Becker's Hospital Review

Sign up for the COMPLIMENTARY Becker's Hospital Review CEO Report & CFO Report E-Weeklies at www.BeckersHospitalReview.com or call (800) 417-2035 19 Coordinating Care and Incentives: Q&A With Cleveland Clinic CFO Steve Glass By Bob Herman I n the general context of finances, few hospitals or health systems compare to Cleveland Clinic. ery models, so patients know that they are going to receive connected care that follows a plan and that is evidence-based, as well. As of Dec. 31, 2012, Cleveland Clinic had more than $10.2 billion in total assets. In fiscal year 2012, the academic medical center posted an operating profit of $228.3 million on more than $6.2 billion of unrestricted revenue, good for a 3.7 percent operating margin. The other part is we don't have clearly defined incentives. Today, incentives lie in treating illness, not treating wellness. That also extends to the patient. The patient needs more responsibility around care, as well. There are a number of patients that have chronic diseases and comorbidities, which creates a complexity that didn't exist 25 years ago. And all that comes with an associated cost. We don't have a good model in the U.S. to correlate that to patient responsibility. A little bit of that has to do with the culture in the U.S. of wanting a quick fix. However, Cleveland Clinic CFO Steve Glass looks beyond the numbers. Mr. Glass has been CFO of the organization since 2005 and joined the system in 2002 as controller and chief accounting officer. He says Cleveland Clinic is successful today not because it focuses on the bottom line, but because it focuses on how to rearrange care delivery to make things better for patients. The finances will take care of themselves if a hospital is doing the right things, he says. Here, Mr. Glass explains why U.S. healthcare has become so expensive, what hospital leaders need to do to change that paradigm, how data can be utilized correctly and why environmental sustainability and international relations are key cogs to Cleveland Clinic's growing success. Question: There have been a ton of stories in the media as of late — from Steven Brill's piece in TIME to the recent New York Times series — talking about the U.S. healthcare system and why it is so expensive. Cleveland Clinic is a $6 billion organization with several affiliated hospitals and some of the most renowned academic physicians and researchers in the world. As the financial head of the organization, can you give your analysis of these stories? Why do you think U.S. health expenditures have spiraled so far out of control? Steve Glass: I don't know if I can fully answer why, but I can give my perspective and what we're focused on at the Clinic. First, we need to do a better job of coordinating care. There are a lot of independent pieces, and patients move through a series of disconnected models. We are developing a system, a healthcare delivery model, that truly integrates care, and information passes along with that patient. Historically in healthcare, once you move from one setting to the next, it's disconnected, which is not like other industries. Individual practitioners, home health companies, hospitals — all of these are different companies with different incentives. We have to design and integrate better care deliv- Here at Cleveland Clinic, with our caregivers, we are designing wellness programs that engage them and tie that to the cost of premiums. It's a way to incentivize people. OK, if you don't want to exercise or eat right, that will result in higher healthcare premiums. Within the context of healthcare, there are certainly things that aren't within everyone's control, but we focus on those that are. Other [causes of high healthcare costs] include that things tend to cost more here in the U.S. Drugs and medical devices cost more here than other countries, and that's part of the problem as well. That's one of the variables that gets plugged into treatment costs. Q: You mentioned that the healthcare system needs to change incentives, both financial and clinical, to reach better results. How would you reform the U.S. payment system to curb these high costs while also improving patient health? How do Medicare, Medicaid and commercial payers fit in? SG: Number one is this whole idea of integrated care, and that's something we spend a lot of time around at Cleveland Clinic. We are a physician practice that operates a health system. The entire care delivery model is organized around that integration. Many hospitals have caregivers who are independent practitioners, and the incentives aren't aligned. You must have good, strong clinical integration. And even within our model to achieve that integration, we leverage evidence-based care. Even with a model like ours, you could have variability from one physician to another. The big step around that is developing integration around technology so every patient gets treated the same way for the same diagnosis. Physicians are trained as individual practitioners, but we have to lever- age technology and data to drive out variability of that care. It's about using more evidence-based protocols. That's one of the things we've done working with [Cleveland Clinic's spinoff health data analytics firm] Explorys. We ask doctors, "How do we drive costs down but drive more efficiencies in healthcare delivery?" With Medicare and Medicaid, we certainly work with many constituents in D.C. to show them how we operate our model here. We have great relationships at the state and federal level, but it's a major challenge to try and reform Medicare and Medicaid. Not all hospitals are the same. Medicare is trying to figure out how hospitals put quality reporting in place across 5,000-plus hospitals, but all hospitals aren't same. A small acute-care hospital might see different patients than those who appear here at Cleveland Clinic, who are highly acute patients. We do work with commercial carriers to identify ways to move into value-based care models. We also want to take advantage of bundling and manage care around an episode. Q: When it comes to bundled payments, Cleveland Clinic is one of the early adopters to work with big employers, such as Wal-Mart. Can you talk about the organization's efforts with employer bundling? SG: Yes. We are working directly with employers because many large businesses are really engaged on how they can get involved and manage the growing costs of healthcare and providing healthcare benefits for employees. Organizations like Boeing, Lowe's and Wal-Mart have gotten very sophisticated in this. Most of our

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