How Jefferson’s Stephen Klasko Intends to Fix Our Screwed-Up Health-Care System

The new president and CEO spent nearly $4 million to rename SEPTA’s Market East Station — the highest-profile move to date in his bid to make Jefferson into a paragon of medical entrepreneurialism. Photograph by Dustin Fenstermacher

It’s mid-morning on a scorching late-summer day, but comfortable in a climate-controlled subterranean corridor covered in tile the shade of a ripe avocado. Stephen K. Klasko, M.D., MBA, looks up at the ceiling under Market Street and seems to realize that in a not at all metaphoric way, his grasp might exceed his reach.

In his dark executive suit and embroidered red tie, the man who has talked long and very often of “changing the DNA of health care” joins a huddle of politicians, SEPTA officials and board members from Thomas Jefferson University and Hospital as they prepare to reach up and grab a swath of blue bunting that hides evidence of Klasko’s latest innovation. In a moment, the commuter rail station that has been known as Market East for three decades will have a new name: Jefferson Station. “The fact is,” Klasko will say, “now I can tell anybody, ‘You get to Jefferson Station, we’ll take care of you.’ That’s pretty cool.”

It’s the latest in a flurry of changes and ballyhoo that Klasko has initiated since he became president of Jefferson University and CEO of the Jefferson Health System. “The thing about the places I’ve run,” he says, “nobody ignores us. And I love that.”

That one of the nation’s oldest medical schools and its highly rated affiliate hospital would commit millions of dollars to brand a train stop is, in the view of one Wharton professor who has worked with Klasko, “totally outside the box of what most medical people would think about.” One of those medical people, a doctor friend of Klasko’s, says, “Steve thinks so far outside the box that you forget there ever was a box.”

Since he moved into the top echelons of academic health-care management more than a decade ago at a then-sleepy outpost in Tampa called the University of South Florida, the guy who got his M.D. at Hahnemann University Hospital and his MBA from Wharton has branded himself as an innovator, a disrupter, a visionary, an early adopter. “Anywhere Steve goes,” his doctor friend adds, “is likely to be blessed, and cursed, with exciting and unique innovation.”

As of this morning, Klasko has been on the job for one year. In that time, the 60-year-old Havertown native has nearly finished merging Jefferson with Abington Health, streamlined Jefferson’s governance structure, eliminated two boards of directors, and financially disentangled the hospital from its former partner, Main Line Health. He has landed a $110 million gift from Sidney Kimmel, the largest in the institution’s history, and renamed the medical school after the philanthropist. In a radical redesign that the longtime Apple computer acolyte has labeled “Jefferson 3.0,” Klasko has drawn a blueprint for the institution’s future that heavily emphasizes technological innovation, strategic partnerships, increased philanthropic help and consumer-friendly health care.

Now, underground, Klasko and his small coterie of dignitaries prepare to pull down the bunting and reveal the new “Jefferson Station” sign. He extends his arm and realizes he can’t reach the fabric. Someone might have mentioned to the SEPTA facilities people that when a guy calls a press conference to announce a transformational leap, he doesn’t want it to be quite so literal. But he stretches and manages to get a grip, and down comes the cover. To applause and a few whoops of enthusiasm from the small crowd, Stephen K. Klasko comes one tippy-toe step closer to his futuristic vision of health care in Philadelphia.

STEVE KLASKO HAS already vividly imagined a time when two-headed, six-armed androgynous creatures from another planet come to Earth and kidnap a medical-school student. They take her to the future, where the health-care system is relatively functional. Talk about science fiction! In 1999, he co-wrote a book in which chapters about aliens alternated with treatises on health-care policy and practices. It was titled The Phantom Stethoscope, inspired by the classic book for brainy kids The Phantom Tollbooth, which was Klasko’s favorite as a boy.

“We share a deep concern about health care,” says Klasko’s co-author, Gregory Shea, a Wharton adjunct professor and management consultant. “We also share an interest in science fiction, the possibilities and threats that lie in the future.” Shea later tells me, “One of Steve’s biggest disappointments is that he can’t be James T. Kirk of the Starship Enterprise. I do not mean play James Kirk; I mean be James Kirk.”

Though Klasko is a seize-the-day kind of guy, waking up at 3 a.m. to write science fiction or return emails, dashing out of his 3rd Street townhouse at 5:30 a.m. to train for the Philadelphia half marathon, he spends a lot of time talking about the year 2024.

