Cleveland Clinic CEO talks strategy, expansion and standardization

Last March, Cleveland Clinic, renowned for its technology transfer prowess, signed an agreement to transfer knowledge based on the quality-of-care processes practiced in the $6.2 billion northeast Ohio academic medical center to several community hospitals belonging to Community Health Systems, the large for-profit hospital chain. The alliance was the handiwork of Dr. Delos “Toby” Cosgrove, who has been CEO of Cleveland Clinic since 2004. In a wide-ranging interview with Modern Healthcare finance reporter Beth Kutscher and editor Merrill Goozner, Cosgrove addressed how he sees that alliance playing out, the future of innovation in medicine and how Cleveland Clinic addresses key issues such as quality improvement and physician engagement. Following is an edited excerpt.

MH: Given your partnership with Community Health Systems, what is your acquisition strategy going forward, either with CHS or on your own?

Cosgrove: We're not going to be doing acquisitions with CHS. They're going to do their own. They pick the targets, and they will be independent of us as far as acquisitions are concerned.

MH: Are there assets that you're looking at or markets you're looking to expand into on your own?

Cosgrove: Yes, but I'm not ready to talk to you about them just yet.

MH: What do you bring to the table with your partnership with CHS?

Cosgrove: Community Health Systems came to us and wanted help with their quality. They have sent us into some of their locations around cardiac surgery. So we're going be to doing one-offs and helping them with that sort of thing.

MH: Mayo Clinic is developing partnerships with providers as a form of brand extension. Will Cleveland Clinic pursue something similar? You've got a great brand.

Cosgrove: No. It's a funny strategy to me for the Mayo Clinic. I don't understand exactly how it benefits the people that they deal with.

MH: Cleveland Clinic is unique in that you've actually grown inpatient volume. What do you attribute that to, and is it sustainable?

Cosgrove: About 80% of our patients come from about a six-county area, about 19% come from the rest of the U.S. and about 1% from overseas. One of our major strategies has been hospital transfers. We have about 20,000 hospital transfers on an annual basis, and people are coming to us for tertiary, quaternary care, and about a quarter of our beds are intensive-care beds. That's one of the things that has sustained us. And we've had substantial growth in our outpatient visits.

MH: Are you looking to build your outpatient centers or urgent care?

Cosgrove: We continue to build outpatient facilities. We think people are increasingly going to outpatient from inpatient, and home care is growing as well.

MH: Are you interested in launching a health plan or partnering with a health plan?

Cosgrove: We do not have a health plan at the moment, and we haven't decided.

MH: Some credit-rating agencies are saying that physician integration, a strategy you're pursuing, may not be the best strategy because there are a lot of costs and the benefits are still uncertain. What are the benefits?

Cosgrove: Integration, efficiency, continuity.

MH: What is Cleveland Clinic doing to standardize care processes and getting buy-in from your physicians?

Cosgrove: We're increasingly building out Care Paths. We've got about 60 to 70 Care Paths in process now, which will take people from a specific diagnosis right through the guidelines and how you look after them. We've also begun to increasingly standardize physician preference items. We're getting a lot of physician buy-in and participation in that.

Quite frankly, the big issue going forward is going to be physician engagement in terms of being able to drive all the changes that need to be made in healthcare. If you don't have physician engagement, I don't see how you possibly are going to take costs out, how you're going to get more continuity of care. Physician engagement is really a critical issue.

MH: Do you find that physicians accept the message that standardization improves quality?

Cosgrove: No. There's a long learning curve. I think that you have a lot of anger in the physician community right now, or denial. They can't believe their whole world is changing. It's essentially Kubler-Ross' degrees of mourning. They have been in denial, and now there's anger and eventually there will be mourning. Then we'll get acceptance. We have to compress that, and that's going to require the physician buy-in, and that's going to take a lot of work.

We increasingly have them engaged in decision-making. We've doubled the number of physicians who are involved in leadership activities. I've upped the number of communications that I do. We've had a big emphasis on transparency internally and externally.

Physicians, the older ones particularly, are having real difficulty understanding what's going on. And I think the problem is that we have never painted a picture of where we want to go. Does anybody know what the model we want to have is? I'm not sure I do. There are penalties for readmissions. There's cutting in reimbursement. There are quality metrics. There's transparency. But no one ever says, “We're going to build a great new system and it's going to look like this.”

MH: Cleveland Clinic has a long history of product innovation. Where do you see that going?

Cosgrove: We have Cleveland Clinic Innovations, which is our tech transfer group. They've spun off 66 companies. Ten years ago, we were seeing devices, and then some pharma came in. Now, it's almost all IT. That's true across the industry. If you look at the venture funding right now for biotech or pharma, it's gone down 50% in the last five years, whereas IT venture funding has gone up three-fold in the last three years. I think that what we're going to see is innovation that's going to take place around the process of delivering care.

MH: Yet you haven't participated in any of the CMS innovation programs.

Cosgrove: I've watched a lot of CMS programs come down the pike in the past. Most of them have been traumatic for the people involved. I thought I'd learn a bit first from other people's successes and failures.

MH: If you were to project out five or 10 years, do you think we're going to go more toward global payments, capitated risk, bundled payments?

Cosgrove: Yes … We'll be in (an accountable care organization) by the end of the year. We've got ... 34 medical homes. We haven't exactly been sitting on

our hands.

MH: It's surprising how even some of the very best institutions, when they really start doing the data, find they are not as good as they think they were.

Cosgrove: Absolutely. If you look at the first word in our mission statement, it says, “striving” to be. We ain't there. We're never going to be there. And we're not satisfied with where we are. That's probably the most important word in our mission statement. And we're very transparent. Our outcomes books show the good, the bad and the ugly. … We're all over this stuff, and we're not as good as we should be or want to be.