Krabbenhoft talks domestic, international growth strategy as Sanford builds relationships

April 22, 2019

In a couple of weeks, Sanford Health CEO Kelby Krabbenhoft and health system namesake Denny Sanford will speak to a conference of banking leaders in Arizona about the future of health care.

About that same time, David Horazdovsky, CEO of The Evangelical Lutheran Good Samaritan Society, will meet with Krabbenhoft – his new boss as of January – to present a list of the biggest growth opportunities that exist for Sanford following its merger with Good Samaritan.

There’s a common theme to both meetings that’s representative of the approach Sanford is taking in 2019 and beyond: Being a major player in health care going forward requires reaching a certain size and scale along with a willingness to find new approaches to everything from delivering care to generating revenue.

“At 30,000 feet, there’s an amalgamation of 25 to 30 health systems in the country right now, and Sanford is one and emerging higher all the time,” Krabbenhoft said.

“So we’re being asked to reflect on that and what it means and what are the implications of 25 or so health systems in the country. I think it’s a positive outcome. I think through that is how we deliver efficiency, lower premiums, and while there will still be independent and smaller ones (health systems), they will be aligned contractually with these larger ones. And we’ve been about that business in this part of the country.”

One year ago, there were about 30,000 Sanford employees.

As of January, when the merger with Good Samaritan became official, that became about 50,000.

One year ago, Sanford had operations in a handful of states. With Good Samaritan’s addition, that has grown to more than half of all U.S. states.

One year ago, there was no Sanford International golf tournament or Sanford Lorraine Cross winner or partnership to deliver genomic testing through the U.S. Department of Veterans Affairs or Great Shots golf and entertainment center.

Such is the pace, the diversification and the futuristic focus Sanford has deemed necessary to remain a significant player in a health care field where consolidation and changing approaches to care demand it.

“Nothing really ever rests here,” Krabbenhoft said.

Coming together, pursuing growth

Gaining a national footprint wasn’t the goal in merging with Good Samaritan, but it was “one of the more profound outcomes,” Krabbenhoft said.

“It will be interesting where those opportunities for growth happen. It could be Arizona, Hawaii, Florida, Iowa — there are all kinds of things emerging for growth.”

In what he calls “a weird personal moment” that had them both laughing, Krabbenhoft gave his former college classmate, Horazdovsky, 100 days to settle in as a member of the Sanford executive team before taking on the task of determining the three to five biggest growth opportunities to come out of the merger.

“I think we could have spent the first six months doing nothing but examining the Good Samaritan opportunities for the organization, but like everything else it had 100 days,” he said.

Sanford took on an organization with well-documented financial challenges and within 100 days determined plans to resolve them, Krabbenhoft said. And the projection is those will be accomplished within 12 to 18 months, so the trajectory of overcoming their challenges was accomplished.”

Good Samaritan already had plans to close some aging, under-performing facilities, he said, and consolidating some services as well as offices on the national campus in Sioux Falls achieved additional savings.

The financial challenge was small when compared with the opportunity that exists to learn from establishing a continuum of care from birth through death, he said.

One relationship already being further forged because of the merger is in Rapid City, where Good Samaritan has a presence and where Krabbenhoft said “a real positive relationship is beginning to evolve as far as how we discuss research and things like that with Rapid City Regional,” the health system that serves the Black Hills.

International strategy

Denny Sanford’s $400 million gift to Sanford Health in 2007 launched the health system into the global health care arena as it began building a network of world clinics.

“For the first 12 years, we’ve used a shotgun approach, and it’s been successful,” Krabbenhoft said. “We circumnavigated the globe with clinics and the Sanford name.”

The next five years will focus on three hubs, including Costa Rica, where Sanford leaders plan to hold their international board meeting next month.

“We’ll be making an investment in Costa Rica,” Krabbenhoft said, calling the country “the springboard for our interests in Latin America and South America and Mexico.”

Sanford partners with Hospital Metropolitano in Costa Rica, the country’s fastest-growing private health care provider with a mission to serve middle-income families through a network of two hospitals and 30 clinics.

The other international hubs for Sanford will be in Scandinavia – Norway, Sweden or Denmark – and “the southern latitude in New Zealand and Australia,” Krabbenhoft said.

“So we’re anxious to see how that strategy complements what we’ve built so far.”

Building the brand

Back home, there could be more growth-related announcements to come. Legal agreements prohibit talking about them, but “there’s some stuff on the horizon,” Krabbenhoft said.

“Some new relationships have formed.”

Sanford has “deep and expanding relationships in research,” he continued, adding that the winners of the inaugural Sanford Lorraine Cross award for health care research last year for their work reversing blindness recently sold their company for $4.3 billion.

“We’re seeing people are wanting to get aligned with Sanford.”

From the CEO’s chair, though, he’s mindful that those relationships start at the entry level of the organization. Sanford conducts surveys to measure how attractive it is as an employer to recent graduates.

He credits a strong performance in those surveys “to our research and technology” and points to how the northeast Sioux Falls headquarters has gone from an empty shell to a place filled with researchers from across the country, including many graduates from South Dakota schools.

“That’s a real sense of pride, and that underlays the notion that Sanford is an employer of choice for a new generation of people. If we don’t take care of that generation and make them feel like they’ve got a great job, they’re going to go somewhere else, and that’s bad for the community.”

As major events have grown the health system’s name worldwide, a diverse mix of other relationships have formed. Former Speaker of the House Newt Gingrich is a frequent visitor to the Sioux Falls headquarters. The head of the American Cancer Society recently spent the day there, too. Krabbenhoft calls NCAA basketball coaches Lon Kruger and Roy Williams “deep friends of us” because of Sanford’s work as the presenting sponsor of Coaches vs. Cancer.

“That’s probably the most rewarding thing for me, personally, because it just accelerates everything we’re doing,” he said.

“It’s all built on relationships.”

The pivotal relationship for the system — the one that gave it its name — is stronger than ever, he added.

“I think the business community is always interested in how Denny reflects on these things. People should know that he’s more interested and engaged in what’s going on now than I’ve ever seen. He really loves what’s going on at Sanford. He just seems really invested and happy, and I love to see that. It’s a nice place for both of us in our relationship.”

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Krabbenhoft talks domestic, international growth strategy as Sanford builds relationships

“Nothing really ever rests here.” We caught up with Sanford Health CEO Kelby Krabbenhoft, who shares what’s next for health system this year at home and abroad.

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