The role of organizational design and culture in the value-based healthcare movement: The case of the Cleveland Clinic

INTRODUCTION

The Cleveland Clinic was founded in 1921 as a multi-specialty group practice staffed and run by four physicians who had served in a military hospital in France during World War I. The four men—Drs. Crile, Lower, Bunts, and Philips—were inspired by a vision of a healthcare system in which physicians “acted as a unit,” collaborating in ways that departed radically from the back-then norm of fiercely independent and competitive physicians and practices. In so doing, the Cleveland Clinic challenged the status quo of physicians as “heroic lone healers.”1

Over the next 101 years, the collaborative vision that gave rise to the Clinic evolved into a nonprofit healthcare system made up of 22 hospitals and 275 outpatient facilities around the globe, including Cleveland Clinic hospitals in Abu Dhabi and London. The Main Campus in Cleveland today has some 1300 hospital beds where patients are treated by over 3000 physicians supported by 40,000 other caregivers, including 11,000 nurses. In aggregate, the Clinic now employs over 77,000 caregivers worldwide—a group that includes more than 5500 physicians and scientists, 3500 advanced practice providers, 2000 trainees, and 15,000 nurses. In 2022, this group of 77,000 treated 3.4 million patients with distinction.2 The Cleveland Clinic has consistently been ranked as a top hospital in US News and World Report rankings, with many top-ranked specialties. For example, the Clinic has been ranked #1 in the category of Cardiology and Heart & Vascular Surgery in all 29 years the rankings have been undertaken.

The stellar rankings and performance of the Clinic have also received national recognition, perhaps most memorably during President Obama's much-publicized trip to Cleveland in 2012, when the Clinic's practices and accomplishments were held up as a model for American healthcare. The Clinic's reputation owes importantly to its ongoing commitment to continuous improvement in carrying out its three-part mission of “caring for life, researching for health, and educating those who serve.” One such improvement was a fundamental and innovative transformation of the Clinic's organizational structure, or “org chart,” in 2008.

Until 2008, the Clinic was organized, like most hospitals (and colleges and their medical schools), into separate “departments” corresponding to their special areas of expertise—departments of Surgery, Internal Medicine, Neurology, and so forth. This departmental organization is a traditional structure that reflects the guild-like nature of medical training, and the bond of common experience shared by physicians working in the same specialties. Departments (or divisions) are further broken down into medical subspecialties such as Cardiology, Nephrology, Rheumatology, and Gastroenterology, and the surgical specialties of Cardiovascular Surgery, Urology, Orthopedics, and other disease-oriented surgical disciplines.

This traditional structure of guild-based departments was completely revamped in 2008 under the direction of the Clinic's then-CEO and President, Dr. Toby Cosgrove. After joining the Clinic in 1975 and becoming chairman of its Department of Thoracic and Cardiovascular Surgery in 1989, Cosgrove was appointed CEO in 2004 (a position he held until his retirement in 2017). Early in 2008—and just weeks before one of the present writers joined the Clinic as head of its Cardiac Electrophysiology section—all the departments were reorganized and replaced by 22 new “Institutes” dedicated to serving the Clinic's three-part mission of patient care, medical research, and continuing education of caregivers.

As Cosgrove himself explained the change in his 2014 book The Cleveland Clinic Way,

Patients don't experience their illness or conditions in terms of academic departments or divisions. Patients who have complex conditions such as diabetes or a brain tumor often require the expertise of many different specialists. Traditionally, that has required them to move among various departments to get care…and has meant that some of the doctors involved in their care weren't communicating with other doctors as fully as possible, leading to duplicate tests. Also, because some departments are more profitable than others, patients often have to contend with understaffing and underfunding in the less profitable departments (such as psychology) relative to the more profitable ones (such as heart surgery).3

And as Cosgrove commented on the effects of such a reorganization, the new Institute structure

fundamentally changed the organizational relationships among thousands of physicians. Many of them arrived at work one morning to find that they had new supervisors and coworkers in an organization unit that hadn't existed the day before.

But as Cosgrove went on to say,

Even so, few staff members offered objections. They clearly understood the potential that institutes had to enhance patient care. Having everyone on the same team allowed the organization to envisage institutes, plan them, communicate the change, implement the change, and fine-tune the concept, all without consulting interests or cozening internal lobbies.

Reinforcing such resistance to change were “powerful forces,” including “the inertia and the temptation to continue doing things the way they've always been done.” “After all,” as Cosgrove stated, “the Clinic was already one of the most successful hospitals in the world, so if it wasn't broke, why fix it?”

In the pages that follow, we attempt to explain why this embrace of the Institute model in 2008—which Cosgrove said in his 2014 book that the Cleveland Clinic “has pushed further than any organization”—should be viewed as a critical new phase in the Clinic's continuous development toward becoming the increasingly “patient-focused” value-based healthcare institution that its four founders envisioned in 1921. As further testimony to its ongoing commitment to ensuring that its structure supports its tri-partite mission as fully as possible, the Clinic is currently in the midst of yet another revision of the Institute model. (The goal of this new operating model, which we discuss in more detail later, is to strengthen the Clinic's ability not only to provide the globally uniform patient outcomes and experience for which it has achieved international renown, but to extend those assurances to all its “caregivers”—nurses and trainees as well as physicians and scientists4—and their local communities throughout the Clinic's many global sites of care. The perennial goal is to be the best place to receive care and the best place to work in health care anywhere. This new operating model, still being implemented at this writing, is organized around current CEO Dr. Tom Mihaljevic's commitment to meeting the requirements of what the Clinic now identifies as its four “cares”: (1) patients, (2) caregivers, (3) the community, and (4) the organization.

As Cosgrove also acknowledges in his book, this vision of value-based care, and the “Institute model” designed and put in place to carry it out, was being advocated by the likes of Harvard Business School's strategy guru, Michael Porter. With Cosgrove's and the Clinic's possible debt to Porter in mind (though the influence was likely reciprocal and mutually reinforcing), our explanation begins with a brief review of the six major tenets of Porter's concept of value-based healthcare delivery and shows how each has informed the practices of the Clinic. In so doing, we draw on the standard doctrine that an organization's structure should be designed to deliver on its mission and strategy. Finally, the case of the Clinic is used to show how an organization's “culture”—as reflected in its shared values and norms—depends upon and is reinforced by its structure while contributing to its success and staying power.