March 9, 2021

Cleveland Clinic + University Hospitals: Two top health systems. Two CEOs. And one extraordinary partnership.

Daily Briefing

    The Cleveland Clinic and University Hospitals are two of the largest health systems in Ohio, and they're direct competitors. But this past spring, the two health systems came together to help combat the Covid-19 epidemic and are looking to continue their partnership in the future.

    Blog series: Lessons from the C-suite

    In this episode of Radio Advisory, host Rachel Woods sits down with Cleveland Clinic president and CEO Tom Mihaljevic and incoming University Hospitals CEO Cliff Megerian to talk about how their partnership came to be, what their partnership will look like going forward, and how competing hospitals and health systems can find ways to collaborate to help their collective communities.

    Read a lightly edited transcript of the conversation below, and download the episode to hear the interview.

    Rachel Woods: Health care organizations have faced unprecedented challenges and uncertainty since the start of the Covid-19 crisis, but it's not all bad news. Some organizations have showcased incredible resilience, innovation, and partnership. And some are already thinking about how they can carry that positive momentum into the future.

    On this episode, I want to share one of those stories. To do that I've brought Dr. Tom Mihaljevic, the CEO and president of the Cleveland Clinic, and Cliff Megerian, the president and incoming CEO of University Hospitals.

    Tom, Cliff, you both lead organizations that operate in northeast Ohio, How long have the two of you actually known each other? Do you sort of run in the same circles?

    Cliff Megerian: I think we clearly run in the same circles today. But to directly answer your question, when I was named CEO-to-be, if you will, in 2019, Tommy was exceedingly gracious and reached out and we, before Covid, arranged dinner together. I give him credit for suggesting that we start simply talking and seeing where this relationship could go.

    Woods: I always think that it is helpful to ground these conversations in how things operated before the Covid-19 crisis. You've mentioned that the Cleveland Clinic and University Hospitals are competitors, I might even call you fierce competitors. Give me a sense about how your two systems acted in normal times.

    Tom Mihaljevic: So in the relatively distant past, we really did not have that much communication between the two places, we just didn't.

    For a number of different reasons, most of them are historical. But with the change in leadership, we did an evolution of our thinking about how we can help communities—so our dialogue intensified and became richer and much more productive. So currently we have an open line of communication, it's a completely different era.

    Woods: I think era is probably the right way to describe it, because when I think about your two organizations, you both operate in the same market. You are both AMCs. You're two of the largest employers in the state, let alone in Cleveland. And you both operate organizations with a growth-oriented mindset.

    Despite all of that kind of competition, you decided to come together and help each other and help the community in the battle against Covid-19. How did that conversation actually happen?

    Megerian: Well I think that first of all, both Tom and myself recognized that perhaps the prior mindset that perhaps the success of our personal organizations, it was a zero-sum game with regards to the community. In other words, we can't both be successful.

    I think we've both seen probably by carefully studying our organizations' pasts that that's actually not true, that we can both be very successful and use discretionary time and effort to then come together on non-competitive arenas. And I think that was probably the basis behind our decision to unleash the forces of our organization to begin searching for even better value together for the community.

    Woods: Do you remember who started the conversation? Who approached whom first?

    Megerian: Well we were both at dinner together, so I don't remember, it was in between sips of our drinks, but I would have to say Tom deserves a lot of credit as someone who had been sitting in the seat for quite some time, and I learned this from a good friend, when you're a new leader you're like a mouse, two big ears and a small mouth. Tom made the suggestion and we ran with it.

    Mihaljevic: What we've learned, I believe I can speak for both of us, is the oldest big initiatives typically just start with a willingness and a simple phone call. It doesn't require much of strategy, quite frankly. Just call up and you'll be really, really surprised how people respond favorably to reasonable requests.

    Woods: Are there any kind of prerequisites that you would recommend other organizations have before they launch a partnership like the one that you now have?

    Mihaljevic: First prerequisite is that you get to know each other. I think what Cliff described—just for us to meet one another at the dinner—it's a really important first step.

    It is difficult to get a phone call from a competitor organization, from the leader of that organization if you are never to have met her or him. But once you meet and establish this personal connection, things typically flow easier. What do you think, Cliff?

    Megerian: As I said at one of our meetings, I really firmly believe we could take our cues from that of diplomacy, larger countries and organizations in it. If you peel the onion back, it all starts with a subtle bit of trust between two leaders.

    And that trust can't be established necessarily over the phone or by email, there has to be some level of humanity and human trust and a bidirectional, non-transactional level of trust that develops. And only from that point can creative strategies for the broader sense emerge.

    Woods: So you've gotten to know each other, you've had that initial outreach, explain to our audience what was it that your two systems decided to do to come together and fight the coronavirus pandemic.