“If you go to doctors and say, ‘What are things going to be like a year from now?,’ our sphincters tighten,” Klasko says one afternoon, sitting in an open office in a high-ceilinged lobby on the first floor of what was once the offices of the Philadelphia Federal Reserve. The place looks like a set left over from the Coen Brothers movie Barton Fink. Klasko’s desk is in full view, and he is surrounded by his personal totems to innovation. There’s a big framed poster of the cover of The Phantom Stethoscope. He’s got portraits of Albert Einstein and Steve Jobs. “I’m talking about how Jefferson becomes the coolest place,” he says regularly, “the Apple of health care instead of the Microsoft of health care. That’s my dream.”

As Klasko describes the evolution of his mission, “I started to talk to big health-care organizations and say, ‘It’s 2024. Health care has become fun. Health care has become really exciting. What got us here?’”

If you want to eliminate the middleman, you can go online and watch the TEDx talk that Klasko gave last March at Temple University. It distills into a lively 18 minutes the themes of health-care innovation that he’s been developing for years now, narrated using a technique he learned from Greg Shea called “history of the future.”

It goes like this: Jefferson has celebrated its 200th anniversary, and Klasko has retired and now runs a store on South Street that sells vinyl records (he was a disc jockey as a young man) and implantable medical devices. Everything he has proposed to improve the health-care system in America has materialized, from the input (med schools admit students who exhibit strong emotional intelligence, not just high grades and test scores) to the output (patients consult doctors through online video visits, as easily and conveniently as they order books from Amazon).

He contrasts that future with the present. “I start with the premise that health care is really broken in this country,” Klasko says. “People get angry and say we’re the best health-care system in the world. No, we’re not.” For one thing, medical students, he says, are indoctrinated into a kind of cult that demands great grades but stifles creativity. Medical training features cutthroat competition that makes doctors
hierarchical and averse to the collaboration that’s needed to improve health-care outcomes.

I watched the TEDx video before I met the doctor. Then I went to his office, sat down, and said, “Where do you want to start?” I got the unabridged version: Klasko stopped talking an hour and 20 minutes later.

Eventually I would speak to more than a dozen of his friends and associates. A number called me (a first in my 30 years doing this kind of story) to offer testimonials to Klasko’s intelligence, charm, humor, high energy and innovative nature. I was reminded of the scenes in The Manchurian Candidate in which captured GIs are hypnotized to say the same glowing things about their comrade-turned-sleeper-cell-assassin: Raymond Shaw is the kindest, bravest, warmest, most wonderful human being I’ve ever known in my life.

ONE OF THE PEOPLE who wanted to talk is Alex Gorsky, chairman and CEO of the pharma, health-care and consumer products giant Johnson & Johnson. He met Klasko when both were in the executive MBA program at Wharton in the mid-’90s.

“Health care is a very big, complex and well-entrenched system,” Gorsky said. “You need people like Steve Klasko who are going to push the boundaries a bit and really fundamentally challenge the way we are thinking.”

Klasko’s signature challenge to traditional thinking is to flip the valence from pessimism and fear of change to what he calls “the optimistic future.” In this, he is a man on a mission and a man with a message, and he stays on message very diligently. He is unfazed by the danger of repeating himself, so that sometimes when he tells an anecdote that he’s told many times before, he’ll rush through parts of it, like an actor running his lines before a performance. If he can shorten phrases to acronyms, he does, and his proposals for new initiatives at Jefferson contain a slew of capital letters.

For instance, there’s CHESS, a Center for Healthcare Entrepreneurship and Scientific Solutions, where Klasko proposes to adapt to health care the big-data analytics and mathematical modeling now used in finance and pro sports. “Doesn’t it stink,” says the lifelong rabid Eagles fan, “that Nick Foles has a better idea of whether a screen pass will work in a given situation than I do of knowing whether a cancer drug will work?”

There’s CAPPP, the Center for Active Patient Provider Participation. Translated into normal people-talk, that’s the venture to get you in contact with a doctor through your smart phone. IHEP is an institute to train people for wholly new health-care jobs created by technological innovation. JASE — Jefferson Advanced Simulation Education — will train doctors and nurses using high-tech mannequins and computer simulation instead of real patients.

And those are just a few of the innovations Klasko has proposed in one of three “pillars” that will hold up Jefferson 3.0. His way of operating, he says, “would be considered normal if I was doing start-up companies. The only reason I’m considered different is because I’m in an academic medical-center environment where nobody wants to take any risk.” How is this risky business being accepted in an institution that is widely respected but frequently described as stuffy and conservative?

