Looking ahead

Editor's note: The Mayo Clinic is working to stay at the forefront of healthcare delivery and medical research in an era of retrenchment in public resources. Modern Healthcare Washington Bureau Chief Jessica Zigmond caught up with Mayo Clinic President and CEO Dr. John Noseworthy during a visit to the nation's capital this month. They discussed the newest round of Medicare cuts, healthcare reform, big data and Mayo's unusual effort to draw state support for a major expansion in its home base, Rochester, Minn. Here is an edited excerpt:

Jessica Zigmond: Medicare's payment cuts to providers from sequestration began for services on or after April 1. How has Mayo been affected by those cuts and what are you doing to minimize their impact?

John Noseworthy: The 2% cuts from sequestration affect us in both practice, education and research, all three parts of our mission. It is significant. It is approximately $47.6 million in one year to Mayo Clinic and a little more than half of that is in payments for our physician services in the practice. About $20 million is in research, and about $2 million is in education. And that kind of cut means you have to slow down or prioritize what you can't do and the things that you were doing that were high-priority need to be stopped or slowed down. Ultimately, it means that we can hire fewer people, fewer young people, fewer young scientists, fewer young physicians, so these cuts are very, very painful.

Zigmond: The CMS Innovation Center is responsible for testing many different payment models. Which payment model do you think is showing the greatest promise for success?

Noseworthy: There is a whole variety of them, and there is not going to be one that meets all types of situations. There is a role for bundling; there is a role for shared savings, and perhaps, there is still a role for fee-for-service for the most complex care that really can't be bundled. We are investing in modeling that to understand what is best for our patients.

Zigmond: In January, Mayo announced its collaboration with Optum, the data analytics arm of United Health Group, to launch Optum Labs. This will marry clinical information and new claims data. Where are you in the process, and what are the short-term and long-term goals?

Noseworthy: The short- and long-term goals for Optum Labs are essentially to drive value, understand what works in healthcare, what are the clinical outcomes that we are all driving toward and what are the cost drivers of that. What's the total cost of care, and what aspects of the costs can be reduced or eliminated to reduce the cost while still improving the quality of care, and therefore, improving the value. The promise of Optum Labs will really come to fruition when other great groups, large academic medical practices, research universities, biotech, pharma and device companies, other insurers and health policy groups, all come together and help us use informatics to pull out the data here that will really define value. That's what we want to create. I think the potential is absolutely almost limitless and really should change the way we design healthcare systems in the future.

Zigmond: Also in January, Mayo had requested more than $500 million from the state for a multibillion dollar, 20-year improvement project. Can you describe how that money would be used?

Noseworthy: The “destination medical center” legislation has been difficult for folks to get their arms around initially. Essentially, over the next 20 years, if one looks back at what we've done and looks ahead at what we have done to grow the destination medical center of Mayo Clinic in Rochester, we have had a relationship with the city and the community over this time planning how the city develops going forward. And we estimate that over the next 20 years, Mayo Clinic will invest something like $3 billion or $3.5 billion dollars in our facilities to continue to grow and serve our patients well. We also know that private investors are likely to invest another $2 billion or $2.5 billion dollars into the amenities that are needed in a community of that size and of that profile. If one looks at that over 20 years, what essentially we are asking for is to have some security, the acknowledgment that the state will indeed keep up with the infrastructure of the city as we grow—roads, sidewalks, sewers, bridges—based on the tax base that will grow from the revenues. We are hopeful that the Legislature will pass this. It's innovative. It is a complex bill in some sense, but our feeling is that there is no risk to the state at all. We are not asking for one penny for infrastructure if revenues don't grow.

Follow Jessica Zigmond on Twitter: @MHjzigmond