    Megerian: The good news is we'd already come together and made a decision, frankly, before Covid was on the table, that we were going to work together. And I think things happened serendipitously.

    In other words, that was a perfect event, whether designed or undesigned, to help us be in a position literally two weeks later after our first dinner for us to be hit with Covid. And we quickly realized that the governor and the leaders of the Ohio Department of Health needed to have a unified voice from northeast Ohio.

    So first, we got together with our teams and reacted to how we felt our priorities should be, and then determined how we can help the governor and the Department of Health respond so that we are exactly saying the same things.

    And those were very crucial conversations because there was some discussion about government mandate to limit surgeries, and there was a big decision whether it should be elective versus what's called essential, and that may not mean a lot, but it can mean a lot depending upon how it's interpreted.

    And when the governor heard that the Cleveland Clinic and University Hospitals of Cleveland were completely lockstep in their recommendations for our patients, that became a series of more, if you will, collaborations.

    Woods: And you also came together for testing, as well, is that right?

    Mihaljevic Yes, that is right. The  chronology of us getting together is first we established direct connections between leaders and leadership teams. Secondly, we agreed that there were going to be certain areas we were going to collaborate. Thirdly, when it comes to Covid epidemic, we put these principles into action and came to a conclusion that we serve the same community. And we called one another, established a joint taskforce to open a first drive-thru testing center in Ohio. And we did it within 48 hours.

    Our teams got together, we identified the location that was best suited to serve the community, and for the first time, two teams from different hospitals, got together and established the testing center drive-thru . And it was really a beginning of Covid testing on a larger scale in our home state.

    Megerian: And then we added to that by putting together a unified response to some areas of living circumstances such as nursing homes and prisons where people didn't have proper care, and we were able to team up with regard that testing.

    We were able to team up and lead a major section together of Ohio in dealing with day-to-day feedback to the governor and his team. And so I think every step of the way we've had a team literally working together that takes off their team jerseys and works together as one team.

    Woods: And I think that in the abstract, this kind of collaboration might seem simple, but I'm betting that the practicalities are hard. I'm even thinking about the decision, the very, very rapid decision about where to put drive-thru testing. And while you're in the same market, you're obviously not in the same place. Were there any kind of barriers that you came up against in this path that you had to knock down that you'd like to give others advice on in order to avoid?

    Mihaljevic: I really don't think there were actually any barriers. Not at all.

    The key is that when our teams know  we are aligned, they're typically not going to come up with problems or barriers. The barriers really start at a leadership level, but the leadership is aligned. There were no barriers whatsoever. That's the reason why we were able to do so much in such a short period of time without really any major hiccups. And there's not one that I would be aware of.

    Woods: Do you think that that would be true in the face of a different crisis? I'm thinking it can be easy to say we're almost at war, we have this common enemy, so everyone needs to get aligned really fast. But would that kind of natural alignment exist for other types of collaboration?

    Megerian: Well I think that we both have plausible deniability because our decision to collaborate began well before the Covid crisis, before we even knew what Covid really was. But at the time we laid out a very quick concept that we're together fighting opioid and opioid issues, and de-escalation of opioid prescriptions and also management of addiction.

    We realized that we have a combined need to help folks in impoverished parts of our joint community to get jobs and job training, and we put that on the list. We realized that we recruit people who are sometimes spouses and couples who each of us don't have the ability to hire both, and so we should jointly work on recruiting where there are trailing spouses, as they say.

    We even talked about issues such as supply chain, possibly working at areas such as central sterile supply, laundry, that perhaps we could look at even joint ventures that are non-competitive.

    So we laid out a list before Covid of areas that we wanted to work. So I think that the Covid crisis accelerated it,. But at the end of the day we were on track to begin these conversations because we knew it was the right thing to do.

    Woods: And this list you're talking about as being the kind of initial conversation is now the future conversation, right? It's now how you plan on continuing the collaborate beyond just the Covid-19 crisis, is that right?

    Mihaljevic: Yeah, I think that is right. What is nice about the list that Cliff described and shared with you, is that both of us think that this is the list that every partnering health care organizations in different geographical areas can embrace without any hesitancy.

    Woods: Why is that?

    Mihaljevic: Well because there is nothing to lose, there's only something to be gained by working together in the areas where we are really not competitive whatsoever. There are a lot of shared areas such as  all of this that Cliff has described—the ability to jointly recruit in our geographical area, to share what we call back office resources, whether it's the supply chain, whether it's laundry, whether it's the sterilization. Those are not parts of the hospital offerings that create any competitive advantage.

    Between two organizations, quite to the contrary, we should all partner together for two reasons. One is to address the needs of the community.

    Through a number of different ways, and the second one is to quite frankly decrease and optimize the cost base for our organizations that are consistently challenged.

    So we do believe that this is a matrix that could be extended and could be envisioned to be extended throughout the United States at a federal level when a nonprofit health care organization should collaborate for the benefit of broader society.