“He’s certainly been a whirlwind,” says Joannes Hoek, a cell biologist with a nearly 30-year tenure in the medical school and the current president of the faculty senate. “He really tries to rethink the institution and how it operates. Steve’s attitude is very much that we have to be in front, rather than behind. He’s creating the climate of expectation — that Jefferson will lead the way.

“But you have to be a little bit wary of these dramatic changes,” Hoek adds. “They come and go. It doesn’t mean that everyone’s immediately on board with everything. But he’s pulling in people in a way that is positive. Can he sustain this process while engaging faculty, making them a part of the process?”

Last April, after he had been on the job for seven months, Klasko took to the stage at a gathering of Jefferson faculty and staff at the Loews hotel. His main message was that things simply could not continue as they had — the math was bad. Government research funding had declined and probably would continue to go down. Clinical revenues were dropping, particularly at urban hospitals. Left unsaid, but understood by everyone in the room, were the reasons why: The state legislature and governor hadn’t yet expanded Medicaid to help pay for the poorest residents’ hospital care. Well-off and insured suburbanites were increasingly choosing the convenience of community hospitals, which have much lower fixed operating costs than a downtown teaching hospital like
Jefferson — not to mention free parking. Making up shortfalls in research and clinical income with med-school tuition increases was becoming untenable.

If we want to continue with the current business model, Klasko told the doctors and managers, everyone needs to take a 25 percent pay cut. He offered to go first. (His base salary is $1.2 million.)

One doctor who attended that speech was Judd Hollander, an emergency-room physician who was then practicing and teaching at Penn’s hospital. He has since moved to Jefferson as the newly named associate dean for strategic health initiatives and is leading the “telehealth” push.

“I’ve been to a million of these speeches with hospital leaders,” Hollander says. “A: No one fills up the room. There are friends and people from the executive suite and four other doctors. And B: When it’s done, everybody just goes and gets coffee and goes home.

“With this, there were a thousand people in the room. And Steve got a standing ovation when he was done. I challenge you to find any other health-care executive talking to his or her employees who got a standing ovation at the end of a speech.”

THOUGH HIS MEDICAL and management career has given him cause to describe himself as “a minor rock star,” Klasko at one time dreamed of being a disc jockey in the style of Wolfman Jack. He was on the air through high school and college, using the moniker “Little Stevie Kent” (Kent being his middle name), and believes he was accepted to Hahnemann because the interviewing doctor had heard him do some graveyard shifts on classic-rock station WYSP.

“The doctor knew me from the radio,” Klasko says. “We spent all our time talking about that. He thought I was the coolest person on the planet, and I got in.”

Klasko tells me this story one night over dinner at Abe Fisher, Michael Solomonov’s secular take on the food of the Jewish
diaspora.

Klasko grew up in a kosher home in Havertown. His father, a Brooklyn native, earned a law degree in New York but married a beautiful Philly girl who wanted to stay close to family, so he ended up selling ladies’ undergarments. The new subdivision where the Klaskos settled was called Marilyn Park, and it was “standard middle-class suburban split-level homes — not the Main Line,” according to David Landau, a lawyer with Duane Morris who was a neighbor of Klasko’s and has been a friend since they were in Cub Scouts together.

“We were nice Jewish boys who applied ourselves to our studies,” Landau says. “It was intimidating being in a high school [Haverford High] with so many athletes. There was what I’d call the American Graffiti contingent. And then there were the rest of us.”

As the appetizers arrive, Klasko tells me that while his older brother Ron, now a Philadelphia lawyer, was a gifted athlete, he himself was not. “I was really uncoordinated,” Klasko says. “There was a Johnson-era program where they took the worst athletes in the gym class and put you in developmental gym.

“It’s not a bad idea, but the way it got presented when I was 12 was, ‘So-and-So and Klasko are leaving us. They’re going to developmental gym with the” — he stops himself before using a then-common term for the mentally disabled. “I remember coming home crying,” he continues, “and I just decided from that day on — I started lifting my brother’s weights, doing 200 layups every day when I came home from school. I started running two miles a day. And I became a pretty good athlete.

“I think some of that trained my no-limits mentality,” Klasko said. “I was not going to let that shit define me.”

