truly rural hospitals.

This includes an increase of up to 30% more Medicare funded GME slots and the ability to care for fewer low-income patients to qualify for the heavily discounted outpatient drug program under 340B, without any benefit to rural community.” And that's the Ways and Means press release. I think it's important to remember that when urban hospitals achieve dual status, this isn't a zero-sum game like much of the rest of the IPPS.

They're not actually taking benefits from rural providers. As I mentioned at the top, the press release was triggered by a study published in Health Affairs that highlights the increase from three dual status hospitals in 2017 to 425 in 2023. You know, it's worth noting that this was already on House Ways and Means radar and has been there for a long time.

It's also important to remember that the language was not included in the OBBBA, and the reason why I call that out is it was cited as saving $10 billion over 10 years in the menu of savers that was circulating at the beginning of the year, when discussions of the reconciliation package that eventually became H.R. 1 or OBBBA were under discussion.

But this is yet again another issue to watch that could be included in a second reconciliation package targeted as a deficit reduction bill, as was rumored to be in the process prior to recess, or a comprehensive bipartisan health package also under discussion prior to recess that would likely ride along with whatever bill ends up funding the federal government for 2026.

At this point, we're hearing conflicting messages on both packages. There's some in D.C. that I talked to that think the prospects are low, and there only be a minimal extenders package that accompanies the Fed fiscal 2026 funding bill. And these include kind of your traditional extenders like your Medicare dependent hospital, low volume hospital would be kind of in that minimal package.

There are others in D.C. that are suggesting that conversations about a broader package are ongoing, and staffers are in the process of aggregating policies into a bill that could garner the most support. I guess it is possible that two things could be true at once, but again, an issue that remains to be monitored.

In terms of the new draft cost report forms, in the 2026 OPPS rule CMS proposes requiring hospitals to report on their Medicare cost reports the median of their Medicare Advantage negotiated rates for each MSDRG for all plans. This data would come from the most recent version of the hospital's price transparency machine readable file. And critical access hospitals would obviously be excluded from this requirement. CMS intends to use this data to set MSDRG rates effective for Fed fiscal 2029.

The agency believes that there is a need to reduce reliance on hospital charge masters and develop, quote unquote, “market based approaches to establishing payment rates under the Medicare Fee-for-service system.” If this proposal sounds vaguely familiar, it's because the prior Trump administration finalized this policy in the 2021 IPPS rule and the Biden administration subsequently repealed it. Given that the IPPS is budget neutral, the impact of changing the data sources CMS uses to set MSDRG rates won't change the amount of dollars flowing through the system, but it will likely create winners and losers.

However, at this point, it would be difficult to model the impact in advance because the MA data by volume, by payer for each hospital is not publicly available to create the weighted average rate for each hospital and calculate new relative MSDRG weights. I think my concern with this policy is that it will definitely increase administrative burden without actually improving the accuracy of MSDRG rates, and, in fact, it actually may make the MSDRG rates less accurate as a reflection of resources used to provide inpatient hospital services.

And I say this for a couple of reasons. First, CMS ignores in this proposal the outsized role that Medicare fee-for-service rates and weights play in negotiations between hospitals and providers when they contract for inpatient services. So, the circularity introduced, should this policy actually be implemented, could cause Medicare fee-for-service rates to become detached from actual resource use, which is what the statute or what the language in the statute actually requires when CMS sets Medicare fee-for-service rates for inpatient services.

Second, CMS is rebasing concept using median MA negotiated rates also assumes that MA rates are negotiated under open market conditions, similar to the conditions under which hospitals contract with health plans for rates in the large group, small group and individual markets. However, nothing could be further from the truth.

There are a number of legal and statutory constraints that prevent MA rates from functioning, or occurring, in a functioning market environment that are completely ignored by this policy, and that is reflected by data. Actually, CMS has cited, at least in the 2021 proposal, about the relatively limited deviation, “a percent or two, 3%, plus or minus, at most” in most cases of MA rates from the actual Medicare fee-for-service rates.

If you want more on the technical issues, the comments I wrote for HFMA in response to the 2021 proposed rule are still available on their website. In terms of the 340B rebate model, earlier this week, HRSA issued FAQs clarifying provisions of its proposal. A couple of the key clarifications include that manufacturers have to give CEs, or covered entities, all the details they need to participate 60 days before the rebate model goes live.

While it's helpful, my concern is that they're not going to provide enough detail for it to be useful for the covered entities. It's certainly not hard to imagine that manufacturers may skimp on some of the more pertinent details. And while 60 days is nice that they're getting at least that much heads up, it's still not going to be enough time to set up a rebate cycle.

