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Mayo Clinic's Unusual Challenge: Overhaul a Business That's Working

The Wall Street Journal. logo The Wall Street Journal. 6/2/2017 Ron Winslow

ROCHESTER, Minn.—Change is hard. It is especially hard when the organization in question is among the top in its field.

Doctors at the Mayo Clinic, the 153-year-old institution that pioneered the concept of patient-centered care, considered it an ideal place to practice, one that wasn’t in much need of fixing. It is renowned for diagnosing and treating medicine’s most complex patients.

Dr. John Noseworthy, Mayo’s chief executive officer, had a different view about the need for change. He saw declining revenue, he says, from accelerating efforts by government health programs, private insurers and employers to rein in health-care costs as a looming threat to the clinic’s health.

So when surgeons asked for two more operating rooms to meet demand for open-heart surgery, one of the clinic’s major revenue sources, Dr. Noseworthy not only said no, he says, he also pushed them to redesign all facets of heart-surgery care and cut costs 20%.

The initial request, made eight years ago, sparked a yearslong revamp—part of a wrenching overhaul spearheaded by Mayo’s CEO that has tested nearly every aspect of the institution’s renowned system and that continues to this day. The heart-surgery department was approved to hire one additional surgeon, who started in March. And in January, it got one new operating room.

“Turning around a successful organization is not that easy,” Dr. Noseworthy says. Hundreds of Mayo doctors “who assumed life was great weren’t immediately eager to change how they work.”

Each year, some 1.3 million patients from all 50 states and 140 countries come to Mayo. Scores of doctors, hospital administrators, politicians and health researchers visit each month in hopes of emulating it.

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To maintain its approach, it must adapt to new payment policies from Medicare, high-deductible health plans and insurers’ restrictions on out-of-network care that are putting pressure on hospital revenue across the U.S. And while the Medicaid expansion under the Affordable Care Act extended coverage in many states, efforts by President Donald Trump and his Republican Party to repeal it could change that.

Mayo, long insulated from many such forces, is no longer immune, says Dr. Noseworthy. “We’re going to be paid a lot less for the work we do.”

The overhaul, called the Mayo Clinic 2020 Initiative, is well past the halfway point, and officials are seeing results of more than 400 projects aimed at squeezing costs and improving quality in services ranging from heart surgery to emergency-room waiting time. Dr. Noseworthy says dozens of major re-engineering projects have helped cut an accumulated $900 million in costs in the past five years.

The clinic is also seeking new areas for growth. Mayo took the lead—including committing $3 billion of its own capital—on a $5.6 billion urban-development project now under way to transform its headquarters city of Rochester into a destination medical center to better compete with rival institutions in Cleveland, Baltimore, Boston and Los Angeles.

Other top hospitals are also facing cost pressures, including Cleveland Clinic, which despite reducing costs by some $800 million over the last four years reported a 71% drop in operating income in 2016 to $139.3 million, citing reimbursement pressure, higher drug costs and pension-plan adjustments. In May, Partners HealthCare, a Boston-based system founded by Harvard-affiliated Brigham and Women’s Hospital and Massachusetts General Hospital, said it plans to cut $600 million of costs over the next three years to better compete “in a challenging new regulatory, legislative and consumer-driven environment.”

While Mayo is “an American treasure,” says Donald M. Berwick, former acting administrator of the Centers for Medicare and Medicaid Services, the clinic, as with most of the U.S. health-care system, is “too expensive and they need to find ways to deliver the same or better care at a lower cost.”

Mayo, with major facilities in Florida and Arizona and a community-based health system of 19 hospitals and 44 clinics within 125 miles of Rochester, has 64,000 employees. It reported $11.0 billion in revenue last year, up 6% from 2015.

Mayo was founded as a surgical practice in Rochester in 1864 by William W. Mayo, a Union Army examining officer. The clinic’s reputation for “patient-centered care” was embedded in its approach long before the term became a marketing buzzword. For Mayo, the concept includes bringing a team of specialists together to focus on the needs of patients with a complex problem and typically providing a schedule of appointments within hours of their arrival at the clinic. Patients don’t have to make each appointment themselves or travel to specialists in different organizations. Mayo patients are welcomed by volunteers who escort them to their appointments.

“What made it jell was a common medical record,” says Chet Rihal, head of cardiovascular medicine. Instead of each doctor’s keeping a private record for each patient, one record followed the patient.

Today, nearly one in five surgeries involves multiple teams. “It’s nobody’s case. It’s Mayo’s case,” Dr. Noseworthy says. “That is hard to do at other places where people work in isolation.”

Mayo physicians are salaried, so there isn’t competition over fees or any incentives to order tests and procedures a patient doesn’t need, in contrast to the much more common fee-for-service medicine.

Dr. Noseworthy, a Canadian-educated neurologist, led an inquiry into the institution’s readiness to face the future a year before he became CEO in 2009. It identified a “perfect storm of reduced revenue and increased costs” due to an aging population with chronic diseases and the emergence of “disruptive technologies” such as DNA sequencing.

The report was presented to Mayo’s board of trustees in August 2008. Six weeks later, Dr. Noseworthy says, “Lehman Brothers disappeared.” It was a stark reminder, he says, of the vulnerability of iconic institutions.

