Bill Gassen: We are excited about what our combination can do for the patients we collectively serve, the majority of whom reside in rural communities. You and I have talked at length about the unique challenges facing rural health care, and at Sanford Health, we know that we need to think differently about what we do today to meet the needs of our communities tomorrow.

From the start, our conversations with the Marshfield leadership team and Board felt natural and collaborative. Sanford Health and Marshfield both share a rich legacy of and commitment to excellence in rural health care delivery. Marshfield has an incredible reputation for physician leadership and culture, which is something we value in a future partner. Bringing together our complementary capabilities will enhance our ability to accelerate clinical innovation, speak with a collective voice, advance solutions on the national stage and continue improving health care quality, accessibility and affordability for the patients we serve.

Larsen: Well said. What are you hoping to achieve by combining with Marshfield? What can you do together that you couldn’t, separately?

Gassen: Our combination is about harnessing the full promise of technology including virtual care, digital health and AI to advance the health of communities. It’s about increasing access to nearly 1,000 active clinical trials and clinical studies and combining research to bring new treatments and cures to patients. It’s about improving patient outcomes through broader population health initiatives, value-based programs and innovative care delivery models. It’s about moving forward together to solve the most pressing challenges facing rural health care.  

Our announcement this week is the first step in the process, and we are optimistic about the opportunities that lie ahead of us as we finalize our combination.

Larsen: While we’re on this, I want to talk a bit more about horizontal consolidation, especially noncontiguous system mergers. Because one consistent truth is that getting bigger as a hospital or health system has very rarely correlated with getting better (on operational efficiency or even clinical quality). We know this isn’t the first time Sanford has set their sights on a large-scale merger; in fact, our last published chat from a year ago covered similar themes. Talk to me about what’s different this time around and how Marshfield fits into Sanford’s broader mission.

Gassen: When I think about the future of Sanford Health, I think about our ability to make good on our audacious aspirations. And you're right, Eric, I'd be remiss if I didn't look back and remember how we've accomplished what we have to date. Our blueprint for the future has many learnings from the past that we need to pull through.

We must continue to come together with other like-minded organizations to grow, particularly those with complementary assets. To make good on that modifier of "strategic" growth, every combination must return value for our patients through greater access or improved quality or ongoing financial sustainability.

Looking back to the time we spent in Minnesota, I remain bullish that had we completed that combination between Sanford Health and Fairview Health Services, it would have meant better care for more patients, no question! We were strategically aligned to harness our shared capabilities in a very meaningful and impactful way.

I'm never going to be interested in growth for the sake of growth, but I do think we need strong, smart, strategic growth to meet the ever-growing needs of the communities we serve today and those we're going to serve tomorrow.

Larsen: Beyond the recently announced Marshfield merger, you and Sanford have had a lot going on — continued growth, investments in digital health and virtual capabilities, and you personally taking on a prominent voice in the development of AI in healthcare — all of which I'm excited to explore with you. But let's start with what people might know (or not know) about Sanford Health, and just how expansive and multi-dimensional the system is. Sanford comprises some 40 hospitals, but also a health plan with 200,000 covered lives, a sophisticated virtual hospital soon to open, and a far-reaching rural network. Bring us up to date on who and what Sanford is today.

Gassen: Thanks Eric. Sanford Health is a treasure — it's an incredible organization with deep roots here in the upper rural Midwest. We've come together over the last 100 years with other progressive organizations, all committed to the mission of delivering world class care to people no matter their ZIP Code.

Sanford Health is an integrated not-for-profit healthcare delivery organization with an acute care footprint of 45 hospitals covering South Dakota, North Dakota, Western Minnesota, and northwestern Iowa.

