Cathy Ackerman: Welcome to Sweet Tea and Strategy, a podcast by Ackerman Marketing and PR featuring business and community leaders throughout Tennessee talking about issues and trends of importance to our state and beyond. And sharing some of their very best sweet tea recipes and tea sipping stories. I'm Kathy Ackerman and I’m so pleased to welcome Ed Pershing, co-founder and CEO of professional services firm PYA, as our guest today on Sweet Tea and Strategy.
Cathy Ackerman: So, Ed, let's start off talking a little bit about sweet tea—that most southern of all beverages. You grew up here in East Tennessee, so you no doubt have had quite a bit of exposure to sweet tea. Do you like it? And how do you drink it? And what do you think about it?
Ed Pershing: Yes, I do enjoy sweet tea and I think it is a very important part of communications about our community and so forth. Although, if I was to create it, I’d call it probably Diet Mountain Dew, which is my favorite beverage, as you know.
Cathy Ackerman: Which you’re drinking right now!
Ed Pershing: That’s right, that's my form of caffeine delivery. Yes. But let me share an example as to why I think it’s so important why I enjoy it. It's basically creating greater awareness of what's happening in our community. Not just from a business standpoint but also from a cultural standpoint and basically letting more people know what's going on.
Ed Pershing: And as I've watched the decline of media, particularly newspapers, they just don't have the reach they once had. When I was growing up, you were growing up, you got your news through the newspaper and the local radio station. That doesn't exist. You know, radio is now consolidated, it’s national in scope. Local newspapers are in decline. And so, I compliment you for starting Sweet Tea, because I think it’s much needed.
Ed Pershing: Much like Tom Ballard with PYA formed Teknovation. And it’s interesting that we're sitting here today, because today is the start of the ninth year, the eighth anniversary for the creation of Teknovation. And it is attempting to do in a—in a different format what you're—and a different focus—what you're attempting to do with Sweet Tea.
Cathy Ackerman: So tell us about Teknovation. What—what is that?
Ed Pershing: It's really around innovation. It's basically trying to communicate what's happening in the East Tennessee region around innovation and technology. One of the things I’ve always felt from many, many years ago, there's a lack of awareness of the resources and innovative capabilities that we have.
Ed Pershing: We have a national lab right here in our backyard. We have the University of Tennessee. And there have been so many tremendous resources and human resources as far as talent—young talent, experienced talent. And so, one of the things we wanted to do was create greater awareness and help change the culture so more and more people know what's possible right here in East Tennessee.
Cathy Ackerman: And so nine years, this has been going on. That’s great.
Ed Pershing: Yeah, we're starting our ninth year. So, my compliments to you for starting Sweet Tea. We need greater awareness of all the—what a fantastic region this is, really.
Cathy Ackerman: Well, and business leaders like yourself adding to the conversation are what is making it catch on and be a good thing, so thank you so much. Give us just a little bit of grounding if you will as to what PYA is and does, since this firm is really your baby, having founded it, what, 36 years ago?
Ed Pershing: Yes.
Cathy Ackerman: Yes. So tell us how it's evolved to sort of meet the changing needs of the world and of your clients in particular.
Ed Pershing: Sure. Well, as PYA—and then we also incorporate into that what we call the PYA enterprise because one of the things I wanted to do is bring a full set of capabilities. PYA was founded as a CPA firm. And the reason for that is I'm a CPA, I’m accounting as far as training.
Ed Pershing: But I was blessed to begin focusing in healthcare consulting when I was at Ernst & Ernst. Today known as EY, which was then one of the big eight accounting firms today, one of the big four. But I was fortunate to be in the first group that the chairman of Ernst selected to create healthcare—basically it’s hard to believe it was that long ago and yet that recent—that create healthcare consultants.
Ed Pershing: That wasn't a profession at the time. Actually, just didn't even hear about healthcare consulting back in 1976 when he chose 18 young people. And so, I was with Ernst almost 10 years, but I really wanted to form a firm focused on consulting to the healthcare industry, but a full-service accounting firm as well. And so, left Ernst in December of 1983 to form PYA, which is known today as PYA.
