Todd Sanders:
Well, welcome back to the podcast. We are very honored today to have Peter Fine who is the CEO of Banner Health here in Arizona. Peter, welcome. Pleasure to have you. Why don't we start with I think most people know you or know of you, but for those who don't, tell us a little bit about yourself and maybe something that we wouldn't find on your bio.
Peter Fine:
Oh, I could do that. There's probably a number of things you wouldn't find in my bio. I'm now in my, what I think would be let's see, 43, about 45 years in this business.
Todd Sanders:
Seen a lot of change.
Peter Fine:
Went to graduate school at George Washington and I've been in Banner as the CEO for 23 years. It's a rugged business and high pressurized business, and people don't usually stay that long in one place. I've had opportunities other places, but I've really enjoyed the atmosphere of Arizona, Phoenix, the people, the opportunities, the growth of the community. So, we just made it a home now for over two decades and we're glad we made that decision. But if I had to give you something that nobody knows for my bio, I'll give you two things.
Todd Sanders:
Excellent.
Peter Fine:
One, I was a ski bum in Aspen before I went to grad school.
Todd Sanders:
Well, there's hope for all our kids out there that want to go be a ski bum somewhere.
Peter Fine:
And the only reason I left is I got into grad school. Otherwise I'm not sure I would've left, which probably would not have been the smartest career decision I ever made. And the other thing is I drove a taxi cab in New York to make money to work my way through college.
Todd Sanders:
Well, that probably prepped you to be in industry and not be phased by all the ups and downs.
Peter Fine:
Did it for five years.
Todd Sanders:
So, that show Taxi that I'm sure you're familiar with back in the day, any truth to that? Did any of that strike a chord with you?
Peter Fine:
I drove a better cab.
Todd Sanders:
Okay.
Peter Fine:
I drove what was called a checker which were giant tanks of a cab. And it was a good experience to learn how to treat people, how to behave around people, customers in particular, how to do well earning tips by doing well with people. Get out, help them with their luggage, be nice. Never hurts to be nice.
Todd Sanders:
Yes. And it costs nothing.
Peter Fine:
And costs nothing. And so it was a good learning experience, believe it or not. You would think, "Oh, he drove a taxi cab and that helped them become an executive in the future?" And the answer is yes,
Todd Sanders:
Absolutely.
Peter Fine:
It really did.
Todd Sanders:
Fundamental things that you learn.
Peter Fine:
A lot of life lessons.
Todd Sanders:
And then before coming to Arizona, where were you?
Peter Fine:
I was in Milwaukee and I worked in another system there. I had been there for about, let's see, seven years.
Todd Sanders:
And then you were recruited to come to Phoenix?
Peter Fine:
I was recruited to come to Phoenix.
Todd Sanders:
And so what was the journey at Banner then?
Peter Fine:
The journey at Banner was taking over a company that 14 months before I got here, had merged two companies called Samaritan Health System, which would be very familiar, people who had been around a while, and the Lutheran Health System, which was based in Fargo, North Dakota, but had assets here in Mesa.
Todd Sanders:
So kind of a challenge by the time you got here, I mean from-
Peter Fine:
It was a challenge. 14 months and the two CEOs left and they recruited somebody new. And it was a difficult time for the company because the culture hadn't been formulated yet, and you had issues with that merger in which there were financial issues in the early stages. So, I was recruited to be a change agent. And that gave me a tremendous amount of freedom. And the board gave me a tremendous amount of freedom to think through what this company should look like in the future.
Todd Sanders:
A little daunting though.
Peter Fine:
I like a challenge.
Todd Sanders:
Yeah. Maybe you didn't know what you didn't know yet.
Peter Fine:
Well, I knew enough but clearly there are always surprises. And one of the keys was how to get people focused on a future state rather than a past state or present state.
Todd Sanders:
And I can imagine in a merger that probably there was a lot of protectors of the past that you had to deal with.
Peter Fine:
Oh, tons. One of the first things I had, I would go and walk around the system, which was at that time in 14 different states. Now we're in six. And I would ask people, "Who do you work for?" And they'd say, "Well, I work for Mesa Lutheran," or, "I work for Good Samaritan," using two names that are familiar down here. And I said, "Well, I thought on your paycheck it says Banner Health." So, building the culture of an organization was an early challenge that had to be done. Fixing the financial situation of the organization had to be done. And we produced a document called the Stair Step. The Stair Step was a document which each step going up on different set of activities and tactics and part of the organization it was a 20 year game plan to take banner from an organization that nobody knew-
Todd Sanders:
Correct. It was brand new.