So, that's something that covered entities need to start working on now. Another one of the FAQs opens the door to manufacturers requesting from HRSA the ability to collect additional data elements beyond the 11 listed in the rule, and that HRSA will consider these requests. And so, when you look at the initial 11 data elements, they're mostly aligned with things, if not completely aligned with things, that you would need to submit for payment to a health plan.

So, the capture of those and the collection of those is usually pretty standardized. My concern is that once you start introducing more variability with different manufacturers, being able to ask HRSA and get permission to collect different things, we lose standardization. We introduce more complexity. And as we introduce more complexity, you increase the likelihood that covered entities will make mistakes and rebates won't be paid for administrative reasons that, quite frankly, have nothing to do with whether or not the covered entity was actually entitled to the rebate or what should be a discount.

The FAQ also clarifies that physician- or clinic-administered drugs are impacted. That original list of drugs, you know, initially look like it was Part D only, but that clarification sort of removes a question mark that I think many of us had and unfortunately, perhaps expands the scope more than we had originally thought. One of the other, I think, beneficial clarifications was that HRSA will review data on timeliness of rebate payment as an accountability measure, and could revoke the ability to participate if it finds that manufacturers are abusing this.

So I think it's going to be important again, to the earlier conversations that we've had around this, that covered entities do a really good job of collecting data, kind of like what you would collect today around your revenue cycle, on performance of the rebate cycle by manufacturer, what percentage of the rebates are paid on time, both in terms of count and dollars, by manufacturer, your denials rate by manufacturer, by dollar amount, by count, and things like that.

So that way, as you see, manufacturers not adhering to what HRSA has laid out in in the proposed rule, you can have conversations with HRSA, you can have conversations with your congressional representative, the administration, to help educate them as to how the rebate model is not working, and reducing resources that are available to provide health care services to populations who would otherwise maybe not have access to care.

Finally, once the pilot is implemented, the Office of Pharmaceutical Affairs will provide a mechanism for 340B program stakeholders to provide feedback on their experience utilizing the rebate model. Again, as I just mentioned, you need to have data to have that conversation. So, make sure you're collecting it. Also, you know, they have suggested that it's going to be the administrative dispute process, the ADR process, that will be the mechanism for where covered entities can take complaints about manufacturers in the rebate model.

I continue to remain concerned about how aggressively HRSA is going to act to address and remedy manufacturer noncompliance. Also, given that the ADR process is where HRSA has pointed covered entities to take concerns about manufacturer nonperformance or lack of adherence to the terms of the rebate model, I remain concerned about how aggressively HRSA is going to act to address and remedy manufacturer noncompliance, simply because historically, the ADR process has not resulted in satisfaction for covered entities.

In terms of health insurance exchange premiums, an analysis by the Kaiser Family Foundation and Peterson Institute of 312 insurers rate filings for ACA marketplace plans in 2026 show a median increase of 18%. That's the largest jump since 2018. Insurers attribute this surge primarily to rising medical costs (about a 10% annual increase in claims driven by higher prices and utilization in services) alongside inflationary pressures on administrative expenses, growing labor costs amid workforce shortages and the influence of high cost drugs such as GLP-1 therapies and other specialty medications.

Beyond simple health care cost trends, insurers are preparing for the likely expiration of the enhanced premium tax credits at the end of 2025, which on average, across those filings, it's estimated, will raise rates by roughly four percentage points as healthier enrollees are expected to drop out of coverage if those subsidies aren’t extended. Other additional factors include uncertainty around new tariffs on medical imports, the ACA marketplace integrity and affordability rules impact on risk pools; however, some of that may be blunted by a recent court decision, and the fate of federal cost sharing reduction payments, all contributing to significant variation in rate requests, which range from a 10 percentage point cut to a 59% hike across states.

Further analysis by the Century Foundation finds the impact will be more profound in rural areas. In the 32 states using healthcare.gov, out-of-pocket premiums for rural residents will jump by an average of 107% versus 89% in urban areas, driving rural households to lose over $1,000 annually in credits across 14 states.

And again, this is the out-of-pocket, not the actual rate increase requested. And the issue driving that spike is the anticipated expiration of the enhanced exchange credits. Some 2.8 million enrollees, including 776,000 adults aged 55 to 64 and 223,000 children, now face sharply higher costs and elevated coverage loss risk, and the risk is particularly acute in the upper Midwest and Southeast.