    Megerian: Let me give you two quick examples, and this is an area that I failed to mention. In research and education there's what's called T32 grants, which are training grants offered by NIH to train the next generation of clinical scientists.

    In one particular area such as gastroenterology, previously we did not have this type of grant. And we decided to work the two groups together where the leaders in GI mutually applying for T32 training. Now we get the grant, now what'll happen is post graduate trainees will train at both places, but the reason the NIH gave the grant is they saw that the combined resources were better than each of us alone.

    Woods: Oh, wow. So you're saying that by coming together, you actually were able to earn an advantage that neither of you would have had in isolation.

    Megerian: We believe we were successful because we came together and had a better application.

    Woods: Running a health system doesn't need to be a zero-sum game. Especially when you think about the mission and being able to serve the community, that there are things that folks can come together on that aren't competitive at all. So why not get the benefits of economies of scale, cost reduction, etc.

    Practically speaking, how do some of these things actually operationalize between your two systems? Are there more taskforces, like you've had with Covid-19? How does that work?

    Mihaljevic: Our executive teams meet with a regular cadence, once every several weeks, depending on what is the appropriate cadence given the things we need to work with jointly. But we actually meet, two executive teams from competing organizations meet together.

    And so we have an agenda that we just outlined with you, the list, the topics that we follow through. Each task, whether it's an opiate taskforce, or educational grants or so on has representatives from each organization so they're there. They report to us and the progress that they have made, and then we determine how we're going to go from that point on. But we actually do meet, executive teams meet and it's full composition. That's very beneficial.

    Woods: And I'm still just amazed that you said, Tom, that you haven't faced any barriers. Even the idea of two completely different executive teams, two kind of different sets of jerseys coming together and there have been no hiccups in the road?

    Mihaljevic: No, absolutely no hiccups, we're not really trying to color it in a way that is inaccurate. But there's no reason for it, quite frankly.

    I mean, we're just doing the right thing. Both organizations have a very, very strong sense of responsibility for doing the right thing.
    We're nonprofit organizations, we're not taking food off of one another's table, and no, we have not had a single issue so far, at least not one that I'm aware of. Cliff, what do you say?

    Megerian: No, I agree with you, but I want to back that up. It's one thing to think that everything is fine, it's another thing to know what the opinions are of the people who matter.

    And first of all, you may or may not have seen an op-ed in our local Plain Dealer that was written by Tom and myself.

    And that was met with incredible enthusiasm from city, county, local college leaders, business leaders, as a sign of new times.

    And then, I can't speak for Tom in this, but I can speak for my board, my board has embraced this frankly as something that they feel as some have said it's about time. So I'm getting wind at my sails from my leadership, and also from the city fathers and mothers that they think this is right for our community.

    Woods: I did see that op-ed, in fact, the op-ed was one of the reasons why I reached out to you, to do this episode at all. Because I guess I too was thinking it's about time, and this is so great, and let's do everything we can to support this kind of cross-system partnership. So maybe I'm even evidence of that.

    Megerian: Well I know that we're also working on a white paper that is much more detailed and sophisticated that our teams are jointly working on that will be potentially shared with another news outlet, maybe even one of the business school journals, that has much more detail in it.

    And so we are continuing obviously to believe as Tom mentioned earlier, the amount of time and unnecessary waste perhaps that goes into certain municipalities where there's competing hospitals, they can still compete on what they have to compete about to remain nonprofit and make sure that they are good in the eyes of the FTC, but there's many things they don't need to compete on, that they can collaborate.

    And we hope that this could be used as perhaps a white paper, a model, for other, if you will, major cities.

    Woods: Does that mean that you have specific kind of metrics that you're targeting or tracking? Is there a way that you've looked at this for gosh, how will we determine the success of this kind of a partnership?

    Mihaljevic: Yes, we do. We have appropriate metrics for every initiative that we are putting together, so I'll just give you one example to be very, very concrete: Job creation in northeast Ohio, both our organizations are the largest employers in the city. And we want to create more career opportunities for, in particular, people from our immediate communities.

    So when we go about that particular initiative, we have very, very firm metrics. And our firm metrics are simply the number of lives that we can improve through job creation from our immediate communities so that we can measure the impact of our joint effort. We know exactly how many people we're employing today individually, and therefore jointly. And we are looking to amplify that ability to create new jobs by joining forces.

    So it is really, really critical for everything that we do to be measured in a very accurate way because ultimately that really stimulates our teams to do the right thing.

    Woods: I want each of you to kind of roll the tape forward for me by let's say five years. What do you think the state of this kind of partnership that you've established now could look like in the coming years?

