Lessons from Kevin Mahoney, CEO of the University of Pennsylvania Health System, on Healthcare Leadership and Extending the Impact of Penn Medicine

Kevin Mahoney, MBA, Chief Executive Officer of the University of Pennsylvania Health System, an academic medical centers dedicated to research, education, and excellence in patient care

Aug 08, 2023

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Welcome back to the Pear Healthcare Playbook! Every week, we’ll be getting to know trailblazing healthcare leaders and dive into building a digital health business from 0 to 1.

Today, we're thrilled to introduce you to Kevin Mahoney, an exceptional individual with an extensive background in healthcare leadership. Kevin has been an integral part of Penn Medicine since 1996, holding various leadership positions within the health system and the Perelman School of Medicine. His transformative projects have elevated Penn Medicine's clinical care, teaching, and research missions.

Before joining Penn Medicine, Kevin displayed exceptional leadership as the vice president for Johnson and Higgins, focusing on risk transfer and alternative risk management strategies. He also held administrative roles at Bryn Mawr Hospital and Episcopal Hospital.

Kevin's insights on health equity, access to quality care, and social justice have been featured in prestigious publications like the New England Journal of Medicine, JAMA, and The Philadelphia Inquirer. Modern Healthcare recognized his influence by including him in its list of the 100 most influential people in healthcare in 2022.

Kevin earned his bachelor's degree in economics from Millersville State College, and he holds both an MBA and a doctorate from Fox School of Business at Temple University.

In this episode we talk about Kevin’s journey to healthcare leadership, the increasing costs of care, how founders can partner with Penn Medicine, and insights on the consolidation in healthcare.

If you prefer listening, here’s the link to the podcast!

What Brought Kevin to Work in Hospital Leadership

Kevin, now 64 years old, found himself uncertain about his future after completing high school. College didn't work out for him, leading to a job with a landscaper. It was in the summer of 1978 that three pivotal events occurred, shaping the course of his life. The first encounter involved a visionary business leader named Bill Rouse, who spoke to Kevin about constructing offices in the suburbs of Philadelphia. Kevin held the belief that people only slept in the suburbs, while work happened downtown.
“He looked at me and said: Never accept things the way they’ve always been,” Kevin recalls. “Build what you think is needed. It imprinted on my brain.”
The second significant event occurred while Kevin worked in a field for the landscaping company. After several days of operating the tractor, he had an accident that left him severely injured and in the hospital. Unexpectedly, Kevin found himself relishing every moment spent in the hospital. The unwavering support and dedication he received from doctors, nurses, and physical therapists astounded him. Even the billing personnel worked with him to navigate his financial constraints. Kevin realized that he wanted to be part of this remarkable environment and contemplated how he could work in a hospital while undergoing rehabilitation.
The third pivotal moment occurred when Kevin made the decision to go back to Millersville State College, a choice that would introduce him to his future wife, Pam. Their marriage has been a source of happiness, with Pam serving as a guiding force in Kevin's life. She consistently offers an alternative perspective, and together, they form a formidable team.
These three transformative experiences collectively shaped Kevin's life trajectory. Bill Rouse's visionary outlook encouraged him to question the established norms, while the accident in the field shed light on the extraordinary nature of hospitals. Furthermore, meeting Pam taught Kevin the value of having a teammate as a partner. These experiences ultimately propelled him into his current role within the hospital industry.

What the CEO Role at Penn Medicine Entails

As the CEO of Penn Medicine, Kevin oversees a thriving organization that has achieved remarkable growth, with an annual revenue of close to $10 billion. Penn Medicine encompasses six hospitals, two joint venture rehab hospitals, and a widespread presence, spanning hundreds of miles from east to west. In addition to the extensive hospital network, Kevin is responsible for managing a substantial outpatient, homecare, and virtual care system.
"My responsibility is fiduciary,” Kevin says. “How do I keep the budget balanced? How do I generate enough margin to invest in our research mission, to invest in our health system capital? How do I make sure that every patient has the same experience I had when I was in the hospital?"
Penn Medicine is powered by a dedicated team of nearly 50,000 employees. Recognizing the importance of a worry-free work environment, Kevin's focuses on creating a system that instills confidence and job security. By developing robust strategic plans and hiring exceptional talent, Kevin empowers his workforce to excel in their respective roles. He believes that every employee should be able to focus on their job without concerns about job stability or the organization's future.
As CEO, Kevin's overarching objective is to lead and operate Penn Medicine as a premier healthcare system. His dedication to creating a worry-free environment allows the organization's employees to wake up each morning, confident and committed to delivering exceptional care. Through strategic planning, talent empowerment, and fostering a culture of trust, Kevin drives the organization forward, making a positive impact on the lives of patients and employees alike.