As I mentioned before, the spike in out-of-pocket costs is driven by the same trends as discussed above, and specifically, it's the expiration of the enhanced exchange subsidies. However, that expiration is magnified in rural areas because premiums tend to be higher, approximately 10% higher. Couple of things to think about on this. First, given some plans are already factoring in higher provider payment rates as a result of tariffs and other cost issues.

Providers should be sure to ask for rate adjustments in contract negotiations to account for the increased expense. Given that plans are already building that rate adjustment into their premium, the impact of the enhanced interchange subsidies will also have a disproportionate impact on non-expansion states. So, for example, Florida and Texas, according to the Kaiser Family Foundation, will lose $2.2 and $1.5 billion respectively in exchange funding.

It is also possible that a bipartisan agreement could extend the subsidies. However, again, kind of like the extenders package, we're hearing sort of mixed signals from D.C. as to whether that will happen. If the enhanced exchange subsidies are extended, it's very likely that there would need to be some offset, regardless of how long the extension was or how much it would cost.

And so as you start to think about what might be the offsets for that, you might see changes in Medicare, site neutral payment policy, PBM reforms, or given some there's been some preliminary conversations, changes to Medicare Advantage risk coding.

This concludes today's Washington Watch. Up next, I'll be joined by Scott Hawig and David Olson of Froedtert ThedaCare Health, to talk about their organization's strategic integration journey.

I'd like to welcome our guests for today's episode, David Olson and Scott Hawig of Froedtert ThedaCare, an 18-hospital health system in Wisconsin. David is the organization's Chief Business Development Officer, and Scott is the Chief Financial and Administrative Officer. David, Scott, really appreciate you both joining us today and I'm looking forward to the conversation.

DAVID OLSON

Thanks for having us. We're looking forward to this, too. Let's have a good talk.

CHAD MULVANY

David, maybe I'll start with you. And if you would, please tell our listeners a little bit about yourself, how you came to healthcare and your professional journey.

DAVID OLSON

Well, it could be a really long story, but I'll keep it short. Almost four years now in the business. I grew up in rural Wisconsin. My mom was a nurse's aide, so I was exposed to healthcare very early and I always knew I wanted to be a hospital administrator. So, you know, really just kind of progressively, kind of moved up the hierarchy.

Primarily, I was mostly involved in operations, CEO of a smaller hospital, small health system. But I came to Froedtert almost 14 years ago as the Chief Strategy Officer and really kind of taxed with: help us grow. Help us grow the business. And so, we've done that. I think, you know, Froedtert has been very successful and now kind of capping off with, you know, the combination of ThedaCare just really about 18 months ago was when this kind of finally came to pass.

CHAD MULVANY

Great. Thank you. It's great background and certainly, you know, aligns with a lot of what we've heard from others on the podcast about just how they got into healthcare, because it meant something personal to them and they felt a calling to it. Scott, how about yourself?

SCOTT HAWIG

Well, thanks, Chad. I, too, am a Wisconsin native. I've worked, long, stretch my career in the South, and so I mix a little bit of Fargo and a little bit of y’all. It's hard to throw the accent off, but I got into a traditional accounting, finance, by education or educational pedigree.

Got into the business through a startup company. So, my first venture was disease management in the ‘90s, when we would call people on the telephone to check in on them versus all the cool digital apps and internet, at the time when that came later. And so that was my intro. I had a long history with family and, kind of seeing, I'll say, healthcare firsthand, but I'd say it was the business side of that first company that that took me eventually to consulting and auditing, where I did all healthcare and got a good chance to see a lot of different facilities and structures and setups throughout the southeast.

And so, largely I was stationed North Carolina, but worked throughout South Carolina, Virginia, Tennessee, and Florida. And so some of that work entailed post-acute providers. A lot of it was health system, a lot of it was medical groups and insurance plans. And so, I'd say I got a chance to see every facet during that period of time.

There was buying of medical groups. There was selling of medical groups. There was buying of health plans, there was selling of health plans. So, it also was a view on strategy. What did the industry think they could do with risk enter it, vertical integration or not. And so, I got a sideline seat of that, at least as a consultant.

Eventually I needed to get off the road and so that got me into my career in academic medicine. So, I've worked at Duke University Health System. I've worked at University of Florida Shands, and now the last 13 years with David at Froedtert. So, it's been a fun journey. All the things that brought me back to Wisconsin were what David mentioned, kind of a very focused strategy on growth and risk, which I'm sure will be part of the conversation today, too.

