June 13: Today on TownHall Reid Stephan, VP and CIO at St. Lukes speaks with John Kenagy, SVP & Chief Information and Administrative Officer at Legacy Health. What was John’s career journey and how has his JD helped him in his role in ways he didn’t anticipate? How does John navigate the challenge of communicating the cost and value of contracts to ensure a productive dialogue on the subject? In terms of financial sustainability, what strategies or techniques has he employed to address the slow incremental increase in IT budget over time? How has the involvement of SVP’s in presenting and deciding on IT investments impacted decision-making within the organization?
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The one thing that's hard in our role as advocates for the best use of information and analytics and technology to be anti doing something cool with technology, so I hate to be like the department of No. I think across the board, CIOs are seen as the no department we try not to be, but, the exuberance of saying yes to much will cost
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(MAIN) 📍 Welcome to the This Week Health Town Hall conversation. I'm Reid Stephan, VP and c o at St. Luke's Health System in Boise, Idaho. And I'm joined today by my friend John Gie, who is the Senior Vice President and the Chief Information and Administrative Officer at Legacy Health.
John, welcome and thanks for the time,
Reid. Thanks so much.
Okay. Question one. Just take a minute and introduce Legacy Health for our listeners, who you are, where you are, the scope of your services.
Yeah, thanks. I, I love starting with that. I love, I'm so proud of working at Legacy Health. It's a wonderful place.
We're in Portland, Oregon, headquartered in Portland, Oregon, and our mission is to be essential to the health of the region. So our region comes from sort of, southwest Washington Vancouver area down to the Willamette Valley, and we have eight hospitals, two urban hospitals in downtown Portland. Four suburban hospitals around the area and two specialty hospitals, a children's hospital and a behavioral health hospital.
We have been around since 1875, so in two years we will celebrate 150 years in the west founded by the Episcopalian communion. And then not to be outdone the Lutherans. Formed our second hospital in the early 19 hundreds, so very much the west, west coast where all the religious, you know, it was basically, healthcare was, done in homes and then done by religious orders.
So we've been around for that. Got over a hundred clinics, just a really community based, so we're not academic or Roman Catholic Or Kaiser. So community health system with a pretty vibrant medical staff. About a third of them are employed and the rest are independent.
Very good. I also love to ask, I think a part of these conversations is to create a sense of community and get to know each other, even if it's virtual and asynchronous. Take a few minutes and just kind of describe your education journey, your career path, like what led you to where you are today.
That's a great question and, you do that in interviews, but I think a really good CIO is pretty humble about themselves, so it's gonna come across as non as you about your journey. But I would start with the places that I've worked that I've, I've been really touched by. I've had the. Honor in my career of working just at four organizations.
Okay. Department of Veterans Affairs, where I started as a PC tech in 1987, and then I moved to Oregon Health and Science University here in Portland. So I moved to the Pacific Northwest 1999. Three months before y2k. Yeah, we all remember where we were that night. We did. So was at, oh, hsu, the academic medical center for seven years.
For seven years, and then I moved to Providence Health and Services at the time before it was Providence St. Joseph served as CIO there for five years and then had the opportunity to come to Legacy 11 years ago on Sunday. I will hit my 11th anniversary, which is three life expectancies of a healthcare cio.
That's right. Congratulations. Thank you. Thank you. Very happy to be here. I have had also the joy of mixing education with that, with the , taking time, you know, as, as you join a new organization and you wanna make differences. I mean, that's really consuming. And then it goes into a little more maintenance mode and, just my own interest in learning and all that.
I, I, I've learned what I want in the organization and so kind of the tail end of that. Tenure, I'll look at a new educational opportunity. So I started with a bachelor's degree in electrical engineering and it was renting a room from a physician. In my last semester at Stanford, where he needed PC help and I got the, a PC tech job.
Mm-hmm. In at the Palo Alto va. Then I did a Master's in Health Administration about a decade later. A decade after that, I did a PhD in business and technology with my dissertation research on physicians using C P O E and used Kaiser, which had done EPIC in 1994. O H S U was doing it in 2004.