Perspective on the Increasing Cost of Care

U.S. healthcare costs are predicted to rise from $4.2 trillion to $7.2 trillion by 2031 (Forbes article). As a healthcare leader, Kevin navigates the challenges posed by the rising costs of care. Recently, during a call with several hospital CEOs, they delved into this issue, recognizing their accountability for managing an increasingly costly healthcare delivery system.
While hospital systems don't have direct control over vendor expenses, the soaring prices of healthcare technologies, such as MRI machines and IT, remain a pressing concern, he says.
Kevin observes that hospitals sometimes act as middlemen, passing along costs from other segments of the industry, such as pharmaceuticals.
To address these challenges, the industry is exploring ways to procure smarter and develop a more resilient supply chain. They aim to purchase more strategically and consider potential changes to the supply chain.
“The fundamental issue we're facing is hospitals are labor-intensive, and we need to figure out how to deliver care more efficiently and with less redundancy so that we can spread those labor costs over more and more people,” Kevin says. “Because the demand is going to continue to grow.”
As the baby boomer generation enters the later stages of life, there will be significant changes in healthcare due to the sheer size of the group. The demand for healthcare services is bound to surge, calling for innovative approaches to meet the increased demand.
As a CEO, Kevin considers inspiring people to reimagine healthcare as a crucial aspect of his role. He believes in envisioning not just how hospitals were, but how they want them to be. This may involve exploring alternative, cost-effective, and patient-centric approaches, such as healthcare services delivered directly to a person's home, moving away from the traditional brick-and-mortar model.
Kevin recognizes that hospitals can play a leading role in curbing the rising costs of the healthcare industry. However, he firmly believes that this is a shared societal responsibility, which includes many industries, healthcare providers, insurance groups, and consumers. If healthcare costs do not decrease, there is a significant risk of facing a future where quality care becomes a luxury, access becomes more restricted, and the burden on individuals and society becomes unsustainable.

Penn Medicine and Home-based Care

Over the years, Penn Medicine’s investment in home care has been significant, with the organization serving approximately 800,000 patients in the comfort of their homes. What's even more impressive is that 50% of chemotherapy and medical infusions administered by Penn Medicine occur in patients' homes. This isn't just a vision for the future; it is happening today. Not only is this approach more cost-effective, but it also offers a truly remarkable experience for the patients.
Kevin appreciates how the strategy improves the treatment experience. Patients can sit in their favorite chair, beside their dog, and watch their favorite TV show while receiving care at home, he says.
This successful shift from the clinical setting is a testament to teamwork across the organization, Kevin says.
One of the great advantages of this approach is that when a patient transitions to home care, Penn Medicine doesn't lose that patient's care. There's always another patient in need of a hospital bed, so this model ensures efficient resource utilization. While the complete transition from hospitals to home care is not complete, the organization has been progressively deconstructing healthcare services, pushing more care into the outpatient setting, and bringing vital treatments into the comfort of patients' homes.
Another innovative initiative, called "Calvary," is underway. The goal is to dispatch an EMT or paramedic to the patient's location, intervening at home before the need arises to call 911 or visit the emergency room. This proactive approach aims to intercept patients early in their healthcare journey, avoiding unnecessary hospital admissions when possible. The success of the "Calvary" initiative has already been demonstrated, and now the focus is on scaling this impactful program across various patient populations and demographics.
Looking to the future, Penn Medicine remains committed to further developing and expanding these groundbreaking initiatives, Kevin says. Scaling home-based care and innovative interventions will require overcoming challenges such as regulatory changes and licensing, but the organization is dedicated to delivering care that is safe, effective, and results in positive clinical outcomes.

