John Noseworthy

John Noseworthy

Best Book I’ve Read This Year:
The Cartographer of No Man’s Land by P.S. Duffy

Red or White, or Beer?
Red with meat, white with fish

Favorite Vacation Destination:
Bay of Fundy, New Brunswick, Canada

WSJ or NYT?
Read and enjoy them both. They complement each other.

Since becoming its president in 2009, Noseworthy has led the Mayo Clinic through the recession and implemented several growth initiatives, in large part by engaging, energizing, and being transparent with his employees. Among other things, we examine the Destination Medical Center initiative, which could to change the face of Rochester for good.

Mayo’s margins improved quite a bit in 2010 and 2011, then dropped in 2012 as it invested in growth initiatives. How did 2013 go, and how is Mayo tracking with its plans?

We were on plan last year. We’re on plan this year [2013]. Our staff is doing a fantastic job responding to the external pressures, which are huge in health care and are going to get more severe going forward. There are going to be tremendous downward pressures on reimbursement in health care, and those are just starting to kick in with the aging population and the Affordable Care Act, likely the permanence of the sequester, at least for a while, and the consolidation in the payer community between insurance companies, private for-profit and not-for-profit groups coming together. So this is going to be a very dynamic situation.

We’ve seen this coming now for a number of years, and so Mayo basically has been planning for 2020, if you will: How are we going to have the most trusted and yet affordable, highest-quality health care system? So this isn’t a reaction to the Affordable Care Act. We’re very pleased with the changes our staff is all making to increase the efficiency of our practice, so all our patients get all the care they need, when they need, in the right place; and that our safety, our quality, our efficiency, our patient satisfaction and, really, the value of our care continues to go up.

How did the ACA affect this process?

Well, the ACA is going to be paid for in large part by reducing reimbursement of hospitals and doctors in general. The amount of that is difficult to predict but it’s, as I mentioned on Squawk Box the other day in New York, it’s going to be on the order of 10 percent, 20 percent, or more going forward, which is an enormous hit to any business.

So what we said to our staff is we need to change not who we are, but how we do our work to make sure that we do drive our efficiencies. The speed at which this is coming is really quite striking. So a year ago, we had 45 to 50 town hall meetings around all the campuses of Mayo, talking to staff about the need to accelerate the pace of change so that we can secure their jobs and secure the future of Mayo Clinic. Our staff has been phenomenal, as they always are. That’s allowed us to be on plan this year in a very tough year. Next year will be tough again, and the year after that, depending on where this goes.

What have been some of the efficiency improvements?

People’s work at Mayo Clinic is changing. Some of them were hired to do X, and if that’s no longer a top priority of the organization, we may have them work over here on another project rather than doing a layoff. And that’s hard for people. It’s hard to [go from doing] X, but now I’m doing Y. But they prefer that to layoffs, and they’re loyal to us.

I think the more we spoke with them, the more we worked with them, the more they realized that this is the right thing to do for the patients. And then, of course, we put together engineers, process improvement tools, and all of those things that a lot of folks used to make this happen, and then we share best practices around the organization. So if we improve the efficiency, safety, and the patient satisfaction, and reduce the infection and readmission rates for a complex colorectal surgery [for example], we share that with the entire organization. And we say, “OK, so what about GYN surgery? What about cancer surgery? What about this? How can we rapidly diffuse that across the organization?”

What would you say one or two of the best achievements have been?

Investing the time, energy, and resources in our staff, and demonstrating to them what needs to happen, then letting their creativity go and harnessing that going forward is unquestionably our best investment. We’re seeing higher-quality care, fewer complications, fewer readmissions, fewer infections, fewer errors, and all those things. That’s going to be tremendously helpful to our patients and also reduce the cost of care. Every quality initiative that we have completed—and we’ve published more than 400 of these in the last eight years—has actually also saved costs both for patients and to Mayo Clinic. Improving quality doesn’t cost money. It saves money. It gets patients back to work faster, and all of that is good for the economy, good for the patients.

Mayo seems to be doing well. You have low turnover and high commitment. So what was behind the “Destination Medical Center” initiative?

