The Top 25
The Power 100 List
Greater Akron, Cuyahoga County, Lake and Geauga County, Lorain County, Mahoning Valley
Major health care system CEOs Toby Cosgrove and Tom Zenty prepare for big changes in their industry.
With Frank Jackson's successful levy, Eric Gordon's Cleveland schools are challenged with implementing sweeping change.
Cuyahoga County executive Ed FitzGerald is putting a lot on the line in his pursuit of the governor’s office.
With Dan Gilbert's casino drawing people downtown, a new convention center and hotel investments booking up, David Gilbert is tasked with bringing visitors into Cleveland.
After a series of careful acquisitions and a relentless focus on efficiency, Mooney has helped reshape and refocus banking after the financial crisis.
After 15 years in the job, Proenza will leave the University of Akron June 30. In that time, he’s increased the university’s profile and enrollment, improved the school’s relationship with the city and worked to build the regional economy.
Douglas sits at the helm of the Austen BioInnovation Institute, a 5-year-old collaboration of Akron hospitals and universities to innovate and commercialize new medical and biomaterial products.
Smith has run Cleveland Hopkins International and Burke Lakefront airports since 2006, when he arrived from Baltimore/Washington International Thurgood Marshall Airport.
Toby Cosgrove has been to the White House to talk health care reform. President Barack Obama name-dropped the Cleveland Clinic in a 2012 debate with Mitt Romney. Reporters have flocked to Cleveland to learn how the Clinic controls costs while providing elite quality care. One overheated headline in 2013 even read: “Can the Cleveland Clinic Save American Health Care?”
Yet this fall, Cosgrove announced that Northeast Ohio’s largest employer, the storied paragon of health care efficiency, had to cut deeper. He launched an early retirement program to shed $330 million, 5 percent of the Clinic’s budget. Layoffs could follow.
“We’re getting paid less,” says the 10-year Clinic CEO, who strives for economy in words too.
For the Clinic, University Hospitals and other health systems throughout the nation, it’s a time of transformation and challenge. The Affordable Care Act and private insurers are pressing hospitals to lower costs. Patients, burdened with higher insurance copays and deductibles, now choose hospitals based on cost as well as quality. The big three credit agencies — Moody’s Investors Service, Fitch Ratings and Standard & Poor’s — all posted negative outlooks for the nonprofit hospital industry in 2014.
Ironies abound for the Clinic. Its superior care still attracts patients from far beyond Ohio, and it’s recruiting doctors for the Cleveland Clinic Abu Dhabi, set to open in 2015. For many, it remains a symbol of what’s possible in American health care. Others are moving closer to its model of organizing a health system. Yet it must retool itself for the new era as well.
“Health care has become so expensive across the entire United States,” says Cosgrove. “There is tremendous pressure on reducing health care costs. And this is coming from private payers and private insurance. The industries and employers are doing this. It’s coming from Medicare and Medicaid.”
The Affordable Care Act, the sweeping legislation that goes into near full effect this month, caused about half of the Clinic’s cuts, Cosgrove says.
The $330 million in new cuts from the Clinic’s $6 billion budget come on top of $180 million it has already saved over five years with efficiencies such as eliminating duplicate services and streamlining its supply chain.
Cosgrove has worked hard to make cost-consciousness part of the Clinic’s culture. That’s an advance in a nonprofit field where penny-pinching talk can raise fears of developing a corner cutting reputation. So Cosgrove explains the Clinic’s quality and efficiency goals to anyone he can.
The Clinic’s doctors are salaried, with annual reviews, so their incentives are to give good care, not to run up costly tests and treatments. Anecdotes abound: prices of items posted in procedure rooms, multiple specialists consulting humbly at a patient’s bedside. Cosgrove maintains a blog where the Clinic’s 43,000 employees can suggest ways to save money.
“One of the guys out at Hillcrest [Hospital] who cleans the rooms realized that people have gone home and only used half of the bottle of shampoo,” he says, referring to the Clinic’s Mayfield Heights hospital. “So we reduced the size of the bottle of shampoo and saved $27,000. There’s a thousand of those sorts of things.”
Under Cosgrove, the Clinic is used to measuring progress and success. It publishes quality outcomes, such as mortality and complication rates. It’s moved up steadily into the top 20 percent in national rankings by the University HealthSystem Consortium, which gave the Clinic a Rising Star Award for quality in 2012.