Peter Fine:
To an organization that had national awareness. And we achieved that and we have that. And it was a long effort, lots of people involved. Part of my job was to help formulate the thinking of what we could be as opposed to what we were and cause that to allow the vision that the boards had when they merged, that vision to become real and live within the organization for the-
Todd Sanders:
It sounded like that backing of the board early on was really key for you because you had to probably make some unpopular decisions and some pretty significant decisions.
Peter Fine:
Significant and unpopular. And without that backing, I don't think I could have done that. I don't think it would've been possible to have pulled that off. And having the opportunity, which was nice, and the freedom to create something. Now it's a giant insurance company of over $3 billion in revenue coming in through our assurance division. We have a big surgery center company that is a partnership with Atlas Health Partners, in which when we started we had maybe five outpatient surgery centers. Now we have 30, a little over 30 with a big game plan for a lot more. Built a big ambulatory business, a big imaging company with about 30 sites. Partnerships have been very important for us. By the way.
Todd Sanders:
I was going to ask you about that. What kind of role do they play?
Peter Fine:
Well, critical in a number of things. So by talking about imaging, we own about 30 sites, but our clinical partner for professional services is RAD Partners. And it's a big group of radiologists who serve our outpatient clinical sites. And rehab, we wanted to get much bigger in rehab and we partnered up with a company called Select Medical out of Pennsylvania, in which in the last few years we now have well over 50 Banner Health physical therapy sites, outpatient sites, and three rehab hospitals, one downtown, one in the Northwest Valley and one in the East Valley. And so we built quite a substantial business around rehabilitation medicine. We have a giant partnership with Quest Diagnostics, the giant lab company in the country, second biggest provider of laboratory services in the country. Here locally, it's called Quest Diagnostics, and the biggest player in Arizona. And that's another partnership in which we co-own that product.
Todd Sanders:
And it sounded like those partnerships were key in making this growth possible for you.
Peter Fine:
And it was because what was important to me was to have partners who had skillset sets we didn't have. And setting ego aside, we had to admit that we didn't have those skillsets.
Todd Sanders:
Of course. Can we do this in-house or do we have to go outside?
Peter Fine:
And some we did in-House. Urgent care has been our own product. But surgery centers, out RAD Partners partnership for the physician side. And we had to pick and choose each one of those things. But we made a very big decision probably about eight years ago in which we said we needed to get closer to the customer. If we wait for the customer come for an inpatient visit of some kind or major surgery, that's far and few between. So, we built these series of businesses, surgery center, imaging, urgent care, rehabilitation medicine on an outpatient basis, laboratory basis, and so we built these things in which we could touch the customer more often.
Todd Sanders:
You weren't just a hospital that you would see once in a while.
Peter Fine:
And that was part of the brand building.
Todd Sanders:
But it seems like that model that you built out has become sort of the standard now. All of a sudden you see this other systems have now started to do this as well.
Peter Fine:
Right. And some can can't. It takes some guts to build that. And even building Banner Aetna insurance company from scratch was a big deal by creating that partnership with Aetna as the big insurer. It's the third largest commercial insurer in town now. And we have a very large Medicaid insurance company and a Medicare Advantage insurance company. And those are all major strategic decisions on how we wanted to position ourself as being a company where you could come into the system through the insurance product, but then you can tap into services that are all part of the network of that product
Todd Sanders:
Holistic type of approach.
Peter Fine:
Very much so.
Todd Sanders:
So if you took that list you made 20 years ago, how well did that jive with what you see today?
Peter Fine:
It actually did a very good job of setting up today. Each one of those stair steps, steps on the stairs, had a different activity. First one in 2001 and 2002 was turn the company around. Stabilize it. Another step was all about performance. How can we measure ourselves against the best of the best around the country and measure ourselves against ourselves also?
Todd Sanders:
And not just in Phoenix. You're talking about nationally.
Peter Fine:
Not just Phoenix, nationally.
Todd Sanders:
Okay.
Peter Fine:
So, we built a performance ethic into the mindset of leadership.
Todd Sanders:
Was that tough given that merger and people?
Peter Fine:
Creating the tactics were tough. Creating the idea, not so much because people want to believe that they're best of the best. But my answer at that time when we built the Stair Step, but you got to prove it. You can't just say it.
Todd Sanders:
Absolutely.
Peter Fine:
Early on in 2001, when I got here, the mission statement was about 3/4 of a yellow legal pad. Who could remember that?
Todd Sanders:
Nobody.
Peter Fine:
So, we went from that to one sentence.
Todd Sanders:
What is it?
Peter Fine:
Making a difference in people's lives through excellent patient care. And that was the driver of the mentality of people we were hiring. If you don't believe in excellence, don't come.
Todd Sanders:
And it says it all. Right?
