The breakup of Centura Health, the joint venture between CommonSpirit Health and AdventHealth, is the biggest news in the Colorado hospital market in decades. But it’s also still a mystery.
Even as ad campaigns roll out announcing that the respective systems’ Centura hospitals will be rebranding to their parent companies’ names, the watching public has yet to hear a good reason for what was behind the breakup — or “disaffiliation,” as the companies prefer.
So, we here at The Sun decided to ask the boss — former Centura CEO now turned CommonSpirit division president Peter Banko — to see if he would tell us. (Banko oversees CommonSpirit’s hospitals in Colorado, Kansas and Utah.)
We popped the question in the middle of a wide-ranging interview that also covered internal and external operating changes and CommonSpirit’s plans for expansion in the Denver metro area.
The following Q&A has been edited for clarity and brevity.
Colorado Sun: We’ve read all the announcements and statements, but one thing we’re still struggling to understand is what were the main reasons for the disaffiliation? What caused this?
Peter Banko: I would say most joint ventures across all industries only last five to six years. This one lasted 27. So it outlasted the norm. It was successful and did some truly great things. I think it ran its course.
At some point, there was misalignment between the two owners around governance and management, how to govern and manage the organization. And neither perspective was good or bad. It was all shaped in their culture and context.
So there’s two big national organizations that wanted to run the organization differently. They went through a process over a period of time, and the two CEOs decided to chart their own path going forward.
CS: Can you put specifics on that? What were the competing visions?
PB: It gets really business wonky when you start to talk about that. So I would just say, what the organization was and how it was managed were probably the two details. When you’re misaligned, it starts impacting people, culture and performance.
There are a lot of examples, none of which are worth getting into. I think it’s like a marriage, right, when two individuals are not on the same page. While there are a lot of symptoms and behaviors that they could point to in their divorce documents, none of that really matters. At the end of the day, they just weren’t on the same page.
CS: There has been some speculation that religious differences had something to do with the split. CommonSpirit is, of course, Catholic-affiliated and AdventHealth is affiliated with the Seventh Day Adventist Church. The disaffiliation was announced around the time that CommonSpirit had been reiterating Catholic health directives to its hospitals, especially when it came to things like reproductive health care. Is there any truth to this idea?
PB: We’re both Christian organizations. We both followed the faith traditions of our churches. So the Catholic side of the organization always followed the ethical religious directives. Any changes — the Dobbs decision, Roe v. Wade, ethical religious directives — from my perspective had absolutely nothing to do with the disaffiliation. In my seven years (as Centura CEO), those discussions never occurred at all.
CS: We also need to talk about the Centura name. How did that not survive the breakup and carry on in some form, after 27 years of investment in the brand identity?
PB: We both had to sell the boat. I would say, for me, that was one of the items that was discussed probably the longest in the disaffiliation process. And it was agreed by both parties to sunset the name over a defined period of time. It had built a lot of brand equity over 27 years. So you can imagine one party wanted it and another party didn’t want it to continue.
So the agreement was to sunset that over the next year. CommonSpirit is moving nationally — when they came together in 2019 (through the merger of Catholic Health Initiatives and Dignity Health) they did not rebrand. There are decisions to move toward a CommonSpirit brand nationally. We’ll be the first three states to make that transition. So it made sense to sunset it and transition to a CommonSpirit brand.
CS: What’s CommonSpirit’s plan for the future in Colorado? Are there any mergers, acquisitions or new construction on the horizon?
PB: I think all that’s on the table. You’re not going to see us going into new markets, but you’ll see us expanding our footprint in existing markets. So, you know, as part of the disaffiliation we don’t have a presence right now in South Denver. (Note: Centura’s hospitals in the South Denver area — in Littleton, Parker and Castle Rock — were all owned by AdventHealth.) So you will see, in time, physician partnerships, outpatient centers and at some point a significant campus in South Denver so that we have network coverage throughout the state.
CS: These would be new facilities you’re looking to build?
PB: Yes. Or existing facilities that we could convert to health care use, as well. A mixture of both.
CS: Do you have your eyes on anything?