Ed Pershing: And we've been very blessed. We've grown now and the thing I wanted to do was bring better business acumen to the healthcare industry. It was an industry that was lagging behind other industries as far as advancement.
Cathy Ackerman: Especially then.
Ed Pershing: Absolutely. One—just one example I can remember going to a number of hospitals and suggesting they hire industrial engineers to improve their processes, and they would look at me almost cross-eyed. Today, that’s, you know, very prevalent. And so, that's just one example of trying to help advance the industry.
Ed Pershing: And particularly advancing it from a planning standpoint. They had very limited planning horizons, and one of the things we really championed was having a much greater extension to your planning horizon. Look 10, 20, 30, 50 years out at the time.
Cathy Ackerman: So PYA was really one of the first, if not the first, firms to focus on that the way you focused it.
Ed Pershing: It was among the first. And we practice as a CPA firm because anyone can hang out a shingle and say they're a consultant, whether they have qualifications or so forth. As a CPA firm, we're required for our people to have continuing professional education each year, we have a code of ethics we have to abide by, and so it really helped us to distinguish ourselves from others.
Cathy Ackerman: Right, and build instant credibility. Absolutely. So what is the size of PYA today in terms of revenue, number of clients, geographic reach, some of those things?
Ed Pershing: Ah, the PYA and then also incorporate into that what we call the PYA Enterprise. Because one of the things I wanted to do is bring a full set of capabilities. One of the areas the healthcare industry lagged really lagged behind was knowledge about real estate and how to incorporate real estate tactics into your strategy.
Ed Pershing: And so, over 20 years ago, we founded Realty Trust Group. We recruited Greg Gheen to be the president. We built around leadership and recruited him to join us and we formed Realty Trust Group because you really can't do real estate advising advice within the type of firm PYA was, and we needed a separate brand.
Ed Pershing: And so, if you look at the PYA Enterprise, there's 375 people. Within PYA, PYA serves clients in all 50 states and we've served several clients in the Caribbean. We've also, RTG serves clients in 30 states. It's now grown to where it’s serving healthcare clients in 30 states.
Cathy Ackerman: What about offices?
Ed Pershing: In offices we have offices, of course the headquarters is here in Knoxville, we have offices in Nashville, Atlanta, Tampa, and Kansas City. It took us 32 years to develop an ongoing client relationship in Hawaii, today we serve four Hawaii health systems. And so, one thing about the industry, when they learn about the quality of your work and so forth, you get a lot of organic growth just through referrals. And so we're very proud this past year we were ranked PYA was ranked number 13 of the top healthcare consulting firms in the US.
Cathy Ackerman: Congratulations! That’s amazing.
Ed Pershing: So we've been very fortunate and very blessed.
Cathy Ackerman: So are there other affiliate companies under the PYA brand in addition to Realty Trust?
Ed Pershing: Yes. One of the things that we formed now 15 years ago was PYA Waltman Capital. And the reason for that was, again, the industry. I really saw some very unfortunate practices in benefits and investment advisory services to the healthcare industry.
Ed Pershing: And there were some practices, particularly in advising hospitals around retirement planning for their employees that I thought was very unfortunate for employees, particularly lower paid employees, and so formed PYA Waltman in order to provide those services 15 years ago.
Ed Pershing: And then one of the things very proud of, I call it my baby, is Healthcare Horizons because it came from an idea, the genesis of that was from within PYA, but then we basically migrated out of PYA to create its own separate brand. And it’s the leading, it is the leading authority in auditing health claims.
Ed Pershing: We audit health claims for many of the Fortune 50, including among the very largest employers in the country. And we developed a technology for basically profiling and auditing 100% of a large employer's health claims. And at the time, no one in the country was able to do that in the fashion we did.
Cathy Ackerman: So you’ve innovated from—from the beginning with several of these new companies that you've introduced to the marketplace.
Ed Pershing: That's what really, that was part of the goal. That's one of my passions is to bring change and improvement to the industry.