Now, the government, too, will measure the Clinic. Under the Affordable Care Act, Medicare will eventually withhold up to 7 percent of its payments from hospitals that fail to meet quality and efficiency standards, such as readmission and complication rates and strong electronic medical record systems. (Cosgrove says the data rules will be no problem, while the Clinic’s readmission numbers, hanging near the national average, need work.)
That brings up another irony. People sometimes credit the Cleveland Clinic and other large, integrated health systems for inspiring parts of the Affordable Care Act.
In that 2012 debate with Mitt Romney, Obama’s point was that the law would encourage hospitals to do smart, Cleveland-Clinic-like things, such as paying doctors based on performance and getting them to collaborate.
Cosgrove dodges any credit for the law. “I’m not sure that’s true,” he says. The Clinic offered advice about the act, he says, but its big recommendation for more preventive care incentives didn’t make it in.
Cosgrove would rather the Clinic be known as a model for its industry. Many other health care systems are going where it has gone.
“Now 60 percent of the physicians in the country are salaried,” he says. “And 60 percent of the hospitals are part of a system. So that begins to look more and more like what we are.”
A few blocks up Euclid Avenue, Tom Zenty, CEO of University Hospitals, is in a remarkably good mood.
“The reason why you’ve not seen a newsworthy story about reductions in our organization is, quite frankly, over the past 3 1/2 years, we’ve taken $180 million in expenses out of our system,” Zenty says. His UH Transformation plan, launched in 2011, improved purchasing, logistics and care models to prepare UH for the Affordable Care Act and private insurance cutbacks. He carried out his big cuts to UH’s $2.3 billion budget in 2012. “[That’s] why we didn’t need to have a knee-jerk reaction,” he crows.
In the eternal Clinic-UH rivalry, this is a delectable moment for Zenty.
He’s increased the goal of UH’s fundraising campaign to $1.5 billion after hitting the $1 billion mark. In 2013, he negotiated mergers with EMH Healthcare in Elyria and Parma Community General Hospital, two of Greater Cleveland’s last independent small health systems.
But health care trends are hitting UH just as hard as the Clinic or any hospital.
“Our whole world has now been really upended,” Zenty says, “in terms of lack of certainty [in] how we’re paid for clinical services, research and teaching.”
A layman might wonder why hospitals are so concerned about health care reform’s reimbursement cuts when the law will also help millions more people obtain health insurance. Won’t hospitals get a flood of new customers?
The problem, say both Cosgrove and Zenty, is that they don’t know how many newly insured patients to prepare for.
“At the moment, it’s all theoretical,” Zenty says. On Jan. 1, Medicaid expands in Ohio and the new individual insurance marketplace opens. But virtually all hospitals lose money on Medicaid patients, Zenty says. The marketplace, which launched slowly thanks to the bugs on the federal healthcare.gov website, will not only insure new people, it’ll attract some away from existing insurance providers.
“We’re treating it, quite frankly, as a zero-sum opportunity for us,” Zenty says.
Yet UH has jumped ahead on another part of health care reform. It’s formed several accountable care organizations, new networks encouraged by the federal law and meant to coordinate care and improve its quality.
“We’re one of the early adopters,” Zenty says. “It’s easier to understand changes from the inside than be a casual observer.” He says the accountable care organizations — for employee and pediatric health and Medicare — are already improving patient care. He thinks they’re also saving money for patients, though it’s “too soon to declare victory,” he says.
The Clinic, more cautious, hasn’t started an accountable care organization yet. “In the past, government-sponsored programs have been notorious money losers for the people who jumped in early,” Cosgrove says.
Despite their differences in strategy, the CEOs of Northeast Ohio’s two top health systems share similar outlooks on their industry. Both fear high-deductible insurance plans will leave escalating bad debts on their collection sheets as patients fail to pay their growing share of costs. Both are looking for more alliances with other health systems to pursue economies of scale.
And both CEOs have a stake in another one of Northeast Ohio’s economic transformations: the growing hospitality economy and the pursuit of medical conventions. The Clinic and UH have both taken space in the Global Center for Health Innovation, the former Medical Mart. Both Cosgrove and Zenty joined the oversight committee formed by Cuyahoga County executive Ed FitzGerald after the project struggled to book tenants. Both say the anchor tenant, the HIMSS Innovation Center, has given the project a focus on health care information technology that should improve its prospects.
Having two nationally renowned health systems in town won’t hurt either.
“When people come to these centers, what they really want to see is how hospitals and health systems are using the technologies,” says Zenty.
For that, both the Clinic and UH are a short ride away.