Peter Fine:
Right. And we stayed like that until 2017. And we made a change in 2017 that to a certain extent wasn't totally popular, but I think was absolutely necessary. We changed the mission statement to another one sentence mission statement.
Todd Sanders:
Okay,
Peter Fine:
Healthcare made easier, life made better.
Todd Sanders:
Which is...
Peter Fine:
And the reason we did that, we noticed that through our consumer testing that people had a lot of trust in us and in the healthcare system. There are other things they didn't have a lot of trust in, but they seemed to have a lot of trust in us and they took to a certain extent, quality medicine for granted. What they didn't take for granted was how they were treated and how easy it was to use you.
Well, we then did a self-examination of our own organization and said, "Wow, we're not as easy to use as we need to be."
Todd Sanders:
A lot of self-reflection there.
Peter Fine:
A lot. And one of the things I brought to the company, I'm a big believer that everything we do can be done better, we just haven't found the way. Not everybody likes that because you're moving their cheese.
Todd Sanders:
Yeah, that's right.
Peter Fine:
You're disturbing the status quo.
Todd Sanders:
Absolutely.
Peter Fine:
I was brought here to be a change agent. I am a change agent, so I disrupt the norm. I disrupt the status quo. I'd rather disrupted myself than have somebody else disrupt me. So, part of that decision at that time in 2017 was that recognition that the customer looks at us, not through the lens we thought they were looking at us through, but through the lens of are you a pain to use or are you easy to use?
So, we began this process of looking at everything we do, and we haven't obviously accomplished it all yet, but looking at everything we do and say, "Is that easy to use?" And everything that we do, we ask a critical question, "Will this make it easier for the customer to use this company?" If it isn't, then what are we doing? And in our minds, if you can do that, if you can make it easy to use, then you then have somebody who's loyal to you, will use your services, will buy your product. Have a lot of other places to buy the product. They don't have to buy it from us.
Todd Sanders:
Correct.
Peter Fine:
During COVID for example, we began to do things on how do we make ourselves easier for COVID patients to get in and created all kinds of procedural things to drop those barriers down. Well, what ended up happening, we ended up getting 45% of all the inpatient COVID patients in 2020, '21 and into the first half of '22.
Todd Sanders:
Which probably also led to some unintended consequences for a team-
Peter Fine:
Totally. It was very hard. Financially, it was very difficult because we didn't know we were getting government assistance at that time when we made that statement.
Todd Sanders:
You were just living by your mission statement at that point.
Peter Fine:
The board said to us in March of 2020, "We only have two things we expect of you perspective." And they then said at that point in time, "One, save as many lives as you can. Two, keep our people safe." Nothing about business, nothing about finances, those two things.
Todd Sanders:
Clearly have an extraordinary board.
Peter Fine:
Incredible to be able to communicate that to us and say-
Todd Sanders:
Without knowing what was going to happen financially.
Peter Fine:
And one, not knowing what's going to happen financially, but two, not knowing how we're going to do it.
Todd Sanders:
Yeah, that's right. It hadn't been invented.
Peter Fine:
We're dealing with a novel virus that nobody understood. People today like to look back and complain and say, "Oh, but they did this and they did that and they shouldn't have done this and they shouldn't have done that." Well, you get out there and make decisions on the fly like that where there isn't knowledge and you're trying to create things from scratch on how to manage and deal with certain things.
Todd Sanders:
I'm sure that was a lot of sleepless nights trying to divine a solution because there weren't any answers.
Peter Fine:
It was.
Todd Sanders:
There was no experience.
Peter Fine:
I mean, and we didn't have supplies. We didn't have masks and gowns. We had to figure out how to find those and get those and use them, and again, keep people safe along the way.
Todd Sanders:
So, I think about what you said when we first were talking that you'd been in this role for 24 years and that's unusual. But it strikes me that the reason why that is because every two years you're reinventing this thing, and you're knocking it down and redoing it, and that's what keeps you engaged.
Peter Fine:
Yes. People have asked me why have I stayed so long? I've stayed so long, one, because I guess I like the environment. I like Arizona. I like Banner. Like the board. There are a lot of likes to have growth state as well, but it was intellectually stimulating, remains intellectually stimulating. That's probably what at 71 now, 71 and a half keeps me going in this role because it isn't intellectually stimulating. And because of that, you have room for creativity, and you deal with problem solving. So for me, and I say this to our leadership all the time, in healthcare, you have to have a passion for complexity and a high tolerance for ambiguity. If you don't have those two things, very difficult to be a leader in healthcare because the environment is so complex. The regulatory environment in healthcare is enormously complex. If you go back and you look at the healthcare bill when Obama was president that was produced, which did a lot of things, it was like 2,500 pages or something like that.
