Mayo Clinic expansion shows local costs of growth

Published 6:11 am Saturday, June 22, 2013

ROCHESTER — In the heart of this southeastern Minnesota city, the Mayo Clinic is building a massive radiation treatment facility that’s expected to draw cancer patients from across the country and perhaps around the world.

The development spotlights a difficult issue faced by clinic officials and the state.

The Legislature in May approved $585 million in future taxpayer support for an economic development project called Destination Medical Center. The plan is to make Rochester a more appealing destination not just for people seeking radiation treatments, but also for the many other faraway patients who travel here for care.

Email newsletter signup

Minnesota policymakers are also dabbling with what experts say is a more fundamental dilemma for the nation’s health care system. The state is now looking for Mayo Clinic to dramatically expand the regional economy, just as doctors and hospitals are being asked to rein in runaway health costs.

“If the costs grow less rapidly, so do the jobs,” Mark Pauly, a professor of health care management at the University of Pennsylvania’s Wharton School said of the national dilemma. “From a policy point of view, that hasn’t been reconciled.”

Mayo Clinic officials contend they’re uniquely prepared to simultaneously satisfy both demands.

By providing high-quality, efficient care while expanding operations in Rochester, the clinic plans to survive and prosper even as cost pressures might force other medical centers to shrink, said Dr.

Brad Narr, Mayo Clinic’s medical director for Destination Medical Center.

“I think there are going to be winners and there are going to be people that are going to be left in the dust,” Narr said. “And it’s going to hinge on what we’re actually doing as a medical system that improves people’s lives and provides value.”


Unclear plans

There are still many unanswered questions about Destination Medical Center.

Mayo Clinic officials haven’t said exactly how they will invest the $3.5 billion

they’ve committed to spend over 20 years. It’s also not clear what sort of investment will come from other private parties who are expected to spend up to $2.1 billion.

All told, the project will create about 30,000 jobs, supporters predict, but it’s not clear when that will happen.

State and local taxpayers are being asked to invest in infrastructure projects that could range from land purchases and building demolitions to the construction of a large atrium where Mayo Clinic visitors could escape harsh Minnesota winters.

Next steps include the appointment of board members to a nonprofit economic development corporation for Destination Medical Center and creation by the clinic of a nonprofit economic development agency.

“This (agency) is what will do the legwork — tee the projects up, make it easy for this public funding … to align with the goal of a destination medical center,” Narr said.

He added that it’s “similar to what the city of Anaheim (Calif.) aligned with to make sure that Disneyland came to be what it is.”

Narr isn’t alone in making references to Disney when talking about Destination Medical Center.

“When Disney World was built (in Orlando, Fla.), it was $311 million,” said state Sen. David Senjem, R-Rochester. “If you fast forward and do the inflation calculator, that’s $1.7 billion today.”

“Mayo is saying, ‘We’re going to invest $5.5 billion’ ” combined with other private parties, Senjem said. “By today’s cash values, that’s three Disney Worlds in downtown Rochester.”


Export potential

Such dreams of growth are tantalizing communities across the country. Mayo Clinic’s pitch at the Legislature referred to public funding for economic development projects connected to big-name hospitals and clinics in Baltimore, Cleveland and Houston.

Pittsburgh turned to its health care sector for growth after the demise of the steel industry. Even Detroit has discussed trying to become a medical mecca — a development that caught the attention of researchers at the Center for Studying Health System Change, a health policy group in Washington, D.C.

In 2011, researchers at the center published an article about how localities hope that health care expansions will create high-paying jobs as the population ages. To the extent the projects can draw patients from outside the region — or even the country — health care can serve as an export product that creates local jobs paid for by faraway patients.

But there’s a limit to this export potential, the researchers wrote, because most patients opt for care close to home.

Mayo Clinic is famous for attracting patients from afar. Yet even the clinic draws only 20 percent of its Medicare patients from outside its home base in Minnesota, Iowa and Wisconsin, researchers wrote, and only about 2 percent of surgery patients come from overseas.

Unless regional health care projects draw new patients from afar, expanded services might simply lead to greater use of those services by local patients. Health insurance premiums would go up as a result, researchers wrote, and costs would be shifted to the federal government through Medicare payments for services.