Although Klasko says that through his extra efforts he “made the basketball team,” Landau says neither of them ever played varsity sports. They were both heavily involved in the FCC-licensed 10-watt school radio station, and the closest they got to jock action was doing play-by-play for school games.

Klasko went on to attend mostly male Lehigh University. He tells a story of his first date with a girl from Kutztown State. He borrowed a car from his father, the underwear salesman. “I’d read somewhere that girls like to go on picnics,” he says. “So I pick her up, and in my memory she’s radiant and beautiful, sunbeams around her head, wearing all white, with a picnic basket. And I say maybe we should put the basket in the trunk. And I open the trunk and it’s full of torsos and pelvises with girdles and bras. It looks like Jeffrey Dahmer’s trunk. And of course I had told her it was my car. So she drops the picnic basket and runs away.”

Klasko managed the campus radio station at Lehigh and remained academically precocious, graduating in three years. Science always came easily to him; someone told him to take the MCATs, and he scored well. He was only 20 when he started med school. Goodbye, Wolfman Jack; hello, Doogie Howser.

By 1982, Dr. Stephen K. Klasko had decided to start his first private practice in obstetrics and gynecology in Allentown. Just after graduating med school, he’d married a woman he met through a cousin while on rotation at a hospital in York. His wife was a special-education teacher. He set about building what he (repeatedly) says was “the busiest private practice in Allentown — and probably the state.”

In less than a decade, Klasko was running the ob-gyn department and residency program at Lehigh Valley Hospital on top of his private practice. The business of medicine was changing, and doctors felt besieged by managed care. “It was bizarre to hear smart people say change would be catastrophic,” he wrote in a recent article for Wharton magazine.

So Klasko got an MBA from Wharton, went on to become dean of the College of Medicine at Drexel, and then spent nearly a decade running the medical school and health system at the University of South Florida, where he used the phrase “I want to fundamentally change the DNA of health care” so often that one journalist instituted a personal moratorium on the quote. The high-energy, whirlwind-visionary persona that recently swept into Philadelphia was developed in the steamy precincts of Tampa, along with Klasko’s repeated insistence that wherever he was would become “the coolest” place.

It’s hard not to speculate that a lot of his motivation to run with the cool kids springs from those early years as the lonely sci-fi fanatic stuck in developmental gym class. When I present this theory to Klasko, he momentarily loses his fast-talking fluency.

“I don’t … ” He pauses. “I’m not a big psychiatry fan,” he says. Another, long pause. “Yeah,” he says. “I think I got — nothing’s going to stop me.” One more pause, and he gains some traction: “The nice thing about being in health care, especially when I was moving up in leadership: We were so far behind, it was easy to make that my brand.”

A business type making coolness his brand might seem a distressing character trait in some people. But Klasko is such a likeable and genuinely enthusiastic person that it’s easy to give him the benefit of the doubt. “I’ve seen him talk to all sorts of people, from state legislators to butchers,” says his second wife, Colleen Wyse, a former Condé Nast sales executive who met Klasko through Match.com. “He’s really able to connect with people. Some would call it charisma. I don’t know anybody who can connect with people genuinely like Steve can. That’s cool to me. That’s a cool person.”

STEVE KLASKO CERTAINLY looks like the coolest health-care executive I’ve ever seen when he steers a pale yellow 1968 Pontiac GTO convertible across the cobblestone streets behind Society Hill Towers on a fall morning. He’s wearing a dark suit and sunglasses, and when he stops to pick me up, I have an urge to vault over the passenger door and into the leather bucket seat like a character in a 1980s buddy-cops show. But I climb in the traditional way, and we roar off with 400 horsepower at our disposal, headed for coffee and doughnuts in Northern Liberties.

Klasko owned a GTO like this when he was in medical school — his first car. In his TEDx talk, he flashed a photo of his younger self standing beside that car, dressed like an extra from Saturday Night Fever, to illustrate how many things have changed in the past 40 years (“I had hair then”) — but not health care. Recently, when he put a video of himself taking the Ice Bucket Challenge on Facebook, Klasko poured some ice cubes over his head while standing in his garage in front of this recently purchased replacement vehicle.

“Of course he did,” Klasko’s son, David, tells me. “He managed to brag about his GTO in the Ice Bucket Challenge. Not even the guy who designed the GTO would do that.” David Klasko, who is an actor in New York, says that in the family dynamic — there are also two daughters — a favorite activity is teasing their father about his propensity to humble-brag.