Todd Sanders:
And only the staff read it.
Peter Fine:
And then you ask anybody if they read it all, they say, "No." It's complex and the answers and solutions aren't readily in front of you. You have to find them and then you have to create the tactics around those solutions.
Todd Sanders:
Well, that makes me wonder. You obviously are a big personality. You're a strong leader. What's it like to work for you? What about your leadership team? What kind of autonomy do they have? What do you expect?
Peter Fine:
They will tell you I delegate profusely.
Todd Sanders:
Didn't expect that.
Peter Fine:
In the old days, younger in my career, it probably was attention to detail, operating detail. But as we've gotten bigger, I can't behave and perform like I used to perform when I was a CEO of a hospital way back when. So, my focus is pretty much mergers and acquisitions, strategy, governance, public policy, which I spent a lot of time on-
Todd Sanders:
Which is significant.
Peter Fine:
And important in our industry. And I have other people that have their own assignments and responsibilities around the product itself and the production of the product in a way that we can be proud of. Are we mistake free? No. Nobody is. But do we learn from our mistakes? That's our motto. You got to learn from your mistakes.
Todd Sanders:
Absolutely.
Peter Fine:
And so for me, I can't have my finger on the pulse of everything in the organization like I did back in 2000, 2001 and 2002. Now I've had to build teams. And we have reinvented the company. In 2002, we made some major decisions. In 2009, major reinvention of the organizational structure.
Todd Sanders:
Dealt with a market crash.
Peter Fine:
Right. And in 2017, a few years after we started down this path of we're going to build a big ambulatory business for the company and the insurance business as well. And so we had to make some structural changes and people changes are around the company as its needs presented themselves at a certain point in time. Some people don't like to be that disruptive because they feel the organization can't handle it. Well, I'll tell you, organizations are pretty resilient. And if you have the right kind of leaders, you can have that kind of change going on and they'll manage it. My first board chair, Wilfred Cardin, who's not on the board any longer, but big name in the valley-
Todd Sanders:
Of course.
Peter Fine:
He was board chair for three years. And in between board meetings, he and I would meet and I'd go out to his office in Mesa, and we spend three to four hours talking healthcare, talking Banner, talking issues. I did a lot of talking. He did a lot of listening. And then he would ask you a prompting question. Well, in my last meeting with him before he turned over the gavel, he said to me, "Peter, I don't want you to forget one thing." And he shook his finger at me and Wilfred never shook his finger at me. I said, "Okay, what did I do wrong that he wants to make sure I'm aware of?" He said, "I don't want you to forget this one thing. Leadership matters."
Todd Sanders:
Absolutely.
Peter Fine:
There's a big believer that leaders do matter and they can be the difference between a successful and an unsuccessful organization. But leaders have to understand certain things. In our company, it's passion for complexity, high tolerance for ambiguity. Visibility breeds credibility. Credibility breeds trust. If you want to be trusted, you better be visible. And leaders have to put themselves out there. Sometimes it's uncomfortable, but you got to put yourself out there.
Todd Sanders:
Well, it is great that that's the culture that you've developed, and I think you're right about this idea that change can theoretically overstress an organization. But I think about if what would've happened to Banner if it was just that little hospital system that you took over? It probably would be gone by now if you hadn't-
Peter Fine:
Well, it wouldn't be what it is for sure.
Todd Sanders:
Correct? Yeah. I mean that's what was needed.
Peter Fine:
It was diversified.
Todd Sanders:
Yeah, absolutely.
Peter Fine:
That diversification was important for the future state. And you have to build a culture in which people learn from each other. You got to allow for that. And that is something you build. It doesn't just happen. You have to work towards that. You have to create an atmosphere that if you make a mistake, that's okay. We learn from that.
Todd Sanders:
That's the ego part, correct? Yes.
Peter Fine:
And you have to check your ego at the door and before you come into our organization, because ego people don't make it. They just don't make it.
Todd Sanders:
It doesn't work. Absolutely.
Peter Fine:
Because it's more team-like.
Todd Sanders:
Well, let me go back to COVID. You mentioned that, and obviously a lot to be said there. But certainly one of the issues with COVID was what you sort of identified that you took 45%, which meant that your team with their normal workload was probably tripled or quintupled even. What's been the aftermath of that from a workforce perspective?
Peter Fine:
Difficult to say the least. We had a whole cadre of professionals that probably could have worked five more years and said, "No mas." Had enough. Quit. And so it created lots of pressure and we had to rebuild. A lot of our activities had to be rebuilt, especially around the professional side, and nursing being a key one that had to be rebuilt. We had to recruit more nurses. Last year we had the biggest year we've ever had recruiting new grad nurses.