Cathy Ackerman: Exactly. Exactly. So the services of a professional services firm are based so much on the—the recruiting talent. Who you're able to bring into the company, what their expertise is. Has—has that been a challenge for you, especially in Knoxville as opposed to being in a larger metropolitan area?
Ed Pershing: It has been a challenge, particularly in the early years. And it’s interesting, sometimes we talk about, you know, your weakness is also your strength. One of the reasons for starting here, I could have easily started in Nashville, I did a lot of work in Nashville, served a lot of Nashville clients.
Ed Pershing: But had I started in Nashville, it would have been extraordinarily difficult to retain talent because those growing healthcare companies in Nashville were always looking for talent.
Cathy Ackerman: You would have been a feeding ground.
Ed Pershing: Just a feeding ground. Yes, an example of that is here in Knoxville, TeamHealth, of course, is the nation's leader in what—and David Jones, the CFO at TeamHealth and many of the colleagues at TeamHealth, he's an alumnus of PYA.
Cathy Ackerman: Exactly. Exactly.
Ed Pershing: So growing talent here, attracting talent in the early years was a real challenge because of one, there wasn't that many healthcare, as I mentioned before, not that many healthcare consultants out there.
Ed Pershing: And so, one of the things we tried to do was be very selective in recruiting and then focus on growing and developing talent internally. Today we're very blessed, we've got a remarkable talent acquisition team. And they're primarily located in our Atlanta office, and they recruit literally from across the country.
Ed Pershing: And so, it's been, but we've been very fortunate. I share with people Knoxville's a great place to live and it’s a great place to grow a business. Sometimes it has some challenges, but sometimes those challenges also have benefits.
Cathy Ackerman: Well, and the quality of life, I think, is an interesting recruiting tool that we have used in other businesses very successfully in Knoxville.
Ed Pershing: One of the things I've said for many years, if we could get a candidate to Knoxville and engage them, then our probability of successfully recruiting them just skyrocketed. Because one, they could see what a great place it is to live.
Cathy Ackerman: Yes, absolutely. So the primary industry being healthcare that you serve, I'm interested in what you think the challenges and trends are in healthcare. I think everybody's pretty confused right now, there are a lot of various proposals floating around as to how to "fix" healthcare. If you were our national healthcare czar, what would you do to untangle us and put us back together?
Ed Pershing: That’s a—there’s not enough time on this podcast to begin to—where do we begin? Here’s the unfortunate part: healthcare is going through the most dramatic changes that I've seen in my lifetime, and it will continue to.
Ed Pershing: There’s several reasons for that. One, it needs to improve. If you saw some of the issues that I saw early on in my career, quality, business acumen was lacking. And also just quality of care standards were lacking.
Ed Pershing: And so, there were, you know, we transformed the airline industry to improve safety through training, through systematization, and so forth. The healthcare industry is still facing real challenges around being able to do that and ensure there's a consistent quality of care across wherever you go to receive your care.
Ed Pershing: And so, I think one of the things that the industry really has to be more accepting of that role, and it is. The last decade has seen great advancement in focus on quality of care. The other thing is it’s such a politically charged issue.
Cathy Ackerman: True.
Ed Pershing: And you've got voices that, personally I feel, are sometimes given a lot of media attention that really aren't qualified to speak as far as what’s needed. And so, that's the unfortunate part.
Ed Pershing: But one of the fundamental aspects I think we need to be mindful of is we have to address accessibility and we have to address affordability. Much of—one of my great passions is trying to bring better quality of care at a lower cost so it’s accessible to more people.
Ed Pershing: One of the things that really troubles me as I look at, for example, drug development in the drug in the pharmaceutical industry, the trajectory of drug cost is unsustainable. We've got to find better ways for drug development.
Ed Pershing: The other thing that is of concern is the power, the market power that’s existent by the health insurance companies. That’s another passion of mine to address.
Cathy Ackerman: Talk about that a little bit. How do we—how do we break that?
Ed Pershing: The consolidation of the health insurance industry has created enormous market power in the hands of a few. And as a result, and the thing that one needs to ask is that market power warranted relative to their actual contribution to improvement of care?