“He’ll always find a way to mention in a conversation one of the following things,” his son says. “He runs marathons, he flies planes, and now it would be his GTO.” The younger Klasko, who has done improv comedy and stand-up, launches into an imitation of his father: “I parked my GTO at a fire hydrant and got a ticket. I was giving this TED talk. And they’re miccing me up for this TED talk. And I was really sore because I had just run a marathon.”

“But guess what?” David says, losing the sarcasm. “He actually did all those things.”

This morning, Dr. Klasko and I order our coffee and doughnuts (he mentions that he doesn’t really need a doughnut because he’s training for a half marathon) and sit down to talk. I haven’t seen him in a few weeks, and have spoken to a number of people about him in the meantime. Most told me things that would be perfect material for a dinner toast. But in Florida, I found a few people who said that a year after his departure, questions were emerging about just how well his innovations were working out.

“His philosophy of disruptive innovation?” said one observer in Tampa. “Some people would say take off the innovation part — he was just disruptive.” David Straz Jr., a retired banker and ambassador and a philanthropist in Tampa, told me, “I think he’s a visionary and had many good ideas. He might have been just a little bit before his time. Some of his initiatives just weren’t at all successful.”

In recent months there have been stories in the Tampa press about USF pulling out of a specialty-care clinic at a retirement community called the Villages, taking a multimillion-dollar loss. And a medical simulation training facility in downtown Tampa known as CAMLS — the Center for Advanced Medical Learning and Simulation — has been reported to be running a deficit. Both were highly touted Klasko initiatives, as was a partnership with a hospital in relatively distant Lakeland to provide more residency training slots for USF medical students. That plan never got off the ground, and at this point its future is unclear.

When I bring up these topics, Klasko first explains them away by saying, “The guy who replaced me is much more traditional” and “thinks the best course is to get USF back to being a traditional medical school.”

The simulation center, though, is another matter, and when I get back to my computer later that day, I find a flurry of emails, started by Klasko, containing responses from various CAMLS officials, all saying that everything is fine there. The next day, I find myself on a speakerphone with the CAMLS CEO and its chief medical officer in Tampa, who assure me that while the center was required to show a loss on paper to account for depreciation, income is matching expenses and the center is on the way to profitability. Both predict that real success will come when the medical profession starts requiring
technical-skills assessments for physicians to earn recertification throughout their careers. That’s another idea Klasko is promoting that’s more or less ahead of its time.

Klasko called the futuristic medical simulations center “one of the things I’m most proud of.” His quick and relentless defense of it reminded me of something a Florida legislator said about him: “He’s a dog on a bone.” While we sit in the doughnut shop talking, Klasko tears a napkin to shreds. I notice that his fingernails are chewed nearly to nubs.

Whatever unrealized visions might linger back in Tampa, the important question now, of course, is whether Klasko’s form of futurism is the right fit for Thomas Jefferson, which treats more than a million patients annually at its hospitals and graduates 240 doctors each year in a time of physician shortages.

“We’re at a period of inflection,” says Richard Hevner, chairman of the newly constituted Jefferson board of trustees. “Change is going to be dramatic, not incremental. Dr. Klasko comes in and has a real vision on how to survive and be strong as an academic health center.”

“I transformed that place,” Klasko says of his Florida school, pushing aside the pile of shredded paper. “For us now, the thing to do is take the 190-year history of Jefferson and get us out on the national stage in a different way. I feel sometimes like I’m delivering a 190-year-old baby.

“For years and years at Jefferson it was always, ‘We’re getting closer to Penn.’ But we’re a different animal. Instead of comparing ourselves to Penn, let’s create a different model. Let’s define ourselves. Like alternative music. We’re not trying to be in the Top 10 of the Billboard music charts. We’re trying to be a different kind of music. My goal is to be the most entrepreneurial academic health center in the country.”

Soon, we pile back into the GTO and rumble toward Center City, attracting stares and shouts along the way. There are also a number of motorists laying on their horns, because Klasko stops at intersections before the light actually turns red, and remains sitting for a while after it turns green again. I think of a poem I read long ago about a guy who was so cool, “he even stopped for green lights.”

But it isn’t that. Dr. Klasko is simply preoccupied, telling me again all about his vision of the optimistic future.

Originally published as “What Does Rebranding a Train Station Have to Do With Fixing Our Screwed-Up Health-Care System?” in the December 2014 issue of Philadelphia magazine.