In addition, we have a sprawling post-acute footprint. We came together in 2019 with the Good Samaritan Society to provide high-quality care across the lifespan. We also have a health plan with, as you mentioned, 200,000 covered lives. The health plan allows us to bring true value to our members across all sectors, from the exchanges to working with small- and mid-sized businesses to governmental products. We also have an expansive research organization that's brought more than 500 clinical trials to our patients, with researchers and full-time clinicians working every day on some of the most audacious goals in healthcare — like curing Type I diabetes. We have 45,000 talented caregivers at Sanford Health, with more than 1,600 employed physicians and a near equal number of advanced practice providers. We pride ourselves on deep operational discipline and we find ourselves to be among the fortunate beneficiaries of the most transformative, most impactful philanthropist that healthcare has ever known, Mr. Denny Sanford. His generosity and impact are without equal.

The unique lens of a provider-led health plan allows us to understand both sides of the equation — whether you call them a member, patient, or resident, it's a person who we're serving. We're uniquely positioned to harness all our capabilities to deliver their care. To date, we've done some amazing things, but our best days are, without question, ahead of us.

Larsen: Bill, true to your and to Sanford's characteristic modesty, you just articulated a whole narrative around Sanford but skipped any mention of revenue.

Gassen: Yes! But to answer, as of today, Sanford Health is $7.5 billion dollars in annual revenue.

Larsen: Sanford has played a national role in advancing rural healthcare for some time now, along with many of these other verticals you mentioned. And yet, not too many people outside of the Midwest know about Sanford. I might even say you all have cultivated a kind of 'intentional anonymity.' But now — especially with some of the national roles you're assuming in AI and AHA, which we'll get into shortly — it feels like Sanford is being more intentional about sharing your story and being more open and communicative. Am I imagining this?

Gassen: You're spot on, Eric. We're doing everything we can to be the premier rural health system in the U.S. That means delivering unmatched care to call, whether a community has 200,000 people or 100 people. We'll accomplish that by deploying virtual care services or getting in a car and driving hundreds of miles to interact face-to-face with patients, as well as anything else we need to do to care for our people.

There has been an intentional shift over the last three and a half years I've served as the president and CEO of Sanford Health to take a more outward approach to talking about what we do and why we do it.

One of the reasons we've made this intentional decision is that we can't do it all ourselves — we need partners. We will be much more effective if we're working together with one voice to advocate for a shared mission, from Washington, DC, to local communities. Some of the most challenging issues facing us in healthcare center on access, quality, and financial sustainability. Those challenges aren't unique to Sanford Health, but we believe that in many respects they are more pronounced in rural America.

We have taken up the mantle to share our perspective and convene like-minded organizations to develop forward-looking solutions that improve access, quality, and financial sustainability. We believe there's a moral imperative to share the way we see the world, to share the points of advocacy most important to us, and to share what we think are some solutions as a call to action. At Sanford Health, we have every attribute, every asset that's necessary to be the best in the world at delivering healthcare. We just need to develop aligned incentives and execute against them.

Larsen: Let's talk about what it means to be a health system in 2024. We've seen this phenomenon of what the Advisory Board has somewhat irreverently called 'SINOS' (Systems in Name Only). In other words, predominantly acute-care-centric hospital companies that like to call themselves health systems but really are enterprises architected to capture inpatient volumes and feed the military-industrial complex of their acute care footprint. And they've gotten bigger: The top 10 health systems in the country comprise more than $300b in revenue, the top 100 more than $900b. As they get larger, they oftentimes don't consolidate much. Many of these horizontal mergers are what I call Noah's Ark — two of everything (two CEOs, two HQ's, two EMR's, etc.) I say all this to draw a distinction with Sanford — you all have pursued a different path in your growth, and, as a result, are one of the best-operated systems in the country (as measured by operating margin year in and year out). Fair?

Gassen: I think that's very fair. Part of why Sanford Health enjoys the position we're in today is the way we came together with other strategic organizations and matured together, leaning into innovation and challenging the status quo. In 2009, then Sanford Health of Sioux Falls, SD, came together with MeritCare of Fargo, ND, to begin creating the system we know today. Shortly thereafter, we combined with several other partners across America's Heartland.