And so I did my study of how they viewed success of C P O E and then, Not to ever finish. Five years ago, I pursued a jd here at Lewis and Clark.
You know, John, people talk about, you wanna be a lifelong learner and never stop learning, which I fully embrace, but you seem to have taken that and injected it with, steroids.
Right? So, you know, you've got your, you've got your bachelor's, you have a PhD, you have your jd. What kind of has fueled that desire to continue your education to that level?
Oh, that's a great, that's a great question, and I would consider it an homage to my parents. Yeah. My dad was a, a middle school principal in Sacramento.
He pursued when my sister and I were under 10 years old, he pursued a doctorate in education. My mom who's. Parents had moved from Italy. She was the first in her entire family to go to college. She went to uc, Berkeley, right at the end of World War ii. And she also got a master's equivalent and was a teacher for a long time.
And it just, it, I don't know, I just kinda caught the bug and paid it forward in, in terms of education. So
How has your JD helped you in ways you didn't anticipate as a cio, c o?
You know, it's it's such a, it's a great question, Reid. I. You know, one of the critical roles that we do in healthcare it, yeah.
Is vendor management, vendor contracts. You know, I remember 15 years ago looking at like indemnification and all the T's and C's in, in a contract and just pouring over it. Those of us CIOs who have Epic, you know, you probably have a binder in your office, which is the Epic license agreement. So that has just upped my knowledge about the implications of, that contract. I think it has helped my, writing ability, there's a lot of presentation and writing. And to be honest, it was so different, doing my day job was cio I'd do evening programs, night school for three and a half years the evening.
Working of my brain was so different than anything that I did today. It was doing constitutional law questions, being ready for a final exam that had nothing to do with, you know, my mouse is broken , and you know, why is voicemail
power of my, my, my role to help you?
Yeah, I would envision, like if I had that jd, I might go to my legal team and say, Hey, you know, I've reviewed this contract already. We're good. We can just sign it. And I'm sure that wouldn't be well received, but I think that I might, I. Use that knowledge.
Now, as you mentioned at the beginning, my title has expanded and the, the ceo, we wanna, we want to tap that, you know, what's the plan when you finish, you pass the bar, what are you gonna do?
And it was a good question cuz I actually kinda didn't know what I wanted to do. It was started in my mid fifties in pursuing this and so I, I took on corporate compliance as a responsibility and so there's a lot, obviously regulatory compliance. I'm now certified in hospital compliance , and again in our role IT security, HIPAA security, and then it's, cousin patient privacy. Mm-hmm. You know, we've been around CIOs are around all this a lot. And so the regulatory side of it just, I think it just kind of deepened my knowledge in this sort of fundamental aspect of working in a highly regulated, and then in our field you know, a lot of , vendor management.
Well, I think that's just an incredible and fascinating background that you have, so thanks for taking a moment to share that. Okay. You and I had talked previously and I want to kind of dive into to this topic for a few minutes and spend some time like chatting together and learning from you in particular around financial sustainability.
It or is cost control and the power of governance to be a great lever for that. So here's kind of , question one for you. Yeah. I think as CIOs, we've all had the experience when you are either benchmarking or you're showing like year over year, like what does your budget look like in total as a percent of revenue and in your organization, there's gonna be just a slow kind of incremental increase in that generally.
Which can be kind of jarring. Like if you just look at what your IT budget is today versus five years ago and just take it at face value that can cause kind of a visceral reaction by the CFO or by others. What are ways that you found to kind of help tell that story and make sure that it's an apples to apples comparison in terms of cost?
It's such a hard story uh, tell, and frankly, some of it's like, I don't want, I just want it to be cheaper. So, I don't want this dialogue to be rationalizing why it costs this much, why does it costs so much, and we get so little. I'm like, well, it's really complicated. You look at the data and one of the, elements I did in this last go round of many, I've been a CIO for 26 years, I've been in healthcare IT for 34, was showing the trend line both of F T E, but also cost, but then them in modern dollars.