Todd Sanders:
And they're hard to find.
Peter Fine:
Experienced ones are hard to find. There's a lot of new grad nurses out there, but we need more. They're not producing enough. And finding this balance between experienced nurses and new graduate nurses, you have to find the right balance because they're not all equal. But our recruiting is going great. And if you look at the percentage of nurses that leave in a year for a whole bunch of reasons, nationally, it's probably about 30%. For us, it was 14% last year. So, we're doing some things pretty well. And the other thing we've done is, in least in Arizona, all the nurses have to do rotations out into the real world.
Todd Sanders:
So, it's practical experience.
Peter Fine:
Sure. 83% of those in Arizona come to a Banner hospital. We have line of sight to a lot of young nurses.
Todd Sanders:
Absolutely. Absolutely.
Peter Fine:
And so we've had to rebuild that program. And we have an international program too where we recruit people from international environments, and that's going really well. And after a certain amount of time, I'm going to say two years, they can become a core nurse.
Todd Sanders:
Okay, so there is that pathway for them.
Peter Fine:
There's a pathway for them. And we build professional pathways for nurses. We've increased salaries like crazy because we've had to in order to attract talent. So, we've done a lot of things from career motivation, compensation, recruitment to rebuild some of these areas in which we lost during COVID, a lot of talent.
Todd Sanders:
Absolutely.
Peter Fine:
And rebuild that talent.
Todd Sanders:
Well, in thinking about, I mean, there's no industry that was more front and center than your industry during COVID. That was it. You were the epicenter.
Peter Fine:
Right.
Todd Sanders:
What were the top two or three things that you learned during that time?
Peter Fine:
One, you can't be prepared for everything, but you have to be prepared for many things. And so we recognize that in a situation like that, do we have things built that could allow for us to get through that process? So, one of the things we learned, and we worked with the state on it, we started seeing all these referrals coming in from the Hinterlands because they couldn't handle it. So, we didn't want any one placed to get overloaded. So, we started moving COVID patients around all of our system. It may have come into that emergency room, but then they were shipped over there because that's where we had available staff and available talent.
Todd Sanders:
It became a logistics company in a way.
Peter Fine:
We did. And actually we built that at the state level. And so the participants were basically the Phoenix hospitals. And with the state, we created this call in. If somebody had to transfer, they'd come into the transfer service and the transfer service would know at any point in time what availability any of us had, this big systems in Phoenix, and could allocate those patients out to those systems and to those available hospitals. And nobody else in the country had done that. Arizona had done that first. Nobody else had pulled that off. Couldn't get everybody to work together. And it was a smart thing. And now we know we can stand that up if we ever had that kind of an emergency.
Todd Sanders:
Which is significant.
Peter Fine:
Which is very important because you have now the clinical officers now communicating much more closely about those kinds of opportunities and potentials. So, we learned and we learned about how do you handle staffing? And what happens when you get a COVID patient that needs five nurses just to turn them over? And we recognized the staffing levels were so much different and we had to figure out how to manage that and how to handle it.
Todd Sanders:
Well, and you also in the middle of all this, trying to sort of invent new things.
Peter Fine:
Totally.
Todd Sanders:
You also had to get into politics, and I think there were a lot of times where you all made public statements about public health that were probably pretty uncomfortable at that time.
Peter Fine:
They were.
Todd Sanders:
But you did it.
Peter Fine:
In February of '20. I pulled Dr. Bessel, Marjorie Bessel, who's our Chief Clinical Officer, she had been two years in her job, groomed for that job with the company for a long time, but was promoted into the head job when her predecessor retired in January of '18. And I said, "Margie, I want you to understand something. For the next, I don't know how much time, you're going to be the face of Banner." She looked at me and said, "That's crazy. You are the face of Banner." I said, "Not now and not for the next couple of years. You're going to be the face of Banner. You're going to be out there. You're going to be doing speeches. You're going to be interviewed because there needs to be a trusted resource." Because at the federal level, there wasn't a trusted resource,
Todd Sanders:
Just confusion.
Peter Fine:
Right. And we said somehow locally in this market, we have to present ourselves as the trusted resource. So she went out there, learned on the fly, Wall Street Journal, Phoenix newspapers, every radio show. And every time there was something that came out from a state level or a federal level, she was doing an interview, and all the newspapers were coming. We were doing public interviews.
Todd Sanders:
It was critical.
Peter Fine:
And she would be able to interpret and tell people, "Here's what this means, here's what it doesn't mean, and oh, by the way, we don't agree with that."
Todd Sanders:
Which it was difficult at the time. There were so many stats, so much data that you really, without any kind of medical experience, you wouldn't know.
