With the fullest house of four for last week’s partner presentations, the nationally ranked Cleveland Clinic had headliner status going in. And the panel likely disappointed few in the IRMC meeting room audience, particularly when there was praise for the Vero facility from executives of both the corporate flagship in Cleveland as well as the Florida division, which includes a hospital in Weston.
The team seemed to calm concerns that their somewhat vague initial proposal implied they were less than certain about wanting a presence here. As testament to its commitment, the organization brought in Dr. Toby Cosgrove, a heart surgeon and CEO who is weeks away from retirement; he will stay on in an advisory capacity.
Since taking the helm in 2004, Cosgrove has greatly expanded the Cleveland Clinic brand, which is now considered world-class in a list of high-acuity specialties.
Cosgrove has also led the charge to expand through acquiring community hospitals like Vero’s. That shift, from treating mainly the very, very sick to also treating, as one in Vero’s audience put it, “my granddaughter’s broken ankle,” has already taken place within the non-profit organization’s eight Ohio hospitals outside its renowned main campus.
Continuing that task will be left to Cosgrove’s successor, Tomislav Mihaljevic, also on hand at the Saturday midday meeting. The Croatian-born cardiothoracic surgeon most recently was CEO of Cleveland Clinic’s hospital in Abu Dhabi. He has been with the Cleveland Clinic since 2004, after a decade at Brigham and Women’s Hospital in Boston.
Mihaljevic’s appointment, announced in September, pointed up the relevance of a question repeated at most of the partner presentations: How does a company retain its executive leadership, and what strategy is in place for succession? Cleveland anticipated the question in its May 1 press release, which wedged in the following between accolades for Cosgrove: “By making leadership development a top priority, Cleveland Clinic has developed a deep, talented pool of physician-leaders who are ready to take on executive roles…”
Physician-CEOs have become a something of a trend in the management of top hospitals, in part because of the trust such leadership inspires in its clinical staff and because of the increased focus on patient care and population health. Cosgrove and Mihaljevic were just two of the physician-CEOs visiting Vero.
Cleveland also brought along Florida division CEO and president Dr. Wael Barsoum, an orthopedic surgeon, and one of its Ohio hospital presidents, Dr. Neil Smith. Smith is an independent physician who has led Fairview Hospital since 2013 while maintaining a private practice in internal medicine. Having replaced a registered nurse in that same position of leadership who went on to Abu Dhabi, Smith spoke to the opportunities at Cleveland Clinic.
Of the four healthcare systems vying to take over IRMC, only Cleveland had a policy in place of clinician-led management. And on the way up, staffers – all of whom are referred to as “caregivers” to imbue them with the company’s patient-first culture – have opportunities in a wide range of arenas, and even geographic locations. Internationally, in addition to the United Arab Emirates, the clinic expects to open a hospital in London in 2020. Cosgrove joked about the “bad neighborhood” – behind Buckingham Palace – that will now become the focus of his attentions.
There is also an outpatient clinic in downtown Toronto, and a $100 million facility in Las Vegas dedicated to diagnosis and treatment of brain diseases including Alzheimer’s, Parkinson’s and Huntington’s disease.
In U.S. News and World Report’s best hospital rankings, Cleveland Clinic’s brand holds great status nationally. Again this year, the Cleveland campus ranked No. 2 in the nation (behind Mayo in Minnesota) and has ranked first in the nation in adult cardiology and heart surgery for 23 years in a row.
With 14 hospitals, mostly in Ohio, the nonprofit system touts $8 billion in operating revenue.
As for its Florida division, despite entering its 30th year, it still rides the coattails of the Cleveland hospital with rankings that lag behind those of the main campus. The Weston hospital slipped from sixth to eighth in the state in the most recent rankings, below Florida Hospital Orlando and Orlando Regional Medical Center, tied for fourth place.
Florida Hospital is part of the Adventist Health System, a finalist in the IRMC partner search; Orlando Regional is part of Orlando Health, also a top contender to partner with IRMC. (Jacksonville’s Mayo Clinic got the No. 1 spot in the state for the second year in a row.)
Still, the prestige of being affiliated with an institution like Cleveland Clinic seems highly appealing to local healthcare dealmakers. There seems little doubt that the glitzy London address, eye-popping architecture in Vegas, and a presence in the richest city in the world – Abu Dhabi – will not conflict with the understated affluence of Vero Beach, should it find itself among Cleveland Clinic’s components.
“Excellent, outstanding presentation,” said hospital board member Gerri McPherson-Smith at the close of Cleveland’s presentation. Similar praise echoed through the audience, just as it had when boards met last month to narrow the field of candidates. During that session, there was a point where the IRMC board of directors seemed to seriously consider having only one finalist – Cleveland. They were dissuaded by their paid consultants, in the event Cleveland Clinic turned out not to want IRMC.
But from the words of the Cleveland Clinic executives, it seems they may indeed want IRMC.
“I think there’s a great cultural fit as we toured your hospital today,” said Barsoum. “Everybody smiles. Every caregiver that we ran into clearly cares about what they’re doing.”
Barsoum pointed out that like IRMC, Cleveland Clinic is a nonprofit; of the four finalists, only HCA is not. Then he pointed up another commonality, one the star-struck board may not have considered.
“You have a great brand,” said Barsoum. “The Indian River brand, to be completely candid, is the premier brand in this area. We want to partner with the best. The way you’ve separated yourselves out in the cancer world, the cardiac world, and the fact that you’ve been willing to invest in areas that have a huge community impact are important.”