CHAD MULVANY

You know, Scott, what I really appreciate about your background, particularly the consulting piece, when I think about how that applies to the role that you're in, that expertise that you gathered, that look into the different components that start to put together, that look like what the combined system is, probably has been an incredibly big leg up.

SCOTT HAWIG

I agree with that. And, you know, a lot of times when you bring in a consultant, that's in a case where it didn't work. And so hopefully there's some amount of lessons learned. Whether it was a strategic, you know, gap, in thinking or operational execution. And so, yeah, I try to remember those.

CHAD MULVANY

Would you please tell us a little bit about Froedtert ThedaCare, just kind of the system in general, and then how it came together?

DAVID OLSON

I'll go ahead and start and, Scott, you jump in at any point. So, we are the largest Wisconsin-based health system now. 18 hospitals, really kind of covered almost the entire eastern half of the state of Wisconsin. And as far as how we came together, and ever since I came to Froedtert, I kind of had this map, a map I'd show with our, share with our board of directors and had kinda every health system that we thought was one that we wanted to work with.

I don't want to say target. It wasn't a target. But you know, health systems that were kind of built like us, you know, nonprofit, high quality, and ThedaCare was always at the top of the list. But, you know, fiercely independent. And so it was about, I'll say it was about five years ago.

You know, I think I'd been stalking them. I remember Cathy Jacobson, our CEO at the time, had said, boy, guess who just called me out of the blue? The CEO at ThedaCare. I said, oh, Cathy, that was not out of the blue. That was not out of the blue at all. But, we had kind of a common story.

And that is, ThedaCare very much wanted to have, you know, hard physical assets, a hospital in Oshkosh, Wisconsin. And so just north of us. We had the same exact story, but it was in a different community, Fond du Lac, Wisconsin, just a little bit south of Oshkosh. And so we had this thing in common, that is, we had attempted to work with the providers that were in that market.

They weren't interested, but the markets were too important to both of us. And so we said, you know what? We should build two hospitals and we should build them together and do it as, what we agreed to do is as a joint venture. We've had a very successful micro hospital strategy in the Milwaukee market.

And so that's what we kind of said. Well, yeah, that makes sense. Let's do it together. And if we like each other, maybe we’ll do more together. So, like I said, that was about five years ago. And really that process of planning those two small hospitals, what that would look like, it just did it really kind of put us in a situation where we got to know each other a lot better.

But then I think we started seeing the market move. You know, there was another health system in Wisconsin. Bellin and Gundersen. They decided to get together. And then you had the Aurora-Advocate-Atrium kind of happened while we were all meeting. And we said, guys, the market's moving. If we're going to get together, we should do this now.

And so, I think that's where everyone was really surprised. We, you know, announced our joint venture. That was April, I think Scott or you know, somewhere in that timeframe and in about eight months, we kind of came together as a single entity. And I think what probably helped us facilitate that is, you know, before we even announced our letter of intent, we kind of had governance figured out.

We had senior leadership figured out. I mean, and those are the two big things that, you know, sometimes will derail, you know, combination. Anything else to add, Scott?

SCOTT HAWIG

Well, I would just, I'll talk a little bit about all of our capabilities. David does such a good job kind of describing, you know, the recent history and so I'll put it in context, because I do think maybe some of this conversation will morph into scale.

What are the benefits? What is the rationale? And so, what I would say is broadly we were, David cued it up, we were two strong systems. What I would say is very regionally focused, in the state we call it the coast or we're, we're on the coast of Lake Michigan. Along the east side. And when together, we feel like we are, you know, approaching kind of that super regional status, but single state, which we think is important and we'll get we'll get more into that.

But it's probably more about the collection of what we're capable of. We think we have, along this geography, a really compelling, comprehensive solution for the community. And so, David mentioned kind of the number of hospitals we've got a relationship with. I'll call with 3,400 providers. I say relationship because some of that we've got experience with some being employed.

We've got experience with the Medical College of Wisconsin and affiliation structure with an academic. We've got experience with folks who want to be independent. And, how we can work with them. And so, I think just the skill set to work with all the different types of structures, we’ve shown that within what I'll call is kind of a super-regional structure.

We've got 370 sites of care. So that clearly is an ambulatory strategy. Some of those high-acuity, I'm going to call them high-acuity outpatient centers. Some of them neighborhood hospitals that David mentioned all the way up to, you know, large community and academic medical centers. So, we really have the acute spectrum, ambulatory spectrum, different models covered. You know, you get into those 1,600 beds, 8,600 discharges, 22,000 employees.