Peter Fine:
You wouldn't. And so she did that phenomenally. I am stunned at how well she became a trusted resource to the public. And we heard about it a lot, and that's why we would have newspapers, "Are you having a press release this week?" Because they appreciated the kind of openness that she provided.
Todd Sanders:
Well, and kudos to you for doing that. Clearly you stepped aside to have her do that. And that obviously goes back to what you talked about ego and leadership. Shifting gears a little bit, one of the things I admire about you is that you clearly have a pretty significant day job and you're in a really tough industry, but you always made it a priority to engage in things that impact the community. And I know we've done a lot with you all. Prop 400 comes to mind just recently. Why would Banner be engaged in that or why do you think it's important?
Peter Fine:
I would almost reverse the question and say why would you think it isn't important for us? I started coming to Arizona because my in-laws lived here. I got married in 1975. My in-laws moved here into Arizona City in summer of 1975. And Arizona City, if you don't know where it is, it's just near Casa Grande.
Todd Sanders:
Okay.
Peter Fine:
Because most people wouldn't know where. It's a little desert community.
Todd Sanders:
No, no.
Peter Fine:
And so in our younger years with our kids, we went to visit grandma and grandpa for vacation. We didn't have resources so we came to visit them. They lived next door to Arizona City Golf Course. Which is a golf course, but you didn't have the 101. You didn't have the 202. You didn't have the 303.
Todd Sanders:
Yeah, there was the 17, right?
Peter Fine:
I don't even know if you had 51 back then. But if you were going and trekking north, there wasn't much like north of Shea Boulevard where I live now. There was so many things you didn't have. Well, because of these transportation propositions, we have a community which you can really get around in. You can really move people around. It's the reason it's a growth state right now. You can move people around. And whether it's people just normally wanting to go from one place to another, and I think it's been very well thought out how this community has created the opportunity to build structure to move people in an efficient way. Same thing goes from a healthcare perspective. Because if I need people right now that want to work downtown, they can actually come from the East Valley and get here.
Todd Sanders:
Sure. It's doable.
Peter Fine:
In those days it wasn't doable. So, it was very difficult. Made people's lives difficult. That Prop 400 I think is so key. Why the governor didn't sign it, I don't know. He won't tell. They won't say. And you had a bipartisan legislature that approved it.
Todd Sanders:
Yeah, we were there. We were at the finish line.
Peter Fine:
Right? We were right there. And the governor wouldn't approve it. Stunning. I mean, the number of people in the business community that were stunned by that answer with no explanation is bizarre.
Todd Sanders:
Yeah, it was definitely a surprise.
Peter Fine:
Totally bizarre.
Todd Sanders:
But I do think your point about why I think a lot of people in your position say, "Well, I'm sure Peter's working on it, so I don't have to work on it." But you always are always available. One of the other areas where, I mean, it was really hard is we started working on workforce and we started getting it out of the Cage Wolf system. We were like, "Hey, we want to get kids into internships." And most healthcare companies thought that was nice, but there was no way, especially when you're looking at kids under 18. You didn't do that. Talk to us a little bit about why and how.
Peter Fine:
So, we have started programs with certain school districts to introduce and educate kids to healthcare professions. Because if you look at the healthcare industry, there's a lot of well paying professions in this industry, whether it's a RAD tech or pulmonary tech. There are a lot of nurses. There are a lot of well-paying positions. But you have to introduce it at a young age so when you come out of high school, either they may not want to go to a four year school, but they can go to a professional school like this and get this trade. There are trade schools but these are healthcare trade schools. And there are number of opportunities in the state to get into those programs. So, we think if we can excite people early on and have them see that as, "Oh, I might not be working on Wall Street, but I can get a good job. We can stay in Arizona and I can get a good job."
Todd Sanders:
Take care of my family.
Peter Fine:
We can hire every RAD tech that's produced in this state. You can hire every lab tech that's produced in the state, every pulmonary tech. We need more programs. And it goes all the way up to the professionals. If we can introduce people to the levels of pharmacists, nurses and doctors, we have shortage of doctors in this state.
Todd Sanders:
Absolutely.
Peter Fine:
And quite frankly, it's not going to get solved by new medical schools. I know the universities love their medical schools. But the fact is, if you want a doctor practicing, you have to have graduate medical education. You have to have residencies and fellowships. That's where you get your population. We'll keep 70% of that pool. You grow the pool, we're still going to keep 70%. Because many, if not most, will stay in practice where they did their graduate training.
Todd Sanders:
Well, and it's making a significant difference. And I can't stress enough. You talked about this earlier. You're in one of the most heavily regulated industries on the planet, and yet you're letting us bring 17 year olds into your facility, and in many ways changing the lives of people and families. That's a big deal, but a huge liability. And you still did it.