At one point midway through the question-and-answer period, it became so obvious that IRMC was smitten that Barsoum felt he needed to summarize. “It sounds to me like you’re not worried about whether or not we can run a hospital,” he told the audience. The laugh he drew was at his understatement.
If Barsoum felt assured of kindred spirts in Vero, there was certainly an ill fit in a prior venture in which Cleveland Clinic took over a hospital in Naples. That small affluent city on Florida’s southwest coast is considered by many to be similar to Vero Beach.
“What happened in Naples?” District board member Allen Jones asked bluntly soon after the floor opened to questions.
Cosgrove dove in. He described the scenario in 2004 when he first became CEO. Cleveland Clinic’s 150-bed hospital in Weston at the time was a joint venture with Tenet, and the Naples hospital it had bought was bleeding money.
“We were losing $1 million a month and had been for 20 years. It was important that we figure out how to get in the black or break even,” he began. “In Naples, we had an 80-bed facility that would be filled in the winter, and 10 patients there in the summer. The second thing was that real estate prices were going so high that we were having to buy housing for physicians. And the third thing was that we applied for cardiac privileges – we had somewhat of a reputation in cardiac. And through the political process in Florida, we were turned down.”
That “political process” continues to plague hospital operators. A state regulatory board decides what healthcare services and facilities can be introduced in a marketplace. Efforts to do away with Florida’s “certificate of need” have failed so far.
Those factors persuaded Cleveland Clinic to sell the Naples facility in 2006, and buy out Tenet in Weston.
Today, as the Weston hospital is undergoing a major expansion, a new surgery center and family health clinic in Coral Springs got underway in April. That center is expected to draw from the long sought-after market in Palm Beach County: surgery patients who don’t want to drive an extra half-hour to Weston.
There are no surgical facilities under Cleveland Clinic’s name in Palm Beach County, though it has doctors’ offices in West Palm Beach’s CityPlace and Palm Beach Gardens and more are being discussed for Wellington. There is also a clinic in Parkland in Broward County.
And just as there was in Naples, there is concern with every new Cleveland Clinic location of drawing patients away from local doctors.
That concern was voiced at Saturday’s meeting by Dr. Pranay Ramdev, a Dartmouth- and Harvard-trained vascular surgeon as well as IRMC’s medical staff representative on the Board of Directors. Ramdev said IRMC-employed doctors as well as independent physicians were fearful of being nudged out by Cleveland’s own physicians, or by the high standards the system sets.
“Right now, there’s a tremendous amount of anxiety about what’s going to happen,” Ramdev told the panel. “There’s all sort of rumors. Is there any truth to any of the anxieties – because this is not just from independent physicians, it’s (IRMC) employed physicians – as to contracts? Are they going to be forced to comply with certain rules and regulations put out by the Cleveland Clinic and inhibiting their ability to practice?”
Cosgrove’s answer did not totally allay these concerns. “We always welcome great physicians,” he began. “There will be quality metrics that will be looked at, and some of the lower tier people that don’t meet our metrics will go through a training process.”
In the end, though, he tried to be reassuring. “Let me be clear: we love independent physicians. They make us a lot of money. They work real hard, and we don’t have to pay them.”
That was not the only moment of hesitation in the Vero audience. When a listener pressed the executives on Cleveland Clinic’s plans for the future, it became clear Vero wasn’t the sole focus of its expansion strategy.
“We are looking at several other acquisitions,” said Cosgrove, after Barsoum, poised to divulge the news, instead passed the baton to his boss.
In fact, part of that news was divulged in the media this summer, after Boca Raton Regional Hospital announced it was scouting for a partnership or merger.
Soon after, an article in the Palm Beach Post quoted Barsoum as saying Cleveland Clinic and the Boca hospital “could be complementary” partners, but denied they were in talks at the time.
Another stand-alone nonprofit hospital long rumored to be ripe for acquisition by Cleveland Clinic is Jupiter Medical Center.
Both hospitals were mentioned in the presentation as participating with Cleveland Clinic in a Medicare shared savings plan. If either or both of those hospitals joined Vero in partnering with Cleveland, it would give the system a patient/donor pipeline through South Florida’s most affluent zip codes. Last year, Jupiter Medical Center’s foundation raised $42 million, including one $25 million donation; Boca Raton Regional raised $36 million.
Regardless of who the other partners might be, the prospect was unsettling to some.
Asked Hospital District Board member Ann Marie McCrystal, “If you are looking at other hospitals in Florida and that happens, that would not dilute the attention and the investment if we were to join Cleveland Clinic Florida? In other words, spreading yourselves out too fast?”
Ann Huston, Cleveland’s chief strategy officer, replied that adding several hospitals at once would make for a smoother transition. “It is much better to do it all together,” she said. “If we know who the partners are and we are doing the idealized design for that pan-regional network, that excites me no end.”
“We feel we need to grow responsibly,” said incoming CEO Mihaljevic. “If we were to jump at every opportunity that comes across our desk, we could grow our brand like wildfire. But this is not what we try to do.”
Mihaljevic fueled even more optimism that Cleveland Clinic might be smitten, too. “I can you tell, we’re all in. We are truly here to partner. We are not here just to put our name on the building.” He stressed that partnering meant extending educational platforms to nurses and physicians to assist with recruitment and retention of talent. “We are here to share our practices when it comes to standardization of care and the operational aspects of running a hospital.”
As he closed out the presentation, Mihaljevic offered a final nugget: “One last thing: We are pretty persistent. Once we make a commitment, we stick with our commitments.”