And so that kind of scale and role in a community, you have 7 billion of revenue. What we have, what we talk about, at the same time is a health plan strategy. I mentioned risk earlier, but included in that, just two months before Froedtert and ThedaCare came together, so in November of 2023, we acquired the remaining 50% of a network health plan.

So now we are, this comprehensive care includes, 100 and almost 70,000 member, health plan, predominantly Medicare Advantage licenses out Medicaid lives that aren't included in that number as a commercial program, as an ACA coverage line. Included in that is a TPA, a growing TPA, or strategy for self-funded. So, when I'm when I kick this off by saying comprehensive from insurance and self-funded vehicles all the way to academic, community, ambulatory settings, we work with physicians. We think we have a really compelling, kind of super regional play.

CHAD MULVANY

Scott, when you describe what the two organizations had, certainly having spent some time with you and Cathy when she was CEO at Froedtert, and then knowing a little bit about ThedaCare from my time at HFMA, for me, when I saw the press release of the two organizations coming together, at least at the surface level, it made sense to me.

And then, as you've described, it certainly makes a lot more sense. When you think about the opportunities that the combined system creates for patients and communities, what can the two organizations do together specifically that you couldn't do as independent systems?

DAVID OLSON

I'll start. Scott, you please add. But, no, I think what we really now have is capability in rural Wisconsin as well, that that was not really something that was in Froedtert’s wheelhouse at the time. I think the other thing is that, and the other asset that we probably don't talk so much about is our relationship with the medical college.

Over half of the physicians that practice in Wisconsin have somehow been, you know, educated or produced, at the Medical College of Wisconsin. So, we have this ability to run a very tight, you know, health network that kind of can do A to Z. I mean, you know, some of the highest-end stuff that happens, you know, in Wisconsin is on our campus and how we impact, you know, small, rural Wisconsin.

And I'm glad that Scott touched on the health plan, too, because I think that that doesn't necessarily get all the headlines. But, its growth potential is just enormous, especially up in the Fox Valley, because ThedaCare had not been the provider network for almost a decade. And so it's just had explosive growth. So, I think those, it's all those pieces that kind of fit together, that really kind of power what we can do as a system.

SCOTT HAWIG

Yeah, maybe a couple pieces to add to that. I will get into talking about culture, but one of the elements, that was consistent across the systems was the spirit of innovation transformation, a boil that down to digital, each kind of pursuing digital strategy and so forth. And so, you know, when you ask, Chad, kind of what are some of the benefits or early opportunities, it's putting those two innovation vehicles and cultures together.

And so, we found there is a fair amount of overlap. And it was another way we crossed over and that their team frequently was there is a little bit of overlap and digital pursuits companies that we were working with. And then for those that didn't overlap, you know, it really inspired, I'll say, the team to dig in deeper on benefit realization, ability to implement more broadly.

And so, I'd say that innovation spirit is probably one item that came together. I think David nailed it with the Medical College of Wisconsin and subspecialty. I'll add to that. There's probably some capabilities in the South or in the legacy Froedtert market around pharmacy and lab as examples, specialty pharma capabilities, mail order pharmacy capabilities, outreach lab capabilities, esoteric lab testing capabilities that can now be delivered more broadly to the community and expanded across the geography.

So that's an example. And then, Chad, I think you, and particularly HFMA and the modern healthcares of the world knew ThedaCare well from its lean mindset, it's kind of cultural focus on driving excellence, driving out zero defects. That’s a great element. I'd like to say that that was consistent, I'll say across the systems.

But Theda’s long pursuit and history in it brought a lot of talent, a lot of experience to build off. There is probably early wins in the ACO CIN structures and capabilities and results and performance. So all those culturally use a lot of alignment about driving forward.

CHAD MULVANY

Sounds like a lot of opportunities—one, to preserve access, expand access with the innovative digital technologies, expand access in new ways, and then with alignment with the health plan and the broad physician network in the work that you've done in pop health to really get crisp around managing total cost of care and really offer a more compelling insurance product. When you, we've touched on it a couple of times, and I certainly thought David's comment earlier was interesting, or the comment earlier was interesting, that even before conversations started around the integration, you guys had a pretty good sense as to who was going to sit in what chairs from a leadership standpoint. And I think that really does speak to cultural alignment.

So, can you talk a little bit more about how important that was in the discussions, and sort of how you guys sort of sussed out culture or cultural fit?

DAVID OLSON

Well, I'll start I think that, we had so much in common right from the very beginning. I mean, we were both, you know, very financially secure, you know, so, there wasn't a driving reason that one of us was coming in weaker. Both very high quality. I think the one thing that I think probably surprised a lot of people on the Froedtert side was, that Cathy Jacobson was willing to retire.