PB: Yes.
CS: Can you say more?
PB: (Laughing) If I say something, that drives the prices up. Right after the disaffiliation, we started looking at, you know, where is population density, travel times. So you can imagine it’s in South Denver, it’s somewhere along that I-25 corridor, developing a presence there so that most if not all of South Denver has access to those services and those facilities.
CS: How’s your financial picture looking right now? It’s been an up-and-down few years for the hospital industry?
PB: It’s definitely a tough economic environment, overall, higher expenses, slower growth. I would say we’re a solid double-digit cash flow in this market. We’d like to see it a little bit higher to be able to reinvest those dollars in growth and expansion and services. But we’re right where we need to be. We’ve just got some opportunities for improvement like everybody.
CS: When you say double-digit cash flow, could you explain more what you mean?
PB: So I use earnings before interest, taxes, depreciation and amortization. So it’s basically a double-digit percentage based on revenue.
CS: Have your costs stabilized and, if not, what’s driving the increases now?
PB: Supplies have leveled out. We faced those issues during COVID where we had double-digit increases in supplies and pharmaceuticals. That’s not really the case for us (now).
We’re having to invest more in our workforce. When we started COVID, our entry-level wage was $12, $12.50 an hour? It’s now $18. You can get a job at McDonald’s making $18 to $20 an hour. I’ve never worked in fast food, but I think our jobs are a little bit tougher entry-level jobs.
So I think investing in the workforce, certainly in nursing, that everybody’s had to make. We’re now seeing the shortage of nursing stabilized. But we’re now seeing shortages in imaging and surgical techs that we’ll be addressing in October.
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CS: What kind of raises are you looking at for the imaging and surgical techs?
PB: It depends on the facility. I would say roughly they’re 5% to 10% off of market that we need to address.
CS: Let’s talk about profits. When you hear leaders at the state talking about hospital profits and the general sense that profits at the big health systems are too high, what do you make of that?
PB: It’s an interesting argument. One, I think it’s picking out one segment of the industry that’s 40% of the total cost picture. So we tend not to talk about the other 60% at all. So I think, if we’re going to talk about hospital profitability, we need to talk about other components of the health system profitability at the same time because it’s a holistic picture.
Two is we’re a not-for-profit, so we reinvest those dollars back into the communities. Whether it’s our health equity and advancement grants that we give to community groups to advance diversity, equity and inclusion, or charity care, or building facilities, creating new jobs. I think we’re missing that part of the picture as well. It’s not like we’re squirreling away these profits and giving them away to shareholders. We reinvest every dollar back into the community and create economic opportunities.
Having said that, health care does need to be more affordable. So I think we all need to sit at the table, figuring out ways to make it affordable. But let’s look at the whole picture, not just publish numbers and say they should be less.
CS: Let’s talk about those expansion plans in the south metro area in Denver, though. There’s already a lot of hospitals there, just no CommonSpirit hospitals. And this is the kind of thing state leaders often point to when talking about business decisions that lead to inflated health care costs — hospitals building new facilities in already well-served markets. So what’s the value of opening a new hospital there and trying to compete for that business as opposed to going someplace that’s not as well served?
PB: I would say health and health care are better where we are. So if you look at some of Leapfrog’s top hospitals, they’re ours. (The Leapfrog Group provides ratings of hospital quality.) They’re not our competitors. So my view is the quality, safety and service we provide is measurably better than our competitors. And our community deserves that.
CS: The Centura disaffiliation really shook up a hospital market in Colorado that hadn’t seen too many big changes for a long time. Do you see any more big shake-ups on the horizon?
PB: I can’t predict what the big shake-ups are going to be. But I would say, between our disaffiliation and Intermountain and UCHealth bringing SelectHealth into the market, I think it’s going to be very disruptive. You’re going to see people trying to (form) or announcing new partnerships that you would have never imagined working together before.
So it’s definitely in my seven-and-a-half years here shaken up the market. Those two things in particular have shaken up the market considerably. So I think you’ll be surprised over the next 12 to 24 months of different relationships and different things that are unfolding in the market.