How Fairview's CEO Engineered a Mission-Aligned Turnaround to Achieve Financial Stability

The health system has climbed back to profitability through disciplined transformation and systemwide culture change, its leader says.

When James Hereford took over as president and CEO of Fairview Health Services in 2016, he understood the importance of transitioning the organization from more of a holding company to an operating company for its long-term viability.

The Minnesota-based nonprofit, which operates 10 hospitals, was already stretched financially in the early days of Hereford’s tenure. Yet nothing could prepare the health system for the seismic impact the pandemic would have on its bottom line.

“Coming out of COVID in the kind of hyperinflation was a little bit of our near-death experience,” Hereford told HealthLeaders.

That trauma created urgency, forcing Fairview to assess and fix the critical factors to its success, and do it in a way that was sustainable and could lead to broader transformation.

As a result, Fairview went from multi-year losses to financial stability, recording its first operating profit since 2018 in fiscal year 2024. The health system generated over $8 billion in total operating revenue and $51 million in operating income last year, marking a significant turnaround from the operating losses of $189 million and $315.4 million in 2023 and 2022, respectively.

It wasn’t achieved through simple cost-cutting, but by undertaking a disciplined, mission-aligned overhaul that improved margins while raising quality, safety, and patient experience scores to their highest levels, according to Hereford.

“If you get the process right, if you get the work right and do the right things in the right way, a lot of good outcomes happen—financially, quality, safety, customer service, and people are more engaged,” he said.

Building and sustaining the workforce

One of Fairview’s most pressing challenges was labor. Minnesota’s stagnant population growth meant Hereford couldn’t rely on an expanding workforce pool.

“We don’t have a constantly growing population to choose from to create the labor force that we need,” he said. “We have to really create it.”

That meant going upstream into high schools, even junior high, to spark interest in healthcare careers. Hereford leaned into healthcare’s career mobility as a selling point.

The strategy paired long-term pipeline building with immediate cost and staffing improvements. Fairview sharply reduced its reliance on costly traveling nurses, cut overtime, and addressed inefficiencies in staffing systems.

Importantly, these measures weren’t about squeezing staff. Hereford credits Fairview’s lean management approach with keeping the workforce engaged while pushing for operational efficiency.

“I’ve always had a great belief in this idea of taking fairly simple, straightforward tools and putting them in the hands of the people who are actually doing the work and having them improve their own quality,” Hereford said. “The challenge is always does the management system support that. That’s what our focus has been on.”

Hereford’s management system is built on three components: enterprise-wide goal alignment, value stream thinking, and daily tiered huddles.

“We spent a lot of time thinking about value streams,” he said. “How are we creating value for the customer from the very front end… all the way through that experience. Healthcare is very good at the point of care. Where we usually fail is in the space in-between.”

Fairview’s daily engagement system, meanwhile, includes tiered huddles starting on the frontlines and cascading up to a 9:45 a.m. executive huddle to ensures readiness, surface problems quickly, and celebrate wins.

Visual management and leader standard work reinforce accountability and transparency. “It’s easy for leaders to get caught up in their office and in front of a computer,” Hereford noted. “That standard work really helps to know what are the things that leaders can do at every level of the organization to reinforce support.”

Pictured: James Hereford, president and CEO, Fairview Health Services.

Rebuilding accountability and unifying operations

When a planned merger with Sanford Health collapsed, Hereford reassessed his leadership bench. Several long-tenured executives were ready to retire, so he recruited a new COO and CMO to bring fresh energy and operational focus.

“The big part of the accountability on the team was just getting the right people who were ready for the work we faced over that next five-year period,” Hereford said.

Execution of discipline came through the Enterprise Project Management Office, which was later transformed into a Transformation Office to drive both improvement and fundamental change.

Part of becoming more efficient for Fairview was thinking and acting as one system.

Historically, the organization operated as a loose holding company. That siloed approach wasted resources, like when two hospitals 15 minutes apart each sought to build competing vascular programs. Hereford pushed for a single operating structure, unified service lines, and a system operations center to match capacity and demand in real time.

Before, a hospital might send staff home for lack of cases while another Fairview site struggled with overcapacity.

“That’s a great example of not thinking as a system and not being able to see the whole picture,” Hereford said. The operations center now ensures “the right cases [go to the] right place with the right physicians and other clinical staff to really be able to manage that.”

One inflection point came when Fairview tackled length of stay challenges. Multiple teams were initially working on the problem in isolation before eventually taking a systematic approach.

“Our length of stays plummeted while our quality and safety and experience went up,” Hereford said. “The team started to see the benefit… and that reinforcing cycle kind of kicks in.”

Even after getting Fairview on solid footing, Hereford cautioned that the journey is ongoing. The $160 million annual gap between Fairview’s 2% revenue growth and 4% cost growth means the system must relentlessly pursue efficiency and innovation.

“The job is never done,” Hereford said. “We have to continue to drive down that cost structure, innovate, transform, and really challenge the status quo.”