Now, Scott and I had worked with Cathy for a very long time. She was always going to retire young. That was her mantra. And so it wasn't a big give on her part. I think that she was excited about it. And I think, you know, being able to kind of, have ThedaCare kind of be one of her last big successes was important to her.

So, like I said, that really kind of helped that we were able to kind of know the leadership structure. We kind of announced at the very beginning a lot of, like, the senior leaders that were going to stay with the organization. So you had kind of this sense of, boy, this is going to come together.

I think the other thing that, I'll say maybe a little bit surprised, but it's been very good is our new health system board. They have bonded so quickly. I mean, you never hear them talk about the north, the south. They very much view themselves as one system of governance. And so I think those things allowed us to kind of put, you know, at least put the deal together very quickly. Integration, that's another part of the story because there's always so much to do there.

SCOTT HAWIG

Yeah. I'll build a minute off what David mentioned that we founded a GPO supply chain structure together. That goes back probably 15 plus years. We formed, I'm going to call it, an ACO together before ACO was a formal definition and a thing. And it was really around how can a couple systems work together around the state to drive value to employers. And so there is a long history, probably all rooted, cheering for the Packers is probably an element of this, but all rooted largely around quality and experience. Learning that the cultures were a lot of like is probably 10 to 15 years in the making through all these little things of working together that David mentioned.

CHAD MULVANY

That sort of long experience that you mentioned probably does help. And it also, you know, I like the fact that both of the organizations were so community focused and really coming together for those reasons, I think maybe helped get priorities straight in their set first. During the exploration of a partnership between equals, there are typically significant synergies that underpin the logic between integration.

However, once the partnership is formalized, it's not uncommon for organizations to fail to realize many of the opportunities that drive deal logic. So, what's the process, or the framework, that you put into place to support disciplined execution, to capture the intended synergies?

SCOTT HAWIG

I can jump in there at first, and I want on that one. David, I would say a couple things on that. We did start pre-combination with outside assistance. So, David mentioned before the relationship grew very quickly. And we had outside help in thinking about that relationship and the governance and the leadership that David mentioned. And then when it got to that stage in April of 2023 for an LOI and, kind of, to move the relationship to the next step, we knew we wanted to move quickly.

And so, we got, you know, additional, I’ll say, outside assistance to come in with that combination and specifically to your point, Chad, integration assistance. What were the success measures? What is, what are we going to tell the community that we are aiming for as a result of this combination? What came out of that work is the need to document and show, I'm going to call it synergies, or value opportunities, but not because that was the thing bringing us together.

So this was not a back office consolidation. This was led by what we think we can bring to the community being together. And we touched on a lot of that kind of early on, that cape, that comprehensive care. And I'll say seamless provision of care across the geography.

But we also hold ourselves to a standard that this kind of scale should drive savings. So we got that outside help. Upon closing, we've kind of launched doing that ourselves. So we are, I'm gonna call it 18 months. And what I would say is we've been very intentional or methodical around continuing to grow market share, continue to drive the quality profile.

Our top decile performance continue to drive and improve patient experience. And being methodical on how we tackle, I'll say the expense base and growth opportunities. So that I think in your question, you've said the words disciplined execution, that we can continue to live up to that legacy. And so, we haven't made headlines by big, bold expense changes because first and foremost, we are continuing to kind of deliver on the performance. And, I'll say doing kind of bringing effectiveness of scale as it relates to what we purchase and how we deploy assets.

CHAD MULVANY

I think that approach makes sense also because you want to, given the unique nature of the culture and the fact that that's the secret sauce, you don't want to do anything big that would also upset that in the process. And to your point, it's not a turnaround situation for either organization where you need to make those big, bold moves so you can be a little more thoughtful about how you capture those synergies.

What's one challenge that you encountered during the cultural transformation process that you either didn't anticipate or fully appreciate at the outset?

DAVID OLSON

I'll start. You know, because we've had success financially, we've had success with quality. We haven't had a burning platform that we really need to change anything. And so I still think there are more opportunities on our integration path that, I don't know, I'm one that I would like to go faster. You know, I think, you know, I'd like to get to one epic platform.

You know, we just, we don't have anything that is, you know, creating this burning platform that says we've got to change immediately. And I think so as a result, some of our employees, some of our leadership is like, well, what's changing? Nothing's really changed that much. And I shouldn't say nothing. But, you know, we're trying be very deliberate. I sometimes wish we had a burning platform.

