Smoke on the Water: Fireworks at the Cleveland Clinic Medical Innovation Summit

10/10/11Follow @venturevalkyrie

I spent the early part of this week attending the Cleveland Clinic Medical Innovation Summit and, despite the fact that the Cleveland Clinic stubbornly insists on holding its conference in Cleveland (aka The Mistake on the Lake), it was well worth attending.

Cleveland is an interesting town. Once upon a time, when old white men roamed the earth in cars driven by chauffeurs, Cleveland was the nation’s fifth largest city and had the highest number of Fortune 500 headquarters of any US city. Today, the Cleveland Clinic is the largest employer in the city, which is known also for a river that used to spontaneously combust and the Rock and Roll Hall of Fame (the perfect song for this occasion is clearly Smoke on the Water). In a way Cleveland is the perfect place to honor aging rock stars, as they can pick up a statuette and an angioplasty on the same trip. By the way, the river doesn’t catch fire anymore I’m told. I was worried because the Clinic hosted a pretty impressive fireworks display over Lake Erie for their 1500 guests and no doubt most of us expected to see even more of a show as the embers hit the water.

Each year the conference has a specific clinical theme. This year’s theme was supposedly cardiology, but that was just a cover. The real theme of the conference, while not explicitly stated, was how the healthcare system is changing and how challenging the environment for innovation has become when it comes to medical devices. Yes, there were several talks about new approaches to treating heart patients and also those with peripheral vascular disease, but the most interesting discussions were focused elsewhere.

The conference audience, in addition to featuring lots of people from the Clinic itself, included the who’s-who of medical device companies, large and small, as well as many healthcare investors and innovators. Because there was so much content at the conference, I’m going to highlight just a few notable discussions and quotes, many of which were made by some pretty high profile folk.

One of the most prevalent themes of the conference was how the confluence of policy changes and economic drivers has changed the locus of control in healthcare from the providers to the payers. It’s not unusual to hear a bunch of doctors complaining how the payers, by which I mean mainly the large insurance companies and CMS, are taking control of the world and ruining medicine. I am pretty sure that this is what physicians who are romancing other physicians whisper in each others’ ears, “Darling, I love you, and don’t health insurers piss you off!?” What was weird was that there was not a single such payer in the room to debate this issue or even defend their alleged hijacking of the system. Not one. No United Healthcare, no Aetna, no CMS (from the payment side-the Innovation Center got to speak at the end of the last day), no one. I thought this was a pretty big oversight.

Moreover, there was not a meaningful acknowledgement by any of the very large employers there, except Xerox and GE, that they themselves are really the large payers that are getting murdered by rising healthcare costs. The CEOs of Medtronic, St. Jude, Pfizer, Abbott and Merck, all of whom were there, must have to fight to keep their own heads from exploding when it comes to how they think about rising healthcare costs. Selling more stuff at high prices grows their top line revenue but … Next Page »

Lisa Suennen is an independent consultant, board member of AngioScore, and a former managing member of the Psilos Group, as well as the co-author of Tech Tonics: Can Passionate Entrepreneurs Heal Healthcare With Technology? and author of the blog Venture Valkyrie. Follow @venturevalkyrie

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  • Bob Kocher

    Really interesting summary!

    Pretty shocking that Toby Cosgrove, CEO echos the myth that payors are highly profitable, “we must manage insurance company profits.” his margins are certainly higher than most of the plans reimbursing him.

  • http://www.thehealthcareblog.com Matthew Holt

    That’s because Toby understands monopoly better than the Ohio Payers do, Bob!

    Meanwhile, it makes sense for GE’s Immelt to be wondering if they should make profit in health care to stave off their health care costs, but the rest of the device manufacturers there make bundles more than the cost of health care for their employees–so it’s clearly better for them for overall costs to rise.

    The question for our Venture Valkyrie is why Xerox and the others are such a bunch of pussies and why they haven’t done the rational thing that Chrysler talked about in the 1980s and handed over the responsibility for their employees health care to the government.

    My guess? Most businesses are run by people who cant do math.

  • David Miller

    I wonder what a clinical site in, say, Argentina or Brazil charges per patient for a clinical trial versus American sites like Cleveland Clinic?

  • http://venturevalkyrie.com Lisa Suennen

    Yeah, it was an interesting meeting guys. I think that we will see a profound transition of employees into defined contribution plans (as compared to the defined benefit current status quo) at companies like Chrysler, which has already done this with their retirees. It gives them a way to be insulated from healthcare inflation by indexing the defined contribution accounts to “regular” inflation and get out of the medical business. As for Cosgrove, you would have to be crazy to offer up your own profits as a sacrifice!

  • http://payer-strategies.blogspot.com/ Torsten Bernewitz

    Thanks for the great summary! The employers’ voice regarding healthcare costs is interesting, as recently many payers seem to refocus their attention on the individual consumer (and may thus be distracted from employers).
    In this light it is perhaps no wonder that no payers were present at the conference. This could be a strategic mistake as there are a lot of changes in the employers segment. Employers’ priorities and benefit strategies will change and diverge significantly. Health insurers must keep the pulse on their evolving needs, create stronger differentiation through products and services, tailor their offering, and become more impactful in bringing the value proposition across. In many cases this means that insurers must get much closer to employers than they currently are. Seems in Cleveland they missed a chance to do this.

  • JP

    The repeated digs against Cleveland were unnecessary and distracting from the purpose of the piece. You spent more time snarking on the completely irrelevant 40-year-old river fire than you did on the “top 10 innovations.” Next time, leave the cheap shots aside and spend your words on thoughtful analysis.

  • http://venturevalkyrie.com Lisa Suennen

    Torsten, thanks for the note. I agree: the employers are a key part of the push for change and will continue to play a key role in the market dynamic, particularly as the Health Insurance Exchanges come to the fore in a greater way.

  • Nicholas Parmelee

    A nice overview of what sounded like a very interesting conference. It is an unfortunate development that one of the more progressive provider organizations in the country totally left payers out. This is concerning and does not bode well for the ACO model.

    The writer Lisa Suennen appears to be an individual of great knowledge and intellect. I was saddened to see her devalue the hard work she put into this piece by loading it with smears of a very proud community.

    I love when some from the coasts site the supposed close mindedness and dated thinking of people in the American Midwest, especially in regard to the electorate. These are the same open minded intellectuals that will strike at the first bate to call Cleveland “the mistake by the lake” or classify all of the American Midwest as “fly over states”. Talk about close mindedness and dated thinking.

    Sounds like it was a good conference. Ah the rants of a proud Clevelander, but frankly we are tired of the jokes. I just want someone to write a review of something progressive that occurred in Cleveland without the mention of something that occurred 40 years ago (polluted river on fire). I don’t see bussing and all of the racial undertones surrounding that black eye mentioned in every article about an occurrence in Boston.

  • http://www.claimppi.co.uk ryan

    Quite an interesting take on the role taht empliyes generally play.