Cleveland Clinic Grapples With Changes in Health Care

New York Times
March 18, 2015
Cleveland Clinic Grapples With Changes in Health Care
By REED ABELSON

In downtrodden East Cleveland, a three-story family health center has replaced the city’s full-service hospital. Seven thousand miles away in Abu Dhabi, a gleaming 24-story hospital is preparing to admit patients this year.

Back in Ohio, shoppers at Marc’s, a local discount grocer and pharmacy in Garfield Heights, can enter a kiosk equipped with a stethoscope, a blood pressure cuff and a two-way video screen that lets a patient talk directly to a doctor.

These disparate ventures bear the imprimatur of the renowned Cleveland Clinic, one of the most respected nonprofit health systems in the nation, as it tries to manage the extraordinary changes now transforming health care.

While it has traditionally relied on its ability to provide high-priced specialty care, the system, along with every stand-alone community hospital and large academic medical center, is being forced to remake itself. Patients are increasingly seeking care outside the hospital — in a family health center, a doctor’s office, a drugstore or at home. Medicare and other insurers are moving away from volume-based payments to new models, to pay less for better care.

Dr. Delos M. Cosgrove, a 74-year-old former heart surgeon who took over as chief executive about a decade ago, likens what is happening in health care to the upheaval decades ago in the steel industry, where companies disappeared when they were unable to respond to change and new competition.

“The disruption is going to happen,” he said. As an inevitable shakeout takes place among health care institutions, a look at how the clinic is responding underscores the industry’s challenges and the flurry of activity taking place as institutions try to adapt.

As other health systems have experienced, the clinic’s revenue growth is slowing; it rose 4 percent in 2014 to reach $6.7 billion. Hospital admissions are down from where they were five years ago. Its rivals, like University Hospitals, are teaming up with other hospitals, and the clinic’s market share has fallen from half or more of Cuyahoga County to 45 percent.

“They are not immune to those challenges,” said Lisa Martin, a bond analyst at Moody’s Investors Service who follows the clinic.

To avoid becoming marginalized in an environment where insurers are looking to health systems that can manage all of a patient’s medical needs, the clinic — long known for treating the “sickest of the sick” — is trying to become as good at primary care and treating chronic disease as it is at performing complicated heart valve repairs. “It’s challenging to develop two business models,” Ms. Martin said.

The clinic has been slow to experiment with some new payment models like a Medicare program for so-called accountable care organizations, which offer systems a share of the savings if they can keep costs low while meeting assorted quality goals. The models seek to push health systems to become better at caring for large groups of people who have a wide variety of medical needs.

Other systems have been working under these models for a while, although with mixed success. “We’re so far behind that we can be ahead,” said Ann Huston, the clinic’s chief strategy officer.

In addition to the main campus, the clinic operates 10 community hospitals and 16 family health centers, which constitute the bulk of its assets.

The clinic’s efforts to reshape itself are most visible in East Cleveland, a low-income neighborhood. In recent years, Dr. Cosgrove has moved to shrink some of the clinic’s facilities, eliminating specialties at some and shutting down one, Huron Hospital, and replacing it with a family health center. A similar fate awaits another hospital, Lakewood, which is owned by the city and managed by the clinic.

“We are doing things differently,” said Dr. Nana Kobaivanova, the medical director for the Stephanie Tubbs Jones Health Center, the facility that was built to replace Huron, which was demolished.

The Huron location has been designated as green space, with grass planted where the building stood. The health center’s doctors have shifted their emphasis to preventing disease and managing chronic conditions, with primary care consisting of about 40 percent of what they do.

A patient with diabetes could take a cooking class to learn how to eat healthful foods and work with a diabetes educator on how to better manage the disease.

The facility recently expanded the hours of its separate walk-in clinic, where patients with sprained ankles or sore throats can come in without appointments, and it is trying to persuade people who go to the emergency room for their basic medical care to visit the walk-in clinic instead.

The Cleveland Clinic must also figure out how to deliver care less expensively. As they develop narrow networks, private insurers are dropping hospitals that they consider too costly or poor-quality care providers. While the details remain vague, Medicare has announced plans to tie as much as half of its payments to value or quality payment models by 2018. Regardless of what happens, “the challenge still points to making health care more affordable,” said Steven C. Glass, the clinic’s chief financial officer.

The clinic cut expenses by roughly $500 million last year. The system is avoiding unnecessary lab tests, for example, and performing a hip replacement for $1,500 less than it did two years ago by standardizing the devices used and using less blood and other supplies, all, it says, without sacrificing quality. Its doctors are typically on salary, making it much easier for the clinic to work with them to figure out how to better care for patients.

“Our biggest challenge is managing all the change,” said Mr. Glass, who is also trying to handicap the odds of whether the Supreme Court will rule against allowing subsidies for people enrolled in the federal health insurance exchange in states like Ohio.

There is also tremendous uncertainty as systems prepare for payment systems that have not yet been fully developed. But systems cannot afford to wait, said Jeff Hoffman, a consultant at Kurt Salmon. “You have to move forward,” he said. “This is something you cannot flip a switch on.”

Dr. Cosgrove was initially skeptical of the Medicare program, for example, but accountable care organizations in Medicare and private insurance have proliferated in recent years. Last December, the clinic announced it would finally take part.

To prepare for these changes, the system has invested heavily in the computer systems that allow it to track patients in different settings and look closely at how they are managing their care. Systems like Kaiser Permanente in California have long used clinical information to better manage the patients they insure under their own health plans.

Under Dr. Cosgrove, the clinic has emphasized the need to measure patient outcomes and other information to better judge how well it is delivering care. “We should have the very best shot at figuring out what is optimal care,” said Ms. Huston, the chief strategy officer.

The question for many health systems is whether they need to add a health plan to their portfolios. While Dr. Cosgrove says he thinks the clinic will be soon assuming the risk of providing care under the new arrangements, potentially losing money if care is too expensive or ineffective, he is reluctant to take the plunge into insurance. “That’s a tough dilemma,” he said.

He has also been trying to broaden the clinic’s reach, particularly through affiliations that include North Shore-Long Island Jewish Health System in New York to provide cardiac care. In Ohio, the system recently agreed to team up with Akron General Health System, a move that will give it a broader presence in the state. It also joined the Midwest Health Collaborative, a group of health systems that hopes to work together to provide care across Ohio.

“Toby’s very interested in our expanding our footprint, finding unique ways to collaborate,” said Robert E. Rich Jr., the clinic’s chairman, referring to Dr. Cosgrove by his nickname.

Its doctors will begin seeing patients at a 2.7 million-square-foot hospital in Abu Dhabi, part of its ambitions to expand internationally as it treats more patients from overseas. While the Cleveland Clinic will staff and manage the hospital, it is owned by the government of Abu Dhabi’s Mubadala Development Company.

There have been missteps. The clinic’s affiliation with Community Health Systems, a for-profit chain of hospitals, ended abruptly after Dr. Cosgrove realized the two systems’ goals were significantly different. “It didn’t bear fruit,” Dr. Cosgrove acknowledged.

But Dr. Cosgrove continues to experiment, pushing to keep the clinic competitive on all fronts. He has made same-day appointments a priority for the system, so patients can easily see a doctor.

He is also eager to explore its capabilities online through tools like Health Spot, the kiosk.

“I think you’re seeing an organization that can essentially respond,” Dr. Cosgrove said.

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