We've taken a very focused approach to growth. We're not just a holding company, we are a fully integrated operating company that has zero tolerance for duplication — that is, having two when there should be one is not an option. We've continued to mature the ways we maximize the benefits of appropriate size and scale coming together and learning from each other. We've tried to steer clear of what you call 'Noah's Ark.' There may be a flood coming, but that's not the answer today.

While not perfect, Sanford Health does a very good job of appropriately maximizing key areas of efficiency. We systematize what should be systematized and leave local what needs to be local. I can speak with conviction about the way we've grown with a direct impact on the improvement of quality, access, and financial sustainability in communities where, but for Sanford Health, no one else would be there delivering the quality of care our patients deserve.

For example, in each of our major hubs, there is a president and a CEO who serves as the leader of Sanford Health in that market. The president has both a system hat and a local hat. The system hat means that while they're advocating for what needs to be done in their community, they never lose sight of what's best for the whole of Sanford Health. They might make a decision that benefits a different Sanford community over what their desire or personal needs may be, which ensures all ships rise for all patients and communities

The market CEO is the face of Sanford Health in the community. This structure allows us to be highly responsive to the unique healthcare needs in each community, despite our growth. It also allows us to invest in and provide the right community benefits beyond just healthcare, truly thinking about the holistic health and success of each community.

Larsen: And where does Sanford Health Plan fit into the operating company?

Gassen: What's going to allow us to be successful in the future is taking appropriate risk, and our vehicle for that is going to be leveraging our health plan. To win, you have to have it, or be part of it.

Sanford Health Plan has a young Medicare Advantage (MA) product that's already earned 4.5 Stars. We also have I-SNP products that allow us to maximize our footprint on the post-acute skilled nursing facility side and align incentives to take the right care for the right person at the right time and at the right cost.

Financial sustainability must be viewed through the eyes of our patients, our members, and our communities. This mentality is why we made the decision to bring in the new president and CEO for Sanford Health Plan, Dr. Tommy Ibrahim. It was important to us to have not just a talented leader, but also a physician who understands both sides of the equation to harness our broader innovation and incredible clinicians to help Sanford Health Plan manage care and risk into the future.

In the years to come you will see us continue to double and triple down on the ways we invest in and deploy Sanford Health Plan to do better for more people.

Larsen: Speaking of Sanford Health Plan, one of the most remarkable stories in the payer domain right now is Oscar Health, whose board you've served on for a year and a half now. Watching the transformation and resurgence of Oscar has been exciting — any thoughts and observations on Oscar? Or translational insights and takeaways for how you and new Sanford Health Plan CEO Tommy Ibrahim are operating and growing the health plan?

Gassen: It's an incredible privilege to serve on the board of directors for Oscar Health. Hats off to the innovation, the vision, and the resiliency of its founders Josh Kushner and Mario Schlosser, who had a vision of starting the first health insurance company built around a full stack technology platform and to stay committed to that vision for personalized access for more members across this country.

They've done an incredible job of doing that and the technology is second to none. Over the last year, Mario and Josh, along with the rest of the board, saw fit to bring in Mark Bertolini to take over as the CEO and Mario voluntarily transitioned over to directly lead technology. Since they've made those steps, they've seen incredible advancements: Their medical loss ratio is in the mid-70s, they've continued to increase their industry-leading member engagement, and they've continued to leverage technology in new and exciting ways to create a more personalized and engaging experience for members.

I've learned so much about the industry through Oscar and the ways we can better use Sanford Health Plan to do more for our patients across the board. They've also been a great partner in extending some of their technology to help us improve the Sanford Health Plan experience for our members.

Going forward, you'll see us do more exciting things together, differentiating and improving member experience and outcomes.

Larsen: Sanford in 15 years has gone from a sub-$1 billion health system to a $7.5 billion health system. That in and of itself is remarkable, but I'm more interested in how you've instilled and maintained operational discipline as you've scaled. You didn't lay off anyone during the height of the pandemic. You were operationally profitable through the pandemic. I can count on one hand how many health systems maintained an operating profit margin and served their community in the self-sacrificial way that Sanford did.

