- The deal locks in an option for Cleveland Clinic to grow its clinical practice transfer business 4x its current size and much larger than Cleveland Clinic’s peers
- There will be significant challenges to executing given the wide geographic dispersion, Community Health Systems’s mostly unranked facilities and strategy of using the hospital “channel” to drive change in care practice
- In the long run, the deal will reinforce Cleveland Clinic’s advantage in Big Data (it will take time to realize this)
- Community Health Systems faces little competition in many markets, potentially giving them an ability to influence payers towards reimbursement models which mesh well with Cleveland Clinic’s clinical practices
Cleveland Clinic’s deal with Community Health Systems (CYH) will dramatically expand the reach of its clinical practices, far outstripping the scale of anything Cleveland Clinic – or its comparables – has done before. While clinical practice transfer is only part of the deal (other aspects include Cleveland tapping operational capabilities and perhaps purchasing scale of CYH; CYH learning better how to manage employed physicians as it accelerates recruitment), it is the most strategically interesting: branded care paths (best practice protocols for the multidisciplinary management of a diagnosis over the duration of the condition) and second opinion consults are an active arena of competition among leading providers and an intriguing model for breaking down geographic barriers to provider competition.
The strategic alliance incorporates Cleveland Clinic’s two main vehicles for rolling out care paths and clinical support: the Quality Alliance program and affiliations with the Heart and Vascular Institute.
Launched in late 2010, Cleveland Clinic’s Quality Alliance is designed to drive greater standardization of care around Cleveland Clinic approaches in independent practice settings (rewarding the providers by negotiating improved reimbursement). Growth has been modest: most of the ~750 currently participating independent physicians are in northeastern Ohio (not surprising given that a local heavyweight health insurer, Medical Mutual of Ohio, was involved in the launch of the program and supportive of the reimbursement changes). The only beachhead made outside Ohio was recent (September 2012) and small scale (100 physicians of the Buffalo Medical Group in upstate New York). (In contrast, perhaps, Mayo Clinic’s Care Network has been signing up partners at a steady pace since its launch in 2011. At this point, Care Network has participating systems with an estimated 8-9K physicians and 5-6K beds).
Cleveland Clinic’s cardiac affiliates program has been around longer (first affiliate in 1994) and began venturing outside Ohio starting in 2004 (not counting the Cleveland Clinic Florida site). There are currently 14 affiliate hospitals (some such as Hillcrest and Fairview with pre-existing ties with Cleveland Clinic) with a total of 6.4K beds. Over the past 18 years, therefore, they have added the equivalent of a 400-500 bed hospital to the program each year – a petty deliberate pace.
Given this baseline, the CYH deal is transformative and includes:
- 3.3x more employed physician than in today’s Quality Alliance program (CYH has 2.5K employed physicians)
- 3.1x the hospital beds vs. those with current cardiac affiliates. Right now, 37 of CYH’s 135 hospitals have cardiovascular programs and could be targeted for affiliate status; more could obviously be stood up in with Cleveland Clinic backing
- 27 new states for the Quality Alliance and 22 states where Cleveland Clinic has no cardiac affiliates
This expansion will likely test the capabilities of Cleveland Clinic in several ways:
- The settings are far removed from northeast Ohio (where the bulk of its Quality Alliance and a large share of the cardiac affiliate experience resides)
- The facilities are largely unranked. Among CYH’s largest 15 facilities, only #13 is noted by US News and World Report as high performing and then only in 3 specialties. And, while Cleveland Clinic counts a few unranked facilities among its cardiac affiliates today, the majority are recognized high performers in a number of specialties
- The hospital is the “channel” vs. rather than direct relationships with the physicians. The vast majority of CYH physicians are still in private practice rather than employed (CYH has roughly 17K physicians overall, of which 2.5K physicians are employed)
- To the extent reimbursement lift is part of the package, Cleveland Clinic must support negotiations with many less familiar health plans likely wary of “brand borrowing”
No wonder the announcement was scarce on specific next steps. Expectations are that they will prioritize opportunities over the next 6-12 months and implement in 12-18 months. Roll out will certainly be piecemeal: Perhaps they will focus first on Ohio (where CYH has 4 hospitals – 3 in one system, 1K beds and competes vs. the nationally ranked St. Elizabeth’s Health Center) or Indiana (where CYH’s Lutheran Health Network has 3 major and 5 smaller hospitals and competes vs. locally ranked Parkview).
In any case, however, Cleveland has effectively locked in an option to grow its care paths business by up to a factor of 3 over the five year term of the deals. (Or more: while Cleveland Clinic did seem to rule out alliances with other for-profit systems, it is keeping options open for working with non-profit providers).
There are two other strategic benefits to the deal:
In the era of Big Data, it is imperative to get Bigger Data
Care variation inconsistent with best practice is bad, but variation where best practice is uncertain is a learning opportunity. This is one of the principles behind the High Value Healthcare Collaborative (HVHC), a bold experiment among a group of high-performing systems to compare how each member does across a variety of conditions, figure out who has the best practice and then codify it and roll it out across the group. The Cleveland Clinic – along with Mayo and Dartmouth-Hitchcock – was one of the founding members of the HVHC.
With the CYH deal, Cleveland Clinic has vastly increased the data it can access to analyze this variation, and compare vs. its own experience. In addition, the CYH data comes from many rural and unranked hospitals – a reflection of how care is practiced and the kind of care resources available to the vast majority of Americans. One other bonus: CYH takes a more top-down approach to the EMR platforms of its hospitals which should facilitate data exchange and analysis. Note, however, that CYH had formerly allied with McKesson but has recently shifted to Cerner as its top-down preferred platform. That shift will presumably be rolled out step and may impact where the first Quality Alliance programs are launched. The value of this may decay over time now that the non-Epic EMR vendors have agreed to work together (Cleveland Clinic, by the way, uses Epic).
Push adoption of those metrics which fit your solution
CYH says it has no substantial competition for about 80 of its hospitals. This position helps explain why – despite having unranked facilities – they are confident they can carve out a 5-6% increase in rate reimbursement for 2013. It also hints at another potential benefit to the deal: Getting everyone agreed on the metrics is the great way to tilt the landscape in the favor of care paths which perform well against those metrics. In uncompeted markets, CYH should be in a better position to influence which metrics payers use for their outcome based reimbursement. Even if the uncompleted CYH hospitals are in isolated rural settings, they can still end up having a real impact on how payers measure outcomes, especially if CYH – backed by the Cleveland Clinic – is driving the discussion. And not just in those 80 markets: impatient payers may end up pushing those same metrics in non-CYH markets if bickering providers there cannot agree on a common view. That is a way to line up the national market to your advantage!