    Megerian: Well, I could go down what my hopes and dreams are, but I think we're on the way, but I would hope that not only in the six or so avenues that I've mentioned that we are collaborating in, that we will have found many other areas that we can collaborate in to make our community greater and stronger. We can escalate in not one plus one equals two, in terms of research output, but we get to the point of one plus one equals three in the totality of the meaningful research contributions that this region is able to be proud of.

    And we have looked even further into areas of education, areas of post-graduate training, areas of ancillary health care training that are known as models for collaboration in the country that others begin to follow. And perhaps others find even better ways of doing it, but they could point to this as a genesis of their thoughts.

    Woods: Tom, how about from you?

    Mihaljevic: Well I believe that what you're hearing from us simply translates in our willingness to create the larger scale for the good of our community. So this is really a joint effort to create a scale for powerful, powerful engine to create more good in our societies and in our communities. Through better health care, better job creation, better research, and better education. This is what nonprofit organizations in the United States needs to stand for when it comes to those in health care, obviously.

    And what I would hope for in five-to-10 years, that a paradigm that we're establishing here in northeast Ohio will be embraced by other health care systems throughout the United States.

    It is really important for us to underscore that competitiveness is really good. It is something that will never go away, that shouldn't go away, it's really important that we have different organizations to compete in areas of quality and access to patient care. There's nothing wrong about this. But then there is this wide, very broad spectrum of public health care needs that we should collaborate in.

    And we the United States have to embrace this as a common responsibility, shared responsibility better said.

    Woods: And I hope that if anything that this epidemic has taught health care organizations that that is the case, because we're seeing kind of in real time that fighting this crisis does require collaboration, not just between health systems, but across every aspect of the health care industry.

    Mihaljevic: That's for sure. I mean, take a look at just where we are in the United States right now, we do not have a national health care system, we have several thousand hospitals, and I know that really commands more than half a percent on the average even large organization of market share, if you will, on the U.S. health care market. So with so many relatively small health care organization, we have to find some kind of unifying ground in order to improve the public health in the United States.

    And I think everything that Cliff and I have shared with you, I think it's a wonderful example that doesn't require broad reforms, that doesn't require new ways of funding. It just requires the willingness of leaders in a certain geographical area to agree on the areas that are important for their community, the basic rules of the engagement, and then also the ways they are going to measure their success. That is in the simplest terms what we are trying to accomplish.

    Woods: That's very well said. Well Cliff, Tom, I really want to thank you so much for coming on Radio Advisory and sharing this really positive story, even in the face of a lot of crisis that organizations are feeling right now. I want to give each of you a moment to kind of speak directly to our listeners.

    When it comes to partnership, what advice do you want to leave the health care leaders listening to this podcast with? Cliff, let's start with you.

    Megerian: What Tom just mentioned I think very succinctly put together the, if you will, mandate that all of us leaders of large nonprofit health systems need to realize. That we're not meeting our mandates simply to deliver a particular margin or grow or keep a certain market share.

    We are nonprofit organizations that by lieu of freedom from paying taxes we have to deliver back to our community. If we can work with our competitors, if you will, in areas that are non-competitive, that are areas that are not necessarily adding to our ability to deliver care, we are going to ultimately develop a better way to respond to our overall goal, which is to give back to our communities. That's very important.

    My second piece of advice will be that you have to have an open mind. You cannot look at every such beginning of such a partnership or negotiation as a mechanism of somehow enhancing your position at the detriment of the other.

    Or you have to take that hat off, and you have to look at someone who is responsible for this most valuable asset, this being this nonprofit organization and how could you do even better? And I will argue that by finding the partners you can trust, and then working together, that you will better achieve the job that all of us CEOs, me soon to be CEO, will have.

    Woods: Tom, what advice do you have when it comes to partnership?

    Mihaljevic: I think it's probably the best advice that I could give to anyone is just simply to be open to it. Be open-minded to it. I think oftentimes partnerships are being viewed as a threat. Cliff and I viewed it as an opportunity. Your crowns are not going to fall off of anyone's head if they partner with one another. Quite to the contrary. And it doesn't require business plan, it doesn't require strategic thinking, it just simply requires a phone call or a dinner. There is nothing wrong about it.

    I think the mandate for all of us ultimately is we have to do the right thing. And the right thing that we have to do is to serve our patients, and the right thing that we all have to do is to serve our communities, it has always been clear to us, it has become clearer through this epidemic.

    Collaborating enriches, it just makes each participant richer for the experience, it mobilizes your own caregivers in your organization in a way that is very, very positive. It speaks volumes to your community just like Cliff has said. I mean, everyone from our municipalities to state government, people are looking for us to do the right thing for our fellow citizens, and what a better way to do it than through collaboration. I think it's a liberating experience, I think this is something that one simply needs to embrace. Just pick up a phone and meet with your fellow caregivers in your neighborhood and trust me, everything is going to be just fine.

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