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

Opinion

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 comes back to bite them in the form of higher health benefit costs, which are eating into profits. Health benefit expenses for large companies are growing at around 9 percent per year. By contrast, Pfizer’s profits are down over 4 percent from two years ago, by way of example. For US Corporations, that is the very definition of a Kobayashi Maru, as they say on Star Trek.

I heard two very poignant discussions of this issue from speakers. GE’s CEO Jeff Immelt said that GE’s massive healthcare division makes approximately $3 billion a year in profits and GE, as an employer, spends over $3 billion a year on health benefits for it’s employees. Thank goodness GE has a jet turbine division, because 100 percent of the health division’s profits are, ironically, unavailable for anything other than to pay for the health requirements of GE employees.

Xerox’s CEO Ursula Burns said that she is allowed to suggest nicely to employees that they stop smoking because it costs Xerox 40 percent more to pay for the health benefit costs of a smoker than a non-smoker over their career at Xerox. She is prevented by law, however, from demanding employees stop smoking or, god forbid, discriminating against smokers, yet she is being forced by economic necessity to find ways of reducing healthcare costs to remain viable as a company. It is an interesting conundrum that can put Xerox in a situation where they have to cut elsewhere because of skyrocketing healthcare expenses they can’t control through more direct means. She pointed out the critical need to educate employees to make good healthcare decisions through transparency of costs, and financial incentives for wellness.

Toby Cosgrove, CEO of Cleveland Clinic, echoed the sentiment by saying, “we can’t afford to protect obese patients from themselves anymore” and “we must manage insurance company profits.” Notably he did not explicitly state that providers’ economic incentives must also be brought into alignment with economic reality, leaving out the the third leg of that stool, though he did say that overall systemic financial incentives are “out of whack”. I’m sure he’d prefer to find a way out for the providers in this since that is how his bread gets buttered, but I’m sure he knows what has to get done–he also acknowledged that, with 68% average occupancy, Cleveland has too many hospital beds.

America’s declining leadership in innovation was another big theme of the conference. One of the barometers for innovation used was the number of new companies funded in the cardiology sector. It was noted that data from Windhover, a medical device research group, shows that there were a relatively low number of newly-funded cardiology ventures since 2008 (22 companies as measured by Series A financings) but that of those, only 4 such companies received first round funding in the past 2 years. This is a pretty sharp fall-off from the days when cardiology deals were quite plentiful, probably to the point of excess. The reasons given for America’s declining innovation leadership were manyfold: the FDA has become a barrier to the introduction of new technologies in the US; the patent office is inefficient and has a backlog of over 700,000 applications; comparative effectiveness has a chilling effect on investment and reimbursement; torts and malpractice lawsuits prevent new technology adoption; and, a big one, US tax policy is driving business to countries that are courting the medical device industry.

Harry Rein, General Partner of Foundation Medical Partners, commented that the incentives to test new technologies overseas are so strong (and the barriers to do so in the US have become so high) that “before long the US won’t be the most skilled in new medical technologies anymore. Physicians and surgeons overseas are getting skilled at US expense because companies are going elsewhere to do First-in-Man studies and to launch new innovations where it’s easier to get them approved.” Daniel Starks, CEO of St. Jude noted, “Tax policy and FDA behavior are driving jobs elsewhere because corporations need to continue to support innovation; it’s great for multinational corporations but bad for the US economy.” Starks pointed out that there are around 400,000 medical device jobs in the US presently and that each of these creates 1.5-4 additional related jobs; thus, if we send the device jobs overseas, it is a big negative for the US economy. He added, “we still have the best ecosystem for innovation but if we let it take place elsewhere, then all the economic benefit goes elsewhere and they’ll sell it back to us at a profit.” Yikes.

Another notable theme of the conference was one I’ve written about often: the meteoric rise in the demand for healthcare IT solutions. Similar to the MedTechVision conference I wrote about recently (see summary here), IT got more than it’s share of mindspace for what is supposed to be a medical device conference. Almost every talk I saw led to this topic at one point or another and there was widespread recognition that physician adoption of clinical analytics, in particular, can meaningfully improve healthcare delivery and costs. Harry Rein said that you can still see people pushing carts full of paper charts around at hospitals (even in Cleveland) but you never see that in the halls of banking institutions. “Technology has skipped medicine,” he said.

To highlight the healthcare IT theme, the conference had a significant presence from Watson, IBM’s technology tour de force. A panel of physicians and IBM experts discussed how the effective use of data could dramatically improve clinical decision-making. Dr. Basit Chaudhry of IBM noted that physicians are drowning in the deluge of knowledge now available about patients and treatments. “An MD needs to know about 15-20 facts to make a good clinical decision today. It used to be 5. Pretty soon it’s going to be 100 and we need new tools to handle it.” Dr. Douglas Johnston of the Clinic added, “something like Watson can help interpret the onslaught of data from the patient, monitors, and EMR into real time,” adding that ,”we still need figure out how to integrate this concept into our workflow.”

Unfortunately, all of the panelists thought Watson would be best suited to start its role in the world of healthcare on the administrative side ( to optimize billing, claims, etc) rather than on the clinical decision side. I guess physicians are not quite ready to relinquish their jobs to machines.

As a lark, there was an hour set aside for two teams of the Clinic’s most esteemed cardiologists and cardiovascular surgeons (self-titled the Gladiators and the Defibrillators) to play Jeopardy against Watson. Watson cleaned their clocks, which was no surprise since the categories were such things as popular movies and New York Times food and wine. I mean, seriously, a bunch of physicians from Cleveland had no chance against Watson. They clearly do not get out much and I’m not sure first run movies even make it to Cleveland (note that the nerdy physicians beat Watson in the 11-letter words category). Maybe if they had “famous Cleveland water-based fires” or “rock stars I’ve operated on” as categories the whole outcome would have been different. One thing is clear: a combination of great physicians and Watson could be a powerful tool for the betterment of healthcare. Click here for a previous post I wrote about this idea.

Lastly, this conference is famous for announcing an annual list of the Top 10 most important innovations in medicine. This year’s list, which you can see here, includes such things as genetically-modified mosquitoes to reduce disease threat and wearable robotic prosthesis (can you hear the Six Million Dollar man now?). It also includes CT scans for the early detection of lung cancer, once thought a death sentence but now known to be curable if caught early.

Since it was a cardiology conference, I’ll end in that area. Number 1 on the list of most important innovations was a new method for treating hypertension called Catheter-Based Renal Denervation. This newly developing approach holds significant promise in reducing some of the most common and deadly problems that can afflict people on the neurology and cardiology front. According to the Cleveland Clinic, “one in three adult Americans has hypertension, which puts them at significant risk for strokes, heart attacks and kidney failure. In fact, more than two thirds of individuals who have a first heart attack and three quarters of those who have a first stroke have hypertension. Hypertension, not smoking, is the number one risk factor for death in the world.”

Most people are able to control hypertension through inexpensive medications, but it is estimated that about 25 percent cannot. Thus the need for an interventional approach. Clearly such an approach is potentially life-altering for those who cannot reach their target blood pressure rate through medication. The countervailing risk is that such a procedure will be overused because it generates far more revenue for a hospital than does dispensing inexpensive anti-hypertensive drugs. It is an interesting challenge to ensure that only the right people are subjected to procedures such as this one given that one man’s savings is another man’s lost revenue. Since the Summit did not include the payer community, most of the individuals present represented organizations that make a lot more money when there are more surgeries, interventional procedures, etc. than not. Ah, healthcare…it’s never easy.

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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