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By Holland Johnson

Executive Editor

SAN FRANCISO — Delos "Toby" Cosgrove, MD, president/CEO of the Cleveland Clinic told an audience at the J.P. Morgan Healthcare Conference during a lunch keynote session that the pace of change coming to healthcare industry is one that has never been witnessed before.

"There are decades when nothing happens, and then there are weeks when decades happen. We're in that period of weeks right now where there is tremendous transformation in healthcare going on and there are substantial disruptors brought about by this healthcare reform."

Cosgrove said that one of those disruptors is the Cleveland Clinic, whose employees are all salaried with no extra financial incentives and one year contracts with no tenure.

Another major agent in the transformation is the transition from a volume-based system to value-based system where outcomes are going to be paid for. At the same time, Medicare is reducing the payments to physicians and hospitals.

Cosgrove said that more than $415 billion in reductions to Medicare payments over the next several years, "which will take money out of the healthcare ecosystem."

Another factor contributing to the coming changes, according to Cosgrove is the rise of transparency in healthcare. "Cleveland Clinic has been involved in this for close to a decade, where we publish on an annual basis all of our outcomes for institutes both in paper form and also on the web."

Cost transparency is also part of the equation, he said, with more people able to compare the cost of a procedure in their region and across the country.

Another contributing factor to the transformation is the rise of retail clinics. There are more than 813 of these branded clinics, including such giants as Wal-Mart and CVS.

With this transformation comes both risks and rewards, Cosgrove noted.

Perhaps one of the biggest concerns is a growing shortage of primary care physicians, who are being replaced with mid-level providers. He noted that self-employed physicians are becoming a rare breed. He said that in 2005, 25% of physicians were employed by hospitals in the U.S. In 2013, that number had risen to 59%. And there's every indication that number will continue to increase."

Another startling change that is coming is the rising consolidation of hospitals in the U.S. Cosgrove noted that there were more than 200 hospital mergers in 2013, "and I suspect that trend is going to continue as financial pressures increase on hospitals and providers. If you look at healthcare, it's the only industry in the country that frankly hasn't consolidated."

Medical research funding via the NIH has taken a hit over the past few years, with the number remaining flat, and due to sequestration last year, losing another 5%. Cosgrove said that lack of research monies could have a major impact on where venture capital goes. Already, Cosgrove noted, the VC market "has seen a 50% decrease in funding for biotech and medical devices and equipment."

All is not lost however, and Cosgrove offered up what he sees as some of the potential opportunities in the healthcare space going forward.

The largest unmet needs revolve around behavior modification and genomics. "They account for 70% of the premature deaths in the United States."

Genomics, in particular, opens up a huge opportunity in healthcare, Cosgrove said. Currently there are 4,300 single gene diseases that have been identified, and the cost of full sequencing of the human genome is dropping rapidly approaching $1,000 a sequence.

Cosgrove also noted that the promise of big data in healthcare has arrived. A company that was spun out of the Cleveland Clinic called Explorys "now has 40 million patient records available for analysis and deidentified."

Cosgrove noted one big equalizer which will create huge changes, the consumerism of healthcare. He noted that the Cleveland Clinic has given 1.8 million patients access to their medical records electronically and through a mobile system on their cell phones."

Cosgrove noted that there will definitely be pain associated with the types of reforms that are needed in healthcare, and he said that one of the largest impediments to healthcare change is the general conservatism of the healthcare profession.

"Physicians are having a difficult time getting their heads around this, particularly older physicians. He added that there is a lot of anger with the profession right now. "We've got to get past this as quickly as possible and I hope we will."

Perhaps the most shocking thing that Cosgrove prognosticated was the coming of a single payer system to the U.S. "I think we are taking steps in that direction," he said. "I think ultimately in maybe twenty years from now we will have a basic healthcare provision across the country and then there will be [optional supplementary] insurance on top of that like they have in England."

Importantly, Cosgrove noted that wellness clearly has to be an increasing part of the healthcare system discussion going forward. "It's forty percent of our problem of premature deaths."

According to Cosgrove, there is no way to overemphasize the magnitude of the change that this is coming to healthcare. "I think it's not going to take just government change but also society change," to make the transformation in the field complete.

Cosgrove concluded by saying that this is a critical time for the industry. "We stand at the turning point in the history of medicine. We now have the opportunity to build a healthcare delivery system that is humane, that is high quality and is sustainable."

Published  January 16, 2014

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