Gassen: I agree — our success is a natural output of the conversation you and I recently had regarding how Sanford was historically constructed and currently structured. We developed a richly mission-oriented organization, but we know that in the absence of margin there is no mission. We take great pride in operational discipline as well as big, bold strategic vision. Our relentless operational leader, EVP and COO, Matt Hocks, has ingrained a culture of operational discipline at every level of our organization.

One of our advantages is our stubbornness about areas that need to be centralized while at the same time, having a level of maturity as an organization to have local autonomy where and when it matters. This is such a fine balance that so many organizations struggle with — it's been part of our maturation process to learn you don't always need to force everything to be centralized, but you must never compromise on the true tenets of a system.

This two-tiered governance structure enables not just the system to grow and benefit, but each community as well. A great example is Bismarck. Since we came together with Bismarck's MedCenter One in 2012, we've seen an over 50% net increase in physicians, an increase in service lines, and an increase of jobs in Bismarck — we're not the kind of system where everything comes back to the Emerald City, but where every community can grow and succeed.

Another asset is our Sanford Health Board of Trustees. In recent years, we have made a concerted effort to identify board members who represent diverse voices and expertise. Our Trustees are committed to strong governance and I'm grateful for their guidance and support as we navigate healthcare challenges together. For example, our board has told us to not look myopically at innovation. Innovation could help reduce burnout for our clinicians, improve patient engagement, and more. Essentially, they've said we need to be eyes wide open.

Our current board chair, Lauris Molbert, has a background as the CEO of a hospitality company, among other ventures, so he brings deep understanding of the importance of building culture and engaging our people in the mission as well. Having board leadership who understand the intricacies of large and complex organizations is key to successful governance where together, management and the board steward the organization's resources to maximize our impact on patients, people, and communities.

Larsen: It's difficult to strike that balance. What are some of the pitfalls you see from other systems in realizing this operational efficiency?

Gassen: In the broader market we can see imbalance both ways, with systematization for systematization's sake or too much autonomy that results in a loosely affiliated group of organizations under a holding company. I think this imbalance has potentially fed the adverse narrative that says consolidation in healthcare hasn't been healthy.

I think there is a material difference between growth and strategic growth — growth just for the sake of size fails time and time again. The right partners are organizations that see the world similarly and have a similar culture. They must have attributes that are additive to what you need, to fill gaps in services you don't have, or bolster parts of the organization that need strengthening.

As we look at potential partners in the future, we're looking for organizations that believe in the value of our healthcare delivery operating model and the extreme power of our provider-sponsored health plan to align necessary incentives. Finding organizations that see things with a shared, aligned focus has allowed us the benefits we've enjoyed over the last 100 years.

We were profitable through the pandemic. We were profitable through the financial crisis that followed the pandemic. We continue to be profitable. And as a community-based 501(c)(3) not-for-profit with no responsibility to shareholders, every dollar generated through positive revenue is plunged back into the organization for the benefit of our patients.

Larsen: Bill, let's shift from the more conventional parts of the health systems — hospitals, ambulatory care, and in Sanford's case, the health plan — to the more frontier innovation happening in digital health. We have an interesting juxtaposition happening — on the one hand, this 'Renaissance moment' in digital health with some 13,000 diagnostic, therapeutic, clinical/nonclinical workflow and care augmentation companies birthed over the past few years (and this all before the advent of LLMs and generative AI), which is stimulating huge creativity and inventiveness in Silicon Valley and healthcare. But on the other hand, we have slow-to-adopt incumbents, especially health systems, that take, on average, 23 months once they sign a contract with a digital health company to deploy the solution. That's an eternity, especially given how quickly the pace of innovation moves.