Ed Pershing: And there’s such a focus on earnings, there’s such a focus on processes that really aren't focused on improving quality of care. They're focused on business models, they're focused on return to shareholders, quarterly earnings, and there’s not an equal balance there to for a strong voice on behalf of quality, on a behalf of accessibility for patients.
Ed Pershing: And so, that's a real challenge to the industry and to our country, really. We do have a remarkable healthcare system and quality of care. The thing that frustrates me is when I hear people talking about systems that they say are more affordable and so forth.
Ed Pershing: But if they ever actually looked at what that care was, in some circumstances anyway that are touted, I don't think Americans would want to go back to that form of care. We have expectations each time we walk into a provider's office or into a hospital as to the nature of the experience we'll receive and the quality of care and the attention.
Ed Pershing: And often that's not the case in government-driven systems. And I think an example we should be mindful of is what’s the unfortunate situation for our veterans with the VA hospitals. So, some of those voices really need to consider there's plenty of examples of what doesn't work.
Cathy Ackerman: Right. Right. So in terms of the pharmaceutical piece, how do we—how do we lower those costs? There are drugs on the market or could be on the market that would be useful to people. How do we get there from here?
Ed Pershing: I think one aspect is we really have to step back and look at some of our public policies, and one of those is the fact, some of the limitations, for example, on the government's competitive bidding on behalf of drugs, even for what the government purchases or through their federal programs.
Ed Pershing: And so, it is unfortunate, and much of that though has helped underwrite the innovation that’s occurred in our current industry. But literally that’s also contributed to if you look at the size of those companies and if you really step back and ask yourself and if you really study how much innovation has actually occurred within those companies.
Ed Pershing: Today their model is much more one of finding innovation in outside smaller creative companies and acquiring it.
Cathy Ackerman: Interesting.
Ed Pershing: And so if you look at what’s being spent within that industry for innovation, much of the innovation, just like the technology we see today, a lot of it happened in the garages of young, bright men and women that were very creative looking for something new. The same is true in the pharmaceutical industry.
Ed Pershing: And so, I think we really have to step back. One of the things, the—the amount of money being spent on healthcare is drawing so much financial interest and so much of what I call the Wall Street interest, that that's not necessarily an interest that’s focused on the best medical outcomes and, you know, true value for what you're providing.
Ed Pershing: And we really I think have gotten a misbalance between value of what the product is and what’s being paid in order to receive it.
Cathy Ackerman: Great point. Great point.
Ed Pershing: It's misaligned today.
Cathy Ackerman: Any suggestions in terms of how to fix the payer model?
Ed Pershing: I have a number of suggestions on that. That's a very complicated matter. And one of the unfortunate things is often times you really there is a lot of there is a tremendous amount of market power within the payer model.
Ed Pershing: And one of the things that’s been one of my great career frustrations is there have been times when innovation was possible, there wasn't the political will to bring that about. Right here in our own state, done work over the years related to TennCare.
Ed Pershing: We actually did one of the things that really proud of some work we did in the mid-1990s when TennCare first came out. We actually in concert with two clients designed a model in which we were able to show we actually on a population of 132,000 TennCare enrollees of which the MCO had been losing enormous amounts of money and there was a lot of dissatisfaction.
Ed Pershing: We actually created a model design in which we had it to break even in four months. We actually were able to reward high-performing providers, physicians, and we had tremendous patient satisfaction. We had the highest vaccination rates for infants and kids among the MCOs in this model, and yet literally fell on deaf ears.
Ed Pershing: There wasn't the political will to really try to tackle it and there’s so much bureaucracy and so many competing interests that it's really hard to bring transformative change.
Cathy Ackerman: What about what’s happening in the rural areas with lack of access to local hospitals and all of that?
Ed Pershing: That's one of my great concerns. And I will say this, I guess one of the things I hope to do now that I’ve stepped down and retired from PYA is spend more time writing, and I really want to write a series of editorials about what we're going to be facing.