SCOTT HAWIG

I think really well said by David. You know, the good news that we just talked about is we are so laser-focused on performing. The flip side of that is, because we have done that, we've been successful at that, there's not a burning platform to point to that can corral or be a target to look at for 22,000 people.

So, you know, being great at communication and keeping the why and the success measures in front of people becomes the job. And so I think David nailed it. The other thing and maybe the eye opener to me, and some of it is timing, is the regulatory chaos, can I say, or the, all the potential regulatory discussions or what it may be and what gets passed or what doesn't get passed. The impact it has, in different regions, in a critical access hospital setting versus a community hospital setting versus ambulatory and physician groups, whether they be independent or affiliated up to the academic, right?

There's a little something in the regulatory discussions that impacts all of them. And the speed at which we, even if many of them were on the radar, for many years, the speed at which we need to estimate them, develop mitigating plans for them, to the degree we think they're going to happen, how we synergize and work collectively to help solve rural versus urban versus academic community versus ambulatory issues, you know, is a level of coordination very early on, you know, within the first 18 months of integration, that was a little bit of an eye opener just in terms of being ready for that and being able to provide the service to operators and support to operators to adjust to an environment that's pretty fluid.

So, I think if you needed a burning platform, that's maybe the one you can point to of saying, this is why scale is important. It's why talent is important. To be able to adjust when things like that happen.

CHAD MULVANY

As you reflect on the last 18 to 24 months, what's one thing that you might have done differently?

DAVID OLSON

A couple things come to mind. I wish we would have kind of figured out, more quickly, what our IT strategy was going to be. I think we have a decision around it now. But boy, the lead time on some of those changes, which is gonna help our integration. It's years to get to, let's say, get to a common EMR platform and get that.

That's probably one of the things that will help us integrate care across the entire enterprise the quickest. So getting to a decision has been, I think, one thing that has been a bit of a surprise that it's taken a little longer on some things.

SCOTT HAWIG

I'll add one to that list because we're getting to it now. And so I feel so good about it now, you know, I'll play Monday morning quarterback and say, boy, on day one, this would have been great, too. And, we've talked a lot about how these were two legacy, ambitious, you know, high-performing systems that a lot of times, and it's true in this case, leads to annual goals, long-term goals that are pretty long.

So this concept of say yes to everything, do everything. Get it in tomorrow. It's probably a little piece of each of our legacies. These were two ambitious organizations that would have a very thorough annual plan. Now, you come into an integration, and integration starts to take up a chunk of that annual plan, but you don't slow down.

So you have your, quote unquote, “normal” hundred things you wanted to do, and then you add integration on top of that. And so my point, or my opportunity, is that I could have been smarter, in terms of being a strong advocate for focus, knowing the amount of time, talent time, team time, communication time, how do you perfect a communication message when you're going through an integration? That the idea that one of the things on day one we came out with is saying, hey, it's important for us to keep up performance, but we're gonna, as part of that, we're going to shrink the number of tactics.

We're going to focus on a big three as an example, that that was something we probably we're doing it now. But you know what would have the effects of that been if we'd have done it a year ago for sake of argument.

CHAD MULVANY

Sort of temporarily set aside some of the day-to-day work just to focus more crisply on the integration, to put the resources there. Kind of slowing down to speed up, if you will. What's one thing that you wouldn't change as you reflect back on the last 18 months that you think you got absolutely right?

DAVID OLSON

I think the governance piece with the board is that I said that has been a bit of a surprise how well they get along. You know, they keep us honest. They make us work hard. But, they just so quickly, immediately said, no, we are one board for one enterprise. They never talk about north versus south and whereas I would say, you know, I think our staff, they still kind of feel like, boy, you know, all of my work is in the South. They're all my works in the North. So I do think we really got governance right.

SCOTT HAWIG

I think David nailed it. If you think of our timing and coming together in January 2024, I remember again two months prior to that was network health plan. You have a board, some constitution of a new board that had to drink from a firehose. What does it mean to own a health plan fully? What's going on on the Medicare Advantage side of the business, a membership side of the business, because that that industry has some things going on, too. What does integration look like for these two systems? How are you going to decide management teams integration? How are we going to keep performance?

And in about 4 or 5 months your second meeting of a new board, you're approving a budget, a $7 billion budget, a bigger budget than any of the legacy boards, you know, had to contemplate before, and capital spend associated with that and so forth.

And so, I think David nailed it. The governance, collegiality, the orientation that went in, in teaching members about ambulatory, acute, academic, community, rural, academic affiliation agreements, the amount of orientation training that went in that it's that people are comfortable enough to make votes, have discussions.