Mayo launched into its 2020 program the following year. Retooling projects included restructuring care for children with complex feeding, breathing and swallowing disorders. The effort reduced average time to diagnosis to four days from 210 days and cut the use of anesthesia and imaging tests by nearly half.

Expanding the role of nurses in the care of epilepsy patients shaved an average of 17 minutes off the time doctors spent on a visit, increasing slots for new patients. Adding more clinicians to the emergency room during the afternoon reduced patient waiting times during high-demand evening hours.

Doctors have bristled at some changes to their routines, Dr. Noseworthy and some other Mayo physicians say, including an initiative dubbed “eliminate white space” intended to optimize physician calendars. One goal was to schedule more time for new, complicated patients while booking shorter, 30-minute follow-ups for “established” patients.

Unhurried visits are a hallmark of the clinic. When one of her patients flew from Washington state for a follow-up, cardiologist Sharonne N. Hayes quickly realized 30 minutes wasn’t sufficient. The patient had suffered two heart attacks since her last visit and the two needed more time.

It turned out the patient was assigned a 30-minute visit by mistake, and despite a full calendar, Dr. Hayes continued the visit into her lunch hour. “I know they have the best intent and want to preserve the culture,” Dr. Hayes says, but “when you see that time going away from your calendar, that is a huge disconnect.”

The administration soon realized the idea wasn’t working and let departments devise their own ways to increase new-patient visits. It was a lesson that surfaced throughout the broader initiative, Dr. Noseworthy says. “Departments and divisions needed to have more local control of this work.”

The heart-surgery project began just as Mayo’s revamp did, in 2009. That year, the surgeons asked for the two new operating rooms to meet demand for surgery they thought would outstrip capacity. Even for high-revenue-producing departments, high-cost proposals generally trigger an intense review.

In denying the request, Dr. Noseworthy went a step further. With the ink barely dry on the 2020 Initiative report, which described challenges neither the surgeons nor the clinic had to seriously consider before, he asked them to cut their costs 20%.

Surgeons were initially “disappointed,” says Joseph A. Dearani, chief of cardiovascular surgery, but “ultimately everybody stepped up and did what was asked.”

Cardiac surgery was ripe for overhaul. An initial analysis showed as much as a twofold variation in surgeons’ average cost per case–from $55,000 to about $110,000 in one procedure. That is “too much variability,” says Dr. Dearani.

The operating-room teams competed in contests to reduce the time from “wheels out”—when one patient’s surgery was over—to when the room was set up for the next patient. Results for each surgeon’s room were posted, and staff met to discuss what worked and what didn’t. No team was declared a winner, but the exercise trimmed average turnover times about 50% to between 20 and 30 minutes, Dr. Dearani says.

The overall effort revealed two main cost drivers: a patient’s length of stay and the surgeons’ use of mechanical heart valves. So many valve brands were on the shelf, Dr. Dearani says, “it was like going into a shoe store.”

The clinic, one of America’s largest users of such valves, decided to use its purchasing power to negotiate lower prices and limit surgeons to models from two vendors. It took nearly two years for surgeons to agree on which ones, Dr. Dearani says. “Everybody eventually came around, but it really ticked off a lot of people.”

Doctors also began discharging out-of-town patients to a hotel a day or two before their flight home, then seeing them for an outpatient visit. Previously, many patients remained in the hospital until just before their flights.

In the hospital, patients are exposed to infection or remain sedentary. “When you get out, your activity level improves and your appetite gets better,” Dr. Dearani says.

Scheduling changed significantly. Surgeons accustomed to operating every other day began doing surgery daily. New physician-developed protocols empowered nurses to streamline post-operative care, making it more efficient.

Some shifts started later in the day to account for staggered operating-room start times, to reduce overtime and to avoid peaks and valleys in intensive-care-unit staffing. That disrupted family commitments, prompting some operating-room staffers to seek reassignment, Dr. Dearani says.

Dr. Noseworthy says at the core of Mayo’s turnaround effort is an attempt to protect its ability to take on complex cases, such as that of Carrie Mearns. The 39-year-old North Carolina high-school teacher, born with a defective heart valve, had heart surgery at Mayo before and after the new protocol. In 2000, after undergoing an open-heart operation to replace the valve, she spent six days in the hospital.

In May, the mother of two was back to have the device replaced. The morning after her third night, her doctors decided she was progressing so well they would discharge her to a hotel that day.

“We were shocked,” says Ms. Mearns, whose parents accompanied her. “With open-heart surgery, you’re kind of like in a little bit of disbelief.” The experience, she says, turned out “very positive.”

Dr. Dearani says the department reduced costs by “millions of dollars” and significantly narrowed the variation among surgeons in cost for heart procedures. The clinic declined to say whether it met the 20% target.

“We are a specialty with a lot of strong personalities who don’t really embrace change,” Dr. Dearani says. “It was quite eye-opening in terms of the improvement that could occur.”

For Dr. Noseworthy, the heart-surgery initiative and scores of projects like it are part of the organization’s continuing evolution. Outside analysts have provided the clinic with projections that over the next five years its reimbursement could decline 5% to 20%.

“The storm,” Dr. Noseworthy says, “is still coming.”

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