Partnerships with Penn Medicine

Penn Medicine actively forges partnerships with founders and embraces innovation. The approach involves evaluating whether to "make or buy," and nearly 99% of the time, Kevin and his team find that purchasing is the more cost-effective choice.
In 1998, Penn Medicine adopted Epic, an electronic medical records software. More than 20 years later the platform continues to offer a great backbone, but the health system also seeks opportunities to collaborate with founders in the middleware space surrounding Epic.
An example of a partnership with a startup for Penn Medicine is the collaboration with Evergreen Nephrology. The shared goal is revolutionizing kidney disease care for patients with chronic and end-stage kidney conditions. Through this alliance, Evergreen Nephrology introduces innovative approaches that assist Penn Medicine in controlling costs, while delivering improved care, such as providing dialysis at home. This strategic shift helps reduce the need for emergency department visits and hospitalizations among patients with kidney disease.
While Penn Medicine, with the Wharton School of the University of Pennsylvania, could have independently tackled this endeavor, Kevin recognizes the value of collaborating with passionate entrepreneurs.
The decision to partner with startups proves to be more efficient, resulting in a mutually beneficial solution and a robust partnership, he says.
As Kevin evaluates potential founders for partnership, he seeks individuals driven by a passion for solving problems that align with Penn Medicine's goals. However, he emphasizes that entrepreneurs should not solely pursue financial gains when seeking to collaborate with Penn Medicine, especially with the future trends in reimbursement for Medicare and Medicaid.
It is probably a bad strategy if you think you are going to make a killing partnering with an institution like Penn Medicine, Kevin says. There is nothing wrong with making money but that cannot be your sole focus when creating a partnership with an academic system like Penn Medicine. There has to be an alignment of values first.
While Penn has long been renowned for its expertise and investments in life sciences, a recent collaboration has emerged between Penn Medicine and Wharton. Together, they have established the Penn Medicine – Wharton Fund for Health, which is dedicated to investing in early-stage, for-profit companies that hold the potential to improve the social determinants of health for economically disadvantaged Philadelphia residents.
"It is impact investing for companies that are working on social determinants of health, which may not have the 6x, 7x, 10x, or 20x (return) that VCs are looking for,” Kevin says. “If you can move the needle on diabetes management or food insecurity…I want to invest in that.”
Even if it means achieving a 5x return, Kevin says, it is essential to invest in initiatives that address social determinants of health. Despite these more modest outcomes, the impact of such investments can be highly rewarding and beneficial in the long run.
One of Kevin's favorite companies is Kinvolved, which addresses the crucial issue of school attendance. Most schools won't call parents at work to notify them about a child’s absence. However, Kinvolved resolves this by sending text messages to parents, providing a list of students who should be present at school, and digitizing attendance records. This simple, yet effective solution has significantly reduced tardiness and truancy rates, emphasizing the vital role education plays in determining social determinants of health.
As Penn Medicine continues to invest in improving the health of its community, they remain open to new ideas that extend beyond life sciences. Emphasizing the need for middleware, patient engagement tools, monitoring solutions, and advancements in social determinants of health, they eagerly seek fresh perspectives and collaboration.
For those interested in establishing partnerships with Penn Medicine, connecting with the Center for Health Care Innovation is a recommended starting point. The center is led by Dr. Raina Merchant, chief transformation officer, and Roy Rosin, chief innovation officer.
Partnering with passionate minds is key to fostering transformative ideas, and Kevin says Penn Medicine is eager to collaborate with like-minded individuals dedicated to advancing healthcare.

What Penn Medicine Looks for in Founders

When Penn Medicine evaluates entrepreneurs or founders for potential partnerships, the institution looks for a combination of key factors.

Great Idea: The idea presented by the entrepreneur must address a specific need and have the potential to make a positive impact on the Penn Medicine community, whether by enhancing patient care, improving healthcare processes, or addressing specific challenges within the organization.
Alignment with Penn Medicine's Core Values: Entrepreneurs should showcase a strong alignment with Penn Medicine's mission and values, emphasizing how their solutions can contribute to the institution's goal of providing exceptional healthcare and advancing medical knowledge.
Expertise in Healthcare Industry: Entrepreneurs who possess a deep understanding of the healthcare industry, particularly the unique aspects of Penn Medicine's operations, are more likely to create solutions that cater specifically to the institution's needs.
Data Security and Privacy: Given the sensitivity of healthcare information, entrepreneurs must prioritize data security and privacy measures, aligning with Penn Medicine's commitment to safeguarding patient data. This includes implementing strong encryption, access controls, and monitoring systems to protect patient data from unauthorized access, use, or disclosure.

Insights on Consolidation in Healthcare

In recent years, the landscape of healthcare has witnessed a substantial rise in mergers and acquisitions. Take, for instance, the case of hospital M&A in 2021, where there was an astounding 56% growth in the 12 months through Nov. 15 compared to 2020. This surge was especially prominent in physician medical groups, which experienced over 400 deals, along with notable activity in managed care and rehabilitation subsectors according to a report from PwC.
From 2010 to 2017, there were 778 hospital mergers, leading to a decline in the number of independent hospitals. As a consequence of these mergers, a growing proportion of hospitals became part of larger healthcare systems, as depicted in Figure 1. In 2005, 53% of hospitals were part of larger systems, but this number rose to 66% by 2017.
Source
Kevin perceives the ongoing consolidation in the healthcare system as a testament to its inherent fragility, underscoring the need for complementary assets to ensure sustainable growth.
As an example of this strategy, Kevin tells the story of Chester County Hospital. A decade ago, when Chester County Hospital, which is located about 25 miles west of Philadelphia, was closing, Penn Medicine absorbed the institution as an independent entity under the enterprise’s umbrella.
This strategic move proved beneficial as the partnership enabled Chester County Hospital to tap into Penn Medicine's excellent neurosurgical department, a resource it lacked on its own. Through the merger, the hospital gained the ability to optimize neurosurgical care by transporting patients via helicopter to another Penn Medicine location, leading to better patient outcomes for residents in Chester County and nearby areas.
Penn Medicine's growth trajectory has also involved the development of a $350 million cancer center at Princeton Medical Center. This initiative complements the overall strategy and demonstrates a preference for rational expansion. While some believe that larger healthcare systems can negotiate better insurance rates and reduce administrative costs, Kevin points out that such outcomes are not always substantiated by literature or practice. In fact, consolidations can pose challenges in terms of streamlining administration effectively. In addition, cultural mismatches between two health systems can be detrimental.
Addressing the question of cultural fit and patient care, Kevin emphasizes that Penn Medicine prioritizes shared values and aligned missions when considering partnerships. They have been selective in choosing partners, recognizing that the merging of long-standing organizations requires meticulous evaluation of cultural compatibility. The core values and objectives of both entities must align to ensure the success of any collaboration.
Kevin firmly believes that maintaining a large clinical margin is critical as it directly funds scientific research (60%), education (15%), and health system capital needs (25%) at Penn Medicine. Any new acquisition must embrace this vision, as the reinvestment into science-driven healthcare is a non-negotiable aspect of Penn Medicine's mission.