Peter Fine:
Yeah. Because it's the right thing for the long term. I created a 20 year game plan back end of 2001 and early 2002. I don't think short term. I think long term, and then you invest both capital and other operating dollars for that future state. But then you have to create the tactics to do that. And that's what part of this is with these young kids is create the excitement for them around healthcare. You take some of these young kids and you show them the inside of healthcare, in many cases, it's a wow factor.
Todd Sanders:
And these are kids who think that they don't really have much of a future out of high school that's the difference.
Peter Fine:
They don't. I look at our graduation rates. Many of them don't. This is a way to give them something that they can look forward to and actually create a life around it and a profession, profession.
Todd Sanders:
And a compounding effect of the community and their families.
Peter Fine:
It totally does that. Taiwan Semiconductor, we've got a clinic on their campus up there. We took one of our employees early on who was from Taiwan, and we said, "You're going to be the ambassador to the Taiwan Semiconductor. You're going to go and help them with their healthcare needs."
Todd Sanders:
Were those cultural differences you're going to need the right person?
Peter Fine:
I think we've delivered over a hundred babies already from that population that came over from Taiwan.
Todd Sanders:
That's fantastic. That's fantastic.
Peter Fine:
And so you got to build capabilities and you got to show the interest to do certain things.
Todd Sanders:
So, when we're thinking about you talk about the focus on the patient and the community. Obviously the one thing that's out there and no one seemed to be immune is cost, cost of healthcare. How should we be thinking about this as maybe not even just Arizona, but as a country?
Peter Fine:
Yeah, obviously I hear that all the time.
Todd Sanders:
Yeah.
Peter Fine:
Healthcare is an expensive business. MRIs are expensive. Everything we pay for that's capital intensive is more expensive than if it's bought in somewhere else in the world, pharmaceuticals as well. I had a son who used to work for a pharmaceutical company, which shall remain nameless. But what he said is, "Outside the US, we cover our costs. Inside the US, we make our profit."
Todd Sanders:
It's much different.
Peter Fine:
And that's true. So, we have a business that's expensive to begin with, but what's the main source of that expense? Is it another MRI? Is it another hospital building getting built? It's not really the main cost of the expense. Usage is the expense, the use of healthcare. So, we've gone down this path with our insurance product and this integrated product. How can we manage usage, still provide a quality product, but make sure people get only what they need?
Todd Sanders:
Not using the ER for basic services.
Peter Fine:
Why would you go to the ER when you go to an urgent care center? Sure we shouldn't clog up the ER with cold. And usage is the key critical issue on the cost of healthcare. Now, people are afraid of that issue because they say, "Oh, but then I won't get what I need when I need it." It's not the intent. Obviously the intent is to manage it properly. I've had my own issues with pre-authorization of things for imaging services.
Todd Sanders:
Even you.
Peter Fine:
Even me and my own company, and hear me when I go wild on our staff about, "What do you mean that's not getting approved?" So, there are these roadblocks that get in the way. Then when you ask the question, "How much are you really saving with that roadblock?" As opposed to ticking off the customer to that level where they're saying, "I'm going to go somewhere else." And so usage is the key issue. The more you use, the more it costs.
And people want to think, well, you're just expensive because you make a lot of money. We make 1% to 2% margins, 1% to 2% margins.
Todd Sanders:
People, I think would be surprised.
Peter Fine:
$13 billion.
Todd Sanders:
Yeah.
Peter Fine:
Now they might say, "Yeah, but look at all the investment investments you have in cash you have on your balance sheet." That's true. Why do we have that? Because when we, nonprofit, go to Wall Street, we don't have the collateral that for-profit companies have. So, they'll look at us and say, "If you want this low rate for non-profit profit rate, you have to make sure you've got collateral to back that up." What's the collateral? Investments and cash.
Todd Sanders:
So, it's chicken and the egg essentially.
Peter Fine:
It is. So, we've had to build that up and we have to keep that at certain levels. In order for Wall Street to be willing to loan us money. We get money from three sources: one, product we sell just like any other organization, two, philanthropy. Because think of this, a dollar of philanthropy is about a 30 to 1 return.
Todd Sanders:
That's significant.
Peter Fine:
So, I have to sell $30 worth of something, at least $30 to have $1 fall to the bottom line to use to reinvest in the community. With philanthropy, we raise $1, that's worth $30 of sales. That's a monstrous return.
Todd Sanders:
Well, I'm glad that I donated it though at the dinner a couple of weeks ago.
Peter Fine:
Appreciate that. The third thing ends up being we borrow money.
