Wright Lassiter will replace Lloyd Dean as CEO of the largest not-for-profit health system by revenue in the country, CommonSpirit Health said Thursday.
Lassiter, the CEO of Detroit-based Henry Ford Health since 2016, will take over Aug. 1 when Dean retires. The incoming CEO is tasked with helping CommonSpirit emerge from the pandemic amid a nationwide labor shortage, which will be a key area of focus, executives said.
"It is really rare to find someone so completely aligned with the organization's priorities," incoming board chair Chris Lowney said in an interview. "Wright has devoted himself to getting results for poor and vulnerable communities, making the patient experience more integrated and seamless, and his work at Henry Ford showed he recognized that employees are the lifeblood of making those priorities happen. And of course he knows without prudent financial management, you are not able to pull these things off."
CommonSpirit's 140-hospital system spread out across 21 states recorded more than $1.1 billion in operating losses over the two years following the 2019 merger between Dignity Health and Catholic Health Initiatives. But the Chicago-based system's finances improved in 2021, when it reported $998 million in operating income on more than $33 billion in revenue and a 3% operating margin.
"The industry faces a host of headwinds that every organization has to deal with. CommonSpirit has the advantage of scale, which has both benefits and burdens," Lassiter said in an interview. "I am confident that we can build on the successes that Lloyd and his team have established, predicated on the financial success of the organization and the impact around quality, safety and wellness."
The system benefited from $690 million in COVID-19 relief funding in 2021, a one-time $523 million gain from the sale of a joint venture share, its acquisitions of Yavapai Regional Medical Center in Phoenix and what's now Virginia Mason Franciscan Health in the Pacific Northwest and rebounding patient volumes.
The Catholic system is more than halfway toward its four-year, $2 billion cost-savings goal. Economists have historically been skeptical of health system executives' efficiency estimations given how hard it is to standardize operations, blend cultures and governance models, reduce redundancies and align IT systems.
"We identified a long list of synergies, many of which are financial, and we're methodically working through them successfully. I think that is reflected in our upgrades to our ratings and outlook," Lowney said.
Fitch Ratings upgraded CommonSpirit's BBB+ rating from stable to positive in November, noting its progress on cost savings and $17.7 billion of unrestricted cash flows, buoyed by $3.4 billion in investment returns and one-time boosts from sales.
CommonSpirit exceeded its $400 million synergy goal in 2021 by paring its real estate footprint, reducing corporate labor expenses and consolidating the human resources, IT and revenue cycle departments, the company said in its annual earnings statement.
CommonSpirit has incorporated Virginia Mason's lean management strategy in different departments across CommonSpirit, executives said. Reducing the number of CommonSpirit divisions to nine, from 13, has accelerated decision-making and boosted its adoption of best practices across the supply chain, labor productivity, pharmacy, clinical engineering, revenue cycle and ancillary services, according to CommonSpirit's earnings statement.
While CommonSpirit's debt-to-capitalization ratio dropped from 55% to 44.2% year-over-year, it is still highly leveraged and will remain so for several years, analysts warned. Like other systems, it will be held back in 2022 by higher labor and supply costs.
But the organization's size and liquidity will allow it to spread IT costs across a large asset base and increase capital spending, analysts said.
"CommonSpirit's substantial size, diversity and national scale suggest credit strength beyond the face value metrics in supporting achievement of CommonSpirit's goals," Fitch wrote in its report. "Nevertheless, the system will need to continue to make progress on efficient cost management, revenue growth in key markets and synergies."
Dean earned more than $16.7 million in total compensation in fiscal 2019, making him one of the highest paid not-for-profit health system CEOs. That includes a base salary of $1.9 million, bonus and incentive pay of $8.2 million and more than $6.5 million of deferred compensation and other reportable compensation, according to the latest Form 990 available.
Prior to joining Henry Ford, Lassiter was CEO of Alameda Health System in Oakland, California. Lassiter earned more than $5.3 million in total compensation in fiscal 2018, $1.6 million of which was base pay, according to the latest Henry Ford tax documents available.
Lassiter spearheaded five partnerships in 2021, including one between Henry Ford and Michigan State University that will address healthcare disparities throughout the state. Earlier this year, Henry Ford and its development partners committed to investing $4.2 billion in Detroit-area neighborhoods. They plan to build new housing, medical and research facilities, retail stores, industrial buildings, educational centers and parks.
"There is a clear opportunity to transform how we approach historically marginalized communities, health equities and disparities, and healthcare costs and transparency," Lassiter said. "The board has a strong commitment to not just be one of the largest healthcare organizations, but to use its size and influence to make an impact."