We have a high participation governance. You know, you can maybe say a word or two and then you're getting questions, which is the I think the exactly how you want kind of the DNA to go, in terms of positive feedback. So, I think David nailed that one.

CHAD MULVANY

So it sounds like one of the things that helped bring everything together was the investment in additional board education, so that everybody could speak the same language, same page, and really understand the issues that were being debated or discussed at the at the meeting. That's great. What advice do you have for other leaders navigating the integration process?

DAVID OLSON

Well, I think the one thing that we think about a lot is we will probably do this again. I mean, I think that we're still seeing healthcare consolidate. I think there's going to be more consolidation in Wisconsin. And so we have to kind of put processes in place that we don't have to kind of reinvent everything the next time something like this would happen.

And I think the good news for us is because of, now, of our size and scale, we're probably in a position to say this is how we do things. Whereas, you know, as ThedaCare and Froedtert came together, we kind of wanted the best of both. And this is something I think our board pushes us on too is, you know, you got to get this integration right, and you have to have processes that can be repeated.

SCOTT HAWIG

David's is really well said. I would frame it, too, as, get the success measures pre-close. Get the success measures right and then diligently hang on to those for the appropriate amount of time. You know through this new integration, new relationship, new culture period. Whether it's access, whether it's quality and experience, wherever growth is and I'll say financial stability or performance is make sure you get those right.

Communicate them to all the people. Have a compelling reason why that moves the community forward. The employers, some of the social determinant things that we are trying to accomplish in terms of global community health or population health, put them at the forefront, put them out in front of people, be aspirational about theoretically, we came together for a reason.

And that's a bold movement and moving those things forward and make sure all your messages are tied to that. The reason I say that is there's going to be lessons learned. We're going to go too fast or too slow. We're going to make a mistake. We're going to second guess the IT platform, whatever it may be. And I think always pointing to the success measures and whether you're advancing and moving them forward, even if incrementally at time versus falling back on them, provides the focus when there are hard decisions to be made. Operating model or design, moving someone's cheese, you know, here’s the rationale on why we're doing it, I think is, it can be a calming, a stable target to keep people's eyes on.

CHAD MULVANY

Scott, David, I appreciate the perspective on that. And it's certainly aligned with some work that I did HFMA when we were looking at what the characteristics of organizations that were better at integrating were versus those that maybe weren't. And that was one of the things that we learned from that work was that, to your point, have the list of measures around quality, access, cost, and then, you know, not only build the work plan for the integration around that, but keep that as part of the messaging and make sure to your point, understand the why behind it. So it becomes something that can bring people together.

As you think about this process, would be interested in hearing from both of you what your proudest moments are as you reflect back on what you've accomplished thus far, also understanding that there's more to be done. But you know, as you look back, what were the wins have been that you're that you really feel good about?

SCOTT HAWIG

I’ll cue one up for you first, David, and see what you think. I am most proud of the energy, attention, focus response to, priority we have been consistent about in the LOI and then and then even louder post-combination and that is access. The conversations we've had about access, and you framed it as maybe accomplished, Chad. And what I'd say is it's still a journey for us, but the amount of time, energy, focus, and commitment we have from all corners of the organization around access being quality, access being population health, access being good economically, good from a patient satisfaction, access being what we have to be good at. I have never seen the engagement on that and it could be left without being seen ED. It's clearly around primary care access and specialty access and what we can do virtually. You’re right, access goes everywhere. But the idea that it is part of every conversation we have, I think, you know, that there's overwhelming satisfaction and drive to say we are focused on the right thing.

DAVID OLSON

Yeah. No, Scott is absolutely right. I think that, you know, we've just launched, kind of, our new mission vision principles, you know? What is going to be our strategic plan for the next five years? And boy, we have never been more kind of, you know, laser focused on, you know, we've got three success measures and that's what we're going to focus on. And access is one of them. I think the challenge is going to be we're used to wanting to do everything.

The challenge is going to be what stuff are we going to stop doing? And I do, I think that's going to be a big effort because people want to keep on doing everything. And I think that if the work effort that they're doing doesn't kind of account for the three success measures, then that's the stuff that you stop doing.

CHAD MULVANY

David, Scott, thanks again for joining us today and sharing your experience with our listeners. And thank you to our listeners for tuning in. If you'd like to learn more about Froedtert ThedaCare's integration journey, we have a link to related content in the show notes. I hope you'll join me again in two weeks for the next episode of Achieving Health.

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