Right now we are a destination medical center in Rochester, as you know. We have patients from 135 countries last year that came here, as well as [from] 50 states. There are very few places that have that kind of a track record. But we will want to grow pretty aggressively once we get in a position to do so.

Yet hasn’t Mayo already been growing at a good pace as is?

It has been growing at a good pace and the net growth continues, although we’re slowing down just a little bit now as we get our arms around the efficiency issues to be successful going forward. But what is it going to look like in 20 years?

And that’s when we realized, heck, we’re going to put $5 billion into this community; three and a half [billion] of our own, two [billion] or two and a half [billion] from private investors. How is this small, wonderful community going to support that? Candidly, there isn’t enough of a tax base in a city of 100,000 or 150,000 to support those kinds of services to bring in and support the retail, hospitality, entertainment, education, and lifestyle activities that we envision. So, it’s a perfect time to plan this [larger-scale destination center].

It isn’t saying, “OK, we’re going to do a $5 billion project within five years”?

We’ve planned at five- and 20-year increments for the last century, of how Mayo’s going to grow in the community. This is really an extension of what we’ve done in the last decade. Looking out over 20 years, does Minnesota want us to grow Mayo Clinic in this community in relationship to the rest of the state? And the state suggests we do. We are the No. 1 private employer in the state. As we grow, it will be good for the cities, community, and state. So it is a very nice partnership.

How is Mayo’s expertise going to be utilized in the broader health care community?

Two of the factors that contribute to the high cost and unsustainability of health care are the fragmentation and uneven quality of it. And so Mayo’s entire strategy to try to create a sustainable system, not just for Mayo, but indeed for the country, is to address that fragmentation, to address the costs and drive up the quality.

Essentially we’re taking what Mayo knows about how to practice medicine—both the medical side as well as the business side, and how we work—and codifying and digitizing it. This information will be used to create tools for physicians and administrators. That becomes a product that helps doctors provide better care locally.

So if you’re a heart specialist or neurosurgeon somewhere else in the country, you benefit not just from what neurosurgeons or cardiologists at Mayo say, but the whole Mayo system. That’s the basis for the Mayo Clinic care network. In the last two years we’ve created a non-owned affiliate network around the country in 11 states—21 large, high-quality practices, including in Mexico City and Puerto Rico, that are subscribing to Mayo information, which they then have access to, to help them provide better care locally.

If that doesn’t provide answers to them, they can connect with us for electronic consultations. And if they say, “Gee, we’d like to send you the patient,” that’s fine if they want to do that; they don’t need to do that. Those costs are not passed onto their patients. So if you’re a patient in one of our systems, and your doctor says, “Gee, I’d like to get an opinion from the Mayo Clinic for you,” we can do it right here in my office.

Who covers that cost then?

Well, the systems buy a subscription, if you will, to us. It’s an annually renewable business relationship depending on the size of those various groups.

Right. Who pays for the systems then? Where do they get the dollars to pay for this?

They make an investment. They decide. If they’re a large disciplinary group practice or hospital system, they say, “We’d like to be part of the Mayo Clinic Care Network.” We send a team there. We spend 90 days doing due diligence: Will this work? Then a business contract comes out of it.

Are they expecting that improved quality of care will reduce their costs overall?

Two things: They know that if they have fewer infections, readmissions, and all that stuff, that their costs will go down. They also have told us, and this sounds self-serving, but it gives them a competitive advantage locally because they can say they’re part of the Mayo Clinic Care Network.

And patients are saying, “I want to go there because I’m just a step away from the Mayo Clinic.” They can recruit better nurses and physicians, and patients seek them out. For some of these folks, it allows them to remain independent so they’re not bought up by the for-profit [care system] that comes to town.

Is it a race to work with more providers before your competition gets to them?

Well, the race is on. As the whole country is consolidating, our approach is the only one of its kind. And it doesn’t work for every group. Some groups say, “We want to be acquired. Who’s going to pay us the most?” But there are lots of good groups that don’t want to be acquired. They’ve been in business for 40 or 100 years, and they want to stay independent. They’re proud of their brand, if you will; proud of their staff, their heritage. So for them it’s helpful.