So if you just use inflationary from. Our 2016 costs to, to 2023. There's been an increase in that. But if you just basically what was the dollar worth and just the, inflationary impact of that we're fairly flat. So yes, on an actual dollar, you know, you look over time at trends, the numbers get bigger. That's kind of how inflation works, the cost of living works. And so, and of course, as you know, we're working with vendors and a really well negotiated contract says basically, I want this at no additional cost, this annual fee for a three year contract, and I want no.
Inflation in the contract. So leave it flat. Well then the contract it has to be renewed and they do a 10%. They get their money, the piper has to be paid. So that's been, one element of looking at those costs is sort of comparing, the dollar, the other one around benchmarking that.
Our industry. It's interesting, of course when you benchmark often they say, let's, remove depreciation and where we are all in the transition of moving to cloud or software as a service to basically not, you know, 10 years ago. Maybe a little more than 10 years ago, everything was a capital purchase with a perpetual license.
Yeah. And now we're moving to subscription fees, which then the depreciation isn't there. we will benchmark as we're a fairly early adopter. Our Epic DR is all in Microsoft Azure. Cache is a subscription, Citrix is a subscription.
So if you normalize to take out depreciation, which I understand the logic of it financially, it makes us look more expensive. Yeah. We have low depreciation, so we've looked at a, percent of our overall cost, depreciation's gone from 25 million or a quarter of my annual budget to over the, over the course of the last five years, since 2016 to today.
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Yeah, and I think that's a trend that we're all kind of experiencing, right? With less capital investment and more on the opex side with cloud and SaaS type solutions. You know it's really kind of simple, but I love just that, concept of comparing historical cost in present day dollar value. We're not trying to massage the message or like talk our way out of a your point. We wanna be efficient and lean and look for cost decreases. But it can also help just to kind of level set, yes, it's gonna increase, but it's not maybe quite as steep as you would think.
Just looking at the, kind of the raw numbers on this slide. And so that's a nugget that I've drawn from you that has benefited me in conversations I've had. So I think that's great.
Okay. I think one thing that if we looked over time in terms of cost, you know, there was, if you look at eras of, electronic health records you had the best of breed for a long time and then you wanted to go to package suite system, and we were all those of us on Epic really, loved that.
We wish there was an epic for enterprise business, you know, ERPs. Yeah. And, but the market is very creative and marketing is very creative. So while we don't have now big, core transactional systems that are best of breed, all the cloud-based machine learning, it's like, well, we work with Epic.
And so the bolt-ons . Had not reduced, I kind of thought that once you did a suite of systems, you'd be able to say, okay, well we're gonna use the one that we put an investment in 10 years ago and use their, software. But the creativity and marketing creativity about you need this or you'll all die.
And they don't sell to is they sell to business. I think the one thing that's hard in our role as advocates for the best use of information and analytics and technology to be anti doing something cool with technology, but at the same time there's a cost and if there's a benefit Yeah. That's great, but the benefit accrues to the business or that department and the cost comes to it.
Yes. And so I hate to be like the department of No. I think across the board, CIOs are seen as the no department and it's like, Well, we try not to be, but, the exuberance of saying yes to much will cost , and people forget that we all said yes collectively seven months ago before we're in budget planning for the next fiscal year.
And I have not cracked that nut. I mean, I complain about it and I try to raise it and during the budget close the budget gap. They don't really care. We're at that point, we're not thinking about the excitement of the, enthusiasm about doing a care management software that really will be beneficial to our care providers and the patients ultimately who we're trying to serve.
But it still comes with the price tag. And so that, that, short term memory of the decisions that lead to higher cost is just something that we cycle through as CIOs. Every year,
so, yeah, absolutely. And you know, I would say, like you said, you haven't cracked it, like maybe you haven't opened that nut, but I think based on conversations we've had, like there's a couple of cracks and so maybe our last kind of point here.
Yeah. And it's adjacent to what you were just saying. So there's never a shortage of, of new ideas, new requests that come in and they're all seemingly like really good. It's rare that something comes in that just is like bad and this immediate, no. Like they all have merit. They're all well-intentioned.