“If all of the costs of increased health spending were financed by local residents, the attractiveness of strategies to expand the health care sector would be diminished,” researchers wrote.

“Health care spending and costs are a big deal, and we need to address them,” said Alwyn Cassil of the Center for Studying Health System Change. “Yet the state hospital associations are constantly putting out reports on the economic benefits that the health industry provides to local economies.

“There’s a huge disconnect there.”


‘Positioned to grow’

At the Mayo Clinic, the plan for growth with Destination Medical Center is focused on drawing patients from outside Minnesota, said Narr, the project’s medical director.

Mayo wants to be a destination for patients seeking second opinions and dealing with “curveballs” that have stumped hometown medical centers, Narr said. The clinic will also maintain expertise, he said, in treating complex medical conditions for which patients need care that’s well-coordinated among different medical specialties.

Mayo Clinic in 2011 launched a subscription service through which hospitals around the country can consult with doctors in Rochester about complicated patient care issues. Currently, 18 medical centers are part of the Mayo Clinic Care Network, which is meant to allow most patients to stay at local hospitals while directing a few to Rochester for advanced care when needed.

With Destination Medical Center, how many more patients might come to Rochester?

In an April interview, Senjem said he was told the Mayo Clinic needs to double its patient base in Rochester to about 600,000 patients per year. Mayo Clinic officials, however, would not comment on the projection or offer specifics about growth plans.

“As the public reporting of outcomes, quality, safety (and) service occurs, we are positioned to grow,” said Karl Oestreich, a clinic spokesman, in a prepared response to questions.


Lowering risks

Over the years, Mayo Clinic has made big investments in reporting systems to gauge health care quality and efficiency, Narr said, and physicians believe the data will help prove their value to patients. With the proof, Mayo Clinic expects to distinguish itself from other hospital and clinic systems and thereby survive whatever consolidation comes to the industry.

The status quo in health care is “bankrupting the nation,” Narr told state legislators in April. The concern helps explain why Mayo Clinic in January announced an agreement with Minnetonka-based health insurance giant UnitedHealth Group for research on getting more value from health care spending.

Mayo Clinic doctors are in a position to focus on efficiency and quality because they are paid salaries, Narr said, rather than collecting fees for each service they provide. Critics of the fee-for-service payment system say it creates an incentive for non-salary doctors to provide unnecessary and wasteful care.

A case in point is prostate cancer surgery. Up until a few years ago, surgical removal of the prostate to treat cancer, Narr said, was the single most common operation performed by Mayo Clinic surgeons in Rochester.

The surgery brings a significant risk of impotence and incontinence for men who undergo the procedure, but Mayo Clinic was at the forefront of improving the operation, Narr said. The high volume of surgeries generated significant revenue for the clinic in the process.

But over time, the clinic and experts across the country started realizing that screening tests were directing far too many men down a path toward surgery when they may not have needed it. Mayo Clinic abruptly changed course.

“We were doing 1,100 (surgeries) per year,” Narr said. “Over the last three years, we’ve gone from 1,100 to 950 to 600. We are doing the ones, I believe, that are indicated right now, and we do them safely and effectively because we’re tracking the outcomes.”

“In smaller areas, what they do with the prostate is between the patient, the doctor and the malpractice attorney — and they’re not tracking those things,” he said. Quality tracking systems that gauge value are “a huge cost to us — it’s part of our big cost infrastructure. But eventually, that’s going to be the norm, and we want to be ready for it.”


Focusing on value

The focus on value is where the U.S. health system needs to go, said Dr. David Goodman, a health policy expert at Dartmouth Medical School.

Mayo Clinic has a reputation for being very efficient in treating Rochester patients covered by Medicare, Goodman said. The clinic’s quality scores for treating Medicare patients also are good, he said.

If Destination Medical Center means the clinic gets bigger so it can provide high-quality, efficient treatment to more patients, that could be good for Rochester and the nation, Goodman said. But the focus needs to remain on value, he said, not jobs.

“Thirty thousand jobs sounds great to the local area,” Goodman said. “But it represents a tremendous amount of money that could be coming out of other health care systems, if they aren’t providing that care, or from employers and the government.”

“Rochester’s gain might be the nation’s loss,” he said, “if there isn’t substantially greater value in the services they’re providing.”