Ed Pershing: And one of those is the coming, if we think it’s a challenge today it’s going to be an even greater challenge tomorrow. And one of the things that I'm seeing in pricing models by the insurance companies I think are going to be some of these so-called shared savings programs.
Ed Pershing: I think it’s going to be with their market power, that's going to be a real threat to the small rural hospitals who have no market power. They don't have a constituency to advocate for them, they don't have the market presence to demand, they don't have the money, they don't have the expertise.
Ed Pershing: You know, they don't have the talent to go up against those with such enormous market power. And so the crisis for the small rural hospital is going to grow in my opinion if we don't take some steps to address that.
Ed Pershing: And I know there's a lot of voices saying the need, but there’s got to be a lot of willpower to help make that happen. And that is so critical for every state, but particularly a state like Tennessee.
Ed Pershing: And again, when a local hospital fails, that’s often in every community I’d say either the largest or probably the second largest employer in that community. So it’s loss of jobs, it’s loss of opportunity, and so it has a huge adverse impact on that community and the surrounding area.
Cathy Ackerman: A real ripple effect.
Ed Pershing: The ripple effect is enormous. And so that's something that deserves a great deal of attention in every state and federally.
Cathy Ackerman: So how will PYA over the next 10 years sort of evolve to be in the middle of some of these important conversations and offer the advice that your folks have?
Ed Pershing: Well, the thing I'm very proud of we have a great team of owners here. We really stress succession planning. We begin planning succession for each owner the day they enter into ownership because we ask them to forecast when what age they think they might retire.
Ed Pershing: And so it’s something we address every year and so we start planning. And so Marty Brown is succeeding me as CEO, president and CEO of PYA, and we have a great team. And so with that presence in serving clients across all 50 states, with the level of talent we've been able to recruit multiple and now multiple offices and our reach.
Ed Pershing: I think we'll be an ever-growing voice within the healthcare industry. One of the things we've done is we always try to work collaboratively. We work with almost all of the top 25 healthcare law firms in the country, virtually every one of them.
Ed Pershing: We've now also really gained the respect of the Justice Department, US Justice Department, for as they address enforcement actions, we're a resource to them. And so I think you'll see as PYA’s grown and we've really focused on adding needed expertise and really focusing on the future.
Ed Pershing: I think you'll see PYA, its best days are ahead of it. And I'm really thrilled for my colleagues because they'll take it to far greater heights than I could.
Cathy Ackerman: And—and meanwhile you're not really retiring. You’re going to be doing some other fascinating things that we're going to want to hear about.
Ed Pershing: Well, hopefully so. I’ve been extraordinarily blessed.
Ed Pershing: One of the things I want to do is try to give back. This region's been remarkably kind to me and so you also want to be able to give back.
Cathy Ackerman: Anything else, Ed, that you'd like for our listeners to know about or that you'd like to talk about this morning?
Ed Pershing: Oh, the one thing I'd like to say, I again commend you for Sweet Tea. I really would like for the listeners to think about how they can contribute to having creating more and greater voices on behalf of the region.
Ed Pershing: Championing. I think at times, one of the things I really hope to be able to do at some point is be a contributor to helping change, improve the culture of East Tennessee to where we realize all things are possible.
Ed Pershing: I like Hollinden Hill’s approach, you know, anything is possible. And I think that's something we need to be more, a greater focus on instilling that in our young people instead of thinking, you know, we're ranked 40-something in some category whether it’s education or whatever. Let’s talk about what we can be.
Cathy Ackerman: We almost need a better collective self-confidence factor.
Ed Pershing: We do. And—and that's the cultural factor. And so, instead of focusing on what we don't have, let's focus on what we do have and what the potential is.
Cathy Ackerman: Great advice. Thank you so much for being with us on Sweet Tea and Strategy and for sharing your fascinating life and work experiences with us. And we look forward to following your, quote, "post-retirement" success, which I think will probably be busy, and we can’t wait to hear more about that. So we appreciate it and we appreciate your passion about East Tennessee.
Ed Pershing: Well, thank you. Thanks, Ed.