March 19, 2015

How Cleveland Clinic is rethinking its strategy—and changing its stance on ACOs

Daily Briefing

    Cleveland Clinic is heavily investing in primary care and population health management to meet the needs of the changing health care market, Reed Abelson reports in the New York Times.

    Cleveland Clinic is best known for its specialty care and treating the "sickest of the sick," the Times reports. However, as patients increasingly seek care in an outpatient setting and providers are incentivized on outcomes, the system is making significant investments to evolve with the changing health care market.

    CEO Toby Cosgrove compares the rapidly changing health care market to the steel industry during its time of upheaval. "The disruption is going to happen," he says. And even prestigious systems like Cleveland Clinic are "not immune," says Lisa Martin, a bond analyst at Moody's Investors Service.

    The system saw its revenue growth slow in 2014, and inpatient volumes have decreased. Moreover, local competition from consolidating providers has eaten into the Clinic's regional market share.

    Responding to disruption

    In response, the system is rethinking how it provides care. Cosgrove has shrunk some specialty clinics and replaced Huron Hospital with a family health center focused on chronic-condition management and primary care. There are plans to replace another hospital with a similar facility.

    "We are doing things differently," says Nana Kobaivanova, the medical director for the Stephanie Tubbs Jones Health Center, which replaced Huron. Doctors at the new facility spend 40% of their time providing primary care. Diabetic patients can get coaching on managing their condition, and the facilities' walk-in clinic has expanded hours to discourage ED visits.

    The system also is placing an emphasis on controlling costs to appeal to value-conscious insurers building narrow networks. Two years ago, a hip replacement cost $1,500 more than it does today. The system cut costs by standardizing the type of artificial hips it purchased and using fewer supplies during surgery.  

    CFO Steven Glass says, "Our biggest challenge is managing all the change." And more change is coming, with Medicare planning to move half of its payments into value-based contracts by 2018.

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    Changing incentives

    Ann Huston, the clinic's chief strategy officer, acknowledges that the system has been slow to adopt value-based payment models like ACOs. But, she says, "We're so far behind that we can be ahead."

    Last year, the system announced it will launch a Medicare ACO, a move Cosgrove had been cautious about in the past. It has also invested heavily in software to track care across a variety of settings.

    The 'Next Generation' ACOs: Medicare's new model rewards patients for opting in

    At the same time, Cosgrove is focused on maintaining Cleveland Clinic's reputation as a center of innovation. The system has placed telemedicine kiosks—complete with stethoscopes and blood pressure cuffs—in grocery stores. And Cosgrove is pushing clinics to offer more same-day appointments.

    He is confident that Cleveland Clinic will continue to be a leader in health care. "I think you're seeing an organization that can essentially respond," he says (Abelson, New York Times, 3/17).

    The takeaway: Cleveland Clinic is adapting to a changing health care market by investing in primary care and adopting a value-conscious strategy. Is your health system evolving, too? See what it means to transform care today.

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