Great. Talking about governance. Yeah. What have you found that helps to kind of create the right lens for a good discussion about prioritization so that you can understand, look, we have finite resources and therefore we have capacity to do this. How have you navigated the conversation to ensure that you're doing the right thing at the right time?
I am proud to say, and, I will give a lot of kudos to the vice president of IS Applications who works at Legacy Borne, who should be a cio. She's phenomenal. she's a strong advocate for governance, obviously, is the application side of the house. Collaborating with the CTO who are both really amazing.
We have finally, Disbanded is governance as a separate governance function, and our senior vice president, CEO and her direct reports, we are the governance function. That's one thing. The second thing is when a VP or director or a hospital president or chief nurse officer wants to promote something, the person who presents it to their peers is the senior vice president themselves.
not it, not the hospital president or cno. The SVP has to say, this is what the thing is, this is why I want to do it. What T-shirts? At that point, it's, we haven't even really done a contract or whatever. Yep. The T-shirt size. Yep. How big this is. And we only do for large, not like, you know, a mini small change to Epic.
That's not the, but a big thing, like $500,000 or more. It comes to this group and it's SVP during its regular. We meet weekly twice a week, and on the operations meeting, the Monday meeting once a month. It is brought forward and we do up or down. And recently we had a bolt on for, or efficiencies, and there was a lot of dialogue.
It would've been over a million dollars a year, probably with a good benefit. But then there was also a module in Epic that could make maybe meet 85, maybe even a hundred, but minimum 85%. And the group said, you know, let's at least start with the Epic module. And if it doesn't, we could always. The vendor will always be there to take our check for a million dollars.
Why don't we start with something internal and then move to it? And it's been effective. Now we're in like, this is March. We're gonna have our third meeting this month. But the SVP is one owning that they present. I love that. And it's there. It's not a separate governance function, Uhhuh at the table. So I hope that sustained beyond just the emergency financial that we're all facing.
Because I do think that that's, it's powerful to have that conversation peer to peer, not me. Yep.
Because it should be what's the business or clinical driver, right? Not this is an it need. And I think you're right. Like for me it'll be, we're gonna learn a lot during this period, and it's not even a moment.
Like this is more, it's not a season, it's more like climate change. So how can we instill these learnings? It's not just a temporary measure. This is the way we need to operate. So last question and then we can wrap up. I'm just curious then. You've had two of these meetings. One more coming up. What's the percentage of ideas that have had a yes go forward versus like, Nope, not right now, or, let's use what we already have.
Do you have any sense of, the breakdown?
Third, third, third. So we've gone through about seven of these larger projects. Yep. And a third were, yeah. That, really has a good roi. We're ready for it. The is department, the operations are ready for it. And so, you know, it's, it was ready. A third was defer
interesting idea. Not now, not affordable, not, the ROI isn't fast enough for what we want to do, and so we gotta get the faster ROI things to then have a margin to be able to then invest in the future. And then a third, we're like the this or one. Yeah. gonna do the best we can with the tools that we have available now.
work with our current vendors rather than do a bolt on. And so I'm proud of that. I mean, that's a Yeah, you should Good model. So, and then, like you said, everything that comes to that level is pretty well vetted. Yeah. And so they're really, there's, each investment on its own would make a difference.
Would, would have a positive thing. It's just we can't do all of them at once and we can't do all many of them now with the constraints of. The length of stay issues and all the other, you know, cost, you know, energy. Healthcare is such an energy intensive, so when energy is 20% inflation mm-hmm.
Exactly. Well, I think John, you've given us hope, like it's possible to have good ideas come in and to say, you know what we're gonna accept 80% is good enough what we need, or it's a good idea, but we're gonna say, no, not right now. Like, that is possible. You're proof of it. So thank you. You're very welcome.
Great to visit with you. Yeah. I appreciate your time and thank you so much for what you've shared.
You're very welcome. Thanks for the opportunity. It's such a great group. Yep,
it is. It is a great community to be a part of. Have a great day.
Thank you. You
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