So, you have this dichotomy between fast-moving digital health entrepreneurs and glacial-moving incumbent health systems. You and I have agreed in the past, Bill, that rural healthcare might be the exception here. In fact, a lot of the things conventionally thought of as disadvantages for rural providers — geographic dispersion, too few caregivers, not enough brick and mortar infrastructure — might actually be advantages when it comes to deploying digital health solutions.

I think Sanford has been at the vanguard of that. You invested somewhere on the order of $300 million in your virtual hospital and in your virtual health system capabilities. I'd love for you to talk about why a rural healthcare provider is, perhaps counterintuitively, at the forefront of deploying digital health solutions.

Gassen: Eric, I totally agree. Necessity is the mother of invention. Why is rural healthcare right for and receptive to the use of technology? Because we have to be. When you're living in and operating in parts of the country where there may be hundreds of miles between your patients and the next hospital, virtual care is the only option.

The only way we're going to be able to continue to meet our patients' needs and deliver the world-class care they deserve is by leveraging and maximizing technology, specifically new advancements that are still yet to come. It's impossible without.

That visionary approach to digital health is why we went to healthcare's greatest philanthropist, Mr. Denny Sanford. We asked him to philanthropically invest in our vision of integrating technology into our already strong organization to ensure our stability for generations to come.

Mr. Sanford made a landmark $350 million philanthropic gift to allow us to create our virtual care initiative and our virtual hospital, which will serve as a hub for partnering on new technologies. I use "partnering" intentionally — I need another vendor like I need another hole in my head. What we truly need are innovative partners that specialize in the use and deployment of new technologies coming together with Sanford's expertise in delivering care to meet the needs of rural America.

Larsen: Talk to me about some specifics. Where can we watch for Sanford's next move?

Gassen: Later this year we'll open Sanford's virtual hospital as an innovation hub. We'll have a simulation center to work on how we deploy and deliver care for individuals in their home — it's actually where we'll be training our residents and nursing students on "webside manner."

The virtual hospital will also be a hub for providers to deploy virtual care and connect in remotely into hospitals and clinics — like the satellite clinic we've set up in Lidgerwood, ND, that serves a community of around 600 residents who would otherwise have to drive an hour or more to another clinic or not seek care at all. Consultations with both primary and specialty care will be deployed from places like the virtual hospital.

There's a great level of receptiveness to this in rural communities — everyone knows how to and wants to use technology, no one shies away from it. Our providers want to run toward new technologies, which creates great motivation for innovation on behalf of our patients.

Larsen: Let's move from digital health broadly, to artificial intelligence (AI) specifically. There are those, myself included, who think AI is going to be one of the most transformative moments in society and in healthcare: We envision the implications of AI in attacking the $1 trillion of administrative spend, advancing care augmentation, synthetic biology and drug development, and consumer empowerment. So, on the one hand we have this hyper-optimism and visions of a 'post-scarcity' society. On the other, a lot of doom and fear about job displacement, bioweapon engineering, election manipulation, you name it.

You've taken a national leadership role, Bill, in what I might call 'shuttle diplomacy' between the private sector and the White House in architecting a framework for thinking about possible AI regulation in healthcare. How are you thinking about taking a measured approach to AI generally and how are you thinking about public-private collaboration to design a framework that allows technology to grow responsibly?

Gassen: My viewpoint on the world in front of us is one of pure optimism. I'm more confident and optimistic about the future than ever before. We've been through several crises, yes — a global pandemic, clinician burnout, increasing costs, inflationary pressures — but it's created an amazing opportunity for us to change. Thankfully, as we have this convergence of headwinds, we have maybe the most powerful tailwind the industry has ever experienced: generative AI. What we do in healthcare will never change, but how we do it has to change. At Sanford Health, we intend to create that change.

Sanford decided to step forward this year in partnership with nearly 40 healthcare delivery systems and payers to start a dialogue between the private sector and the administration to develop the rules of the road for AI. Our coalition, which is led by our mutual friend, Aneesh Chopra, who was the country's first Chief Technology Officer and currently leads CareJourney, doesn't have a fancy name; everything about its identity lives on HealthcareAICommitments.com.