Todd Sanders:
And that's why you need to have those healthy balance sheets.
Peter Fine:
Right. Because we can't make the kind of money to build a new hospital, build a new surgery center, and meet the needs of the public from an accessibility perspective, unless we have the resources. And we can't get those resources just from sales because it's 1% to 2% margins or from philanthropy, because there's a limit to that too. We have to borrow money. And more we can borrow at the lowest rate possible, the easier it is for us to have financial stability.
Todd Sanders:
Helps total cost. So, it sounds like it's education and its culture a little bit for Americans.
Peter Fine:
It is. And then we're always looking to figure out are there other opportunities to cut our costs? So, if they like how things are functioning from their own business mindset, and certainly there's some big insurance companies that like it just the way it is, they don't get pushed away. Because they either have private company that makes revenue from it, public company that has investors that they have to meet the needs of. And somebody wants to get pushed away from the trough. Well, if you disrupt healthcare, you move somebody's cheese, you're going to have to push somebody away from the trough and they're not going to like it.
Todd Sanders:
So, it's going to take a maverick like yourself coming in that's not afraid to disrupt.
Peter Fine:
So much resistance.
Todd Sanders:
Okay. So, we're going to do a quick lightning round. What was your first job?
Peter Fine:
My first job, while as a kid, it was working in a stationary store and learned about how to be accountable and responsible. That then portrayed into a series of other just jobs to make some cash. I mean, my first real job in healthcare was after I graduated from George Washington, I worked at a inner city hospital in Queens, New York.
Todd Sanders:
You definitely had the tough city start, New York. And I like the fact that you were a ski bum, so this is going to be an interesting question. What are you reading right now?
Peter Fine:
I have reading interests that are more narrow because what I use reading for is escapism.
Todd Sanders:
Okay. That's your escape from everything else.
Peter Fine:
It is. And everybody gives me books. Here's a management book you need to read. Here's something. And my son, who's an attorney in town, works at DLA Piper, he's kind of appalled at my reading. He says, "Dad, you need to read things that are more intellectually stimulating." I said, "Cameron, my life is intellectually stimulating. I need escapism."
Todd Sanders:
That's a good point.
Peter Fine:
So, I'm always reading spy novels of one kind.
Todd Sanders:
Like John Carr, that kind of stuff?
Peter Fine:
Exactly like that kind of stuff. Spy novels and those kinds-
Todd Sanders:
A good John Grisham novel.
Peter Fine:
Love the John Grisham novels.
Todd Sanders:
Okay. All right.
Peter Fine:
Pick your favorite thing. I mean, there's just so many that I like to read. But let me just look something up here right now.
Todd Sanders:
Well, I will say to your point. I get those same things as well or people will send them to the chamber, and I find them-
Peter Fine:
How do you read-
Todd Sanders:
Excruciating. And so I'm with you. I will admit, thank God I'm here with you that I can say I do the same thing. Reading should be enjoyable. You do it enough during the day that...
Peter Fine:
No it's not. Now it won't open. Oh, bummer. Oh, there it is. So, I'll read Daniel Silva, Brad Thor, Vince Flynn, Tom Clancy, TJ Newman. These are ones that I can put myself somewhere else. I don't have to really think about it. I mean, every once in a while I will. And I just read, which is out of character for me, The Personal Librarian.
Todd Sanders:
A good one.
Peter Fine:
That's a very good book.
Todd Sanders:
Phenomenal story and true.
Peter Fine:
And my wife was impressed that I read it.
Todd Sanders:
Well, good for you.
Peter Fine:
And then we had the chance, we were in New York a few months ago, and we went to Morgan's Library. Fascinating place.
Todd Sanders:
Well, just to give people a quick teaser, tell them what it's about. It's a phenomenal story.
Peter Fine:
It's about this person. She was an Afro-American, but wasn't of a dark color. And so she was able to get by in this world with the greatest financier maybe of ever, and became his personal librarian. And it's a fascinating story of watching what her family decided to do, and then what happened to her at the end, working for Morgan, and then working for his son after that. But I've read a biography of JP Morgan, which is fascinating history of this individual's life. But if you ever get to New York, go see his library.
Todd Sanders:
It's quite a legacy, isn't it?
Peter Fine:
It's unbelievable. He's got an original Gutenberg Bible in there sitting in a glass case.
Todd Sanders:
Well, he was voracious and she was amazing. Traveling to Europe, traveling all over the world, getting rare manuscripts for him. So well, I love that recommendation. And once again, Peter, thank you for being here. And thank you for everything you've done.
Peter Fine:
Happy to do it. Thanks very much.
Todd Sanders:
Appreciate it.