The use of AI and Data to Improve Healthcare

AI, according to Kevin, is a vast and often misunderstood concept. It encompasses chatbots, predictive analytics, and the elimination of repetitive human tasks, among many other things.
One AI area that he finds particularly intriguing is its potential application in screenings. The current volume of colonoscopies and other screening tests often overwhelm the number of available physicians, leading to challenges in timely access to screenings. Kevin envisions a future where AI, combined with gene sequencing and patient history, could enable efficient triage to identify patients who need immediate attention versus those who can wait, thus optimizing care and resources.
Similarly, AI's role in enhancing fetal monitoring during labor holds immense promise. By utilizing predictive analytics and vast datasets of fetal monitoring strips, AI could provide real-time monitoring, alerting medical staff to potential issues promptly.
"Wouldn't it be great if AI was watching that fetal monitoring strip the entire time, using predictive analytics from the millions of fetal monitoring strips we have?” Kevin says. “And it could ping the doctor or the nurse, saying, 'You have a problem, let's get in here.’” This could be especially beneficial in situations where continuous monitoring by doctors and nurses is not economically feasible.
Nevertheless, Kevin acknowledges the complex challenge of balancing the data-driven nature of AI with patient privacy and safety. Healthcare data is precious and requires careful safeguarding. He raises thought-provoking questions about whether healthcare data should be considered a public utility, freely shared to benefit all, or a competitive advantage held by individual hospitals. While he is personally inclined toward data sharing for the greater good, he acknowledges the ethical dilemmas surrounding data ownership and commercialization.
"I'm hoping that large healthcare systems will do a better job of sharing data to train AI and then share that AI to make patient care better, not necessarily to enrich your hospital or company," Kevin says.
As the healthcare industry navigates this complex landscape, the focus should remain on delivering high-quality care to patients while leveraging AI ethically and responsibly.

Advice from Kevin

Pick your organization first and your job second
1. When choosing an organization, assess its core values and mission statement. Look for companies that align with your own principles and where you feel passionate about the purpose of their work.
2. Reflect on your personal motivation for wanting to work with a particular organization. Pursuing work that excites and motivates you will likely lead to a more fulfilling and rewarding career.
3. Network: Consider if the organization provides opportunities to expand your professional network and make valuable contacts within your industry.
Don’t solely chase the CEO position or any one particular position
1. Instead of fixating on becoming a CEO, Kevin learned to seek organizations with enduring purpose and meaningful missions. He realized that happiness and fulfillment were not solely dependent on reaching the top leadership position.
2. Fixating solely on one position can blind us to other valuable opportunities for growth and fulfillment. It can lead to a narrow focus on achieving a title rather than acquiring a diverse skill set and gaining a breadth of experience. Rather than focusing on a single job title, Kevin advises concentrating on the journey, exploring various paths, and allowing yourself to adapt and thrive in a rapidly evolving professional landscape.
Understand that success is a daily pursuit of a worthy goal
1. Kevin learned a valuable lesson from his friend, Darrell Bell, during his early career days at Bryn Mawr hospital. When Kevin shared his ambition of becoming a hospital CEO by the age of 40, Darrell applauded the goal but posed a crucial question: "What happens if you're 41?"
2. This simple yet profound inquiry made Kevin reflect on the rigidity of his aspirations. Darrell went on to impart a powerful piece of advice: Success is the daily pursuit of a worthy goal.
3. Goals are not set in stone; life is dynamic, and circumstances change. Therefore, it is essential to focus on pursuing meaningful and worthwhile goals each day, regardless of how they may evolve over time. This mindset allows individuals to find fulfillment in the process of continuous effort and dedication.

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