We were able to come together with the administration in a sixty-day sprint; since then, we've had monthly interactions with the administration to talk about how we use AI. We've made sure we have the right stakeholders at the table — and we've learned from our payer partners how they're using AI and how they want to drive transparency with members and patients.

It's no mystery that payers and providers can have differences and there can be some healthy tension that exists. But there is way more we have in common, especially in this space, than what's different. Our delivery teams, payers, patients, and members need confidence that we're going to use these revolutionary and transformative tools responsibly and we want to work with our elected officials in Washington to develop the right rules and regulations, which advance and accelerate positive change, not stymie progress.

I'm excited to be in the infancy stages and I think this will be a framework for how we use AI moving forward to have an incredible impact to the positive.

Larsen: You and I are pretty unabashed optimists about this. And yet, we're also not Silicon Valley 'techno-optimists' who are convinced technology is the solution to everything. It's so important for incumbents to be the architects or co-architects with the technologists in this. I think historically our industry has abdicated its responsibility in designing technology, and it's one of the reasons why this industry has historically been so hostile to and slow to adopt technology.

To have you and your 40 counterparts at the table designing rules for responsible AI use is wise and will hopefully forestall the government storming in with heavy-handed regulations. And it ensures technologists won't invent something for healthcare that is not bespoke, customized, and hyper-personalized to what we're doing. How do you see this playing out over the next few years?

Gassen: I believe AI is how we're going to continue to streamline workflows on both the payer side and the provider side. Sanford Health has exemplars of where AI drives benefit for us through administrative simplification, care augmentation, and consumer engagement, and is monitoring where that can continue to develop in the future.

We're tracking, for example, some of the administrative ease from ambient listening in the clinic so that our physicians are spending more time face-to-face with patients and less time in front of a keyboard. We know assistive, secure ambient listening drives greater efficiency and better output for what's communicated in the EMR and, most importantly, everybody's happier.

One of the other things we've done is use AI to develop a protocol for handling the large number of patients who need colorectal screening. We saw an influx of patients when the standard was lowered from 50 to 45 and found ourselves coming out of the pandemic with lots of deferred preventative screening. We used AI to create an algorithm based on preexisting conditions and other biomarkers to help physicians understand the risk of the patient in front of them without having to scroll through medical records, saving doctors time they can spend with patients instead. Some individuals may be able to use an FDA-approved, at-home stool sample for screening, while others who have indications on their history or genetic predispositions should get scheduled for a colonoscopy.

These are just some of the areas where AI is helping us do a better job.

Larsen: Beyond the responsible AI council, you've also served on the AHA board. What's the zeitgeist among your peers on the AHA board — and what lessons can you leave us with from this type of leadership?

Gassen: I'm new to the board (my term started in January of 2024), but I have already had the opportunity to become involved in several committees, task forces, and smaller groups where I've been able to learn firsthand how and why the AHA has been so effective and influential at advancing healthcare policy at the federal and state level on behalf of their members. Many of us are facing common challenges, and the AHA has provided a place where we've been able to share solutions and best practices that help our own patients and ultimately improve healthcare for everyone around the country. I commend the AHA for establishing a structure that brings together urban and rural hospitals, independent hospitals and health systems, so that everyone has a seat at the table.

Looking ahead, I'd like to further engage with the AHA's advocacy team on bringing together some of the other stakeholders in the healthcare sector that are necessary components to successfully delivering healthcare to the patients we serve. We all know that hospitals are a quintessential part of healthcare, but we also recognize we can't do everything on our own. We need to find common ground with some of these other stakeholders to advance our shared interests and make the overall experience of receiving healthcare better for those we serve.

The AHA has been the leading association for hospitals and health systems for more than 125 years, and there's a reason for its longevity. The AHA has established a powerful team whose reputation as thought leaders and change makers is recognized by everyone in our field. Sanford Health is proud to be a member of the AHA and I'm honored to serve on its Board of Trustees.