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March 5, 2018
Don’t call him a visionary, Kelby Krabbenhoft insists.
“I’m not. My mother wouldn’t say I got special genes,” said the CEO of Sanford Health. “But sitting in that chair for 36 years now, between scars and intuition, you get a feel for some things.”
And in early 2017, “I had a feeling something big was going to happen.”
As he traditionally does, he convened his leadership team for a couple of days of what he calls “grinding it out.”
It’s a gut check. A time to talk about priorities and about industry disruption, the world of “a tweet a minute” and the post-presidential election uncertainty that accompanied it.
In the health care field, where federal policy can change the rules of the game with a congressional vote, Krabbenhoft was coming off a rare inside look.
He’d made three trips to Trump Tower in New York City, met with the president-elect multiple times and got appointed to an advisory group despite never writing a check or otherwise supporting the campaign.
“And I’m not going to do a commercial on Donald Trump, but he is such a different person in person, talking and focusing on key issues,” Krabbenhoft said. “And this notion of reducing regulation and the modest tax implications that went through have had really reverberating implications.”
He does not anticipate wholesale changes to the tenets of so-called Obamacare — coverage for pre-existing conditions, allowing adult children to remain on parents’ insurance and community ratings for insurance. He expects continued support for selling insurance across state lines.
“All of these make sense,” he said. “From a policy standpoint, that should not be controversial. If it’s common sense, I think Trump will do it and I think the Republican Party will do it, and I’m glad about that.”
While some health care organizations have struggled financially, “you’re seeing the organizations that thought ahead, got diversified and put the package together, that they’re having record profits and doing better than expected,” he said.
For Sanford, positioning for the future has meant making significant investments in precision medicine, pioneering regenerative medicine and diversifying into areas Krabbenhoft knows don’t always make immediate sense from the outside looking in.
When the next phase of development is announced this year at the Sanford Sports Complex, for instance, he knows some will question it.
“We are not going to be able to sustain what we have today, in terms of employment and opportunity and bigness and success, on just taking care of sick people. We have to diversify,” he explained.
“There will be a health care component, but a 2 or 1.5 percent margin in a $6 billion company isn’t going to get it done. We’ve got to supplement with things people enjoy spending money on.”
He feels good, from a business standpoint, about the direction the country is headed. Sanford’s conservative financial projections mean that when the fiscal year ends June 30, net income likely will be double what was budgeted, he said.
“People like me feel like it’s worth taking risks now,” he said.
Which goes back to that feeling about a year ago that something big was coming.
“Lo and behold, six months later Dave Horazdovsky walks in here and says, ‘What do you think? Is now the time these organizations with real similar heritages come together?’ ”
Since then, he and the CEO of The Evangelical Lutheran Good Samaritan Society have been working through a prospective merger.
“I want to see the potential to complement what we have now, so there is enhanced economic impact. As its own line item, its own business model nationally is going through a tough phase, but we’re not coming at it like acquiring a distressed business,” Krabbenhoft said. “We’re coming at it as though we’re still creating Sanford. Sanford is not done coming out of the womb yet.”
Barring any unforeseen challenges, he’s optimistic a deal will come together this year.
“The Good Samaritan Society is still a preface in the book about Sanford Health,” he added. “We’re still forming. And what a giant piece.”
When the leadership team convened again in early 2018, the message had changed in a year.
“Finish,” Krabbenhoft said. “That was the tone. That was the word. What we’ve got going with (a new department of veterans and military services), with property development, what we’ve got going with Good Samaritan — let’s finish. We’ve got to finish now. I hate people who talk a lot and don’t get it done. That just drives me crazy.”
If he sticks to the plan, he has five years remaining as CEO.
From his office in northeast Sioux Falls, he challenges himself to look out to Great Bear Recreation Park — a symbol of the vision that does drive many of his moves.
“I have to always be looking to Great Bear. I can’t solve what’s out in the parking lot. I have to be looking to there,” he said.
“I like how the last 20 years has gone now that I can look in the rear-view mirror. Sanford has been a noisy company in a small town, and as the town has gotten bigger, Sanford has too.”
People have become “comfortable with the things Sanford looks at that are maybe a little different than traditional organizations,” he continued.
“I believe people of this community and this region now understand why. Sitting still in health care is a formula for death. You’ve got to move. It’s like people.”
In early 2017, Kelby Krabbenhoft had a feeling something big was about to happen. That and more will guide Sanford Health in 2018.