Competitive challenges face Mayo Clinic, says health finance expert

Mayo Clinic expansion
This undated photo, shows the Mayo Clinic. The Mayo Clinic, Minnesota's largest private employer, pressed state lawmakers Wednesday, Jan. 30, 2013 to commit more than $500 million toward an ambitious development project tied to the renowned medical center in Rochester, Minn.
AP Photo/Rochester Post-Bulletin, Elizabeth Nida Obert

Mayo Clinic unveiled a proposal yesterday to invest $3.5 billion to expand its Rochester campus over the next 20 years.

The health care provider estimates the expansion could attract at least $2 billion in additional private investments. Mayo Clinic has asked the state to invest $500 million for infrastructure, based in part on the company's claim that the expansion could generate thousands of new jobs.

Mayo Clinic also pointed to growing competition and the need to invest in what it called a "destination medical center."

Steve Parente, chair of Health Finance at the Carlson School of Management at the University of Minnesota, spoke with MPR's Tom Crann about the competitive challenges facing Mayo Clinic.

Tom Crann: Mayo proudly calls itself the country's premier healthcare facility. Is that legit?

Steve Parente: It's pretty legit. I mean if you go by its competition in the United States, you have Johns Hopkins hospital in Baltimore, Md., Cleveland Clinic, [MD] Anderson [Cancer] Center in Texas, but typically Mayo is thought of as in pole position number one and two nationally.

Crann: We were told yesterday by [Mayo Clinic CEO and president] Dr. [John] Noseworthy that it is a very competitive environment. You mentioned those top competitors, but I'm wondering what are the institutions all competing for?

Parente: They're competing for patients but ... this is maybe not as obvious, they're also competing against international centers of excellence in medicine, too. The U.S. is quite good, but a lot of other countries are also investing in their infrastructure as well. And I think what Mayo is doing is preparing not just for 10 years but really for 30 years out.

Crann: I'm also wondering are these institutions competing to attract talent, medical talent from around the world, to work there.

Parente: They absolutely are. That is a major issue for Mayo... Most of the other institutions they're competing with are in major metropolitan communities. Johns Hopkins in Baltimore, but it's really part of the northeast corridor that really runs as a complete, total city. Cleveland has a much larger metro area than Rochester, Minn. And it does raise a very legitimate concern.

Crann: Yesterday we heard about another sort of competition, and that's the competition for Mayo's services and maybe even facilities in other places. How realistic is that — that other places would be eyeing Mayo and might put together a better deal for them to come there or open there?

Parente: It's a funny question because it almost sounds like a sports franchise.

Crann: Exactly.

Parente: Believe it or not, it's pretty viable. I've actually visited Dubai Healthcare City two or three years ago and that place is primed for something like Mayo or Cleveland Clinic to basically come in there, and it would get enormous infrastructure investment if they decide to go in that direction.

And people might say, 'Well that's just crazy,' but then again it links with the government of United Arab Emirates and Emirates Airlines, where they have point-to-point flights with A380s and double-decker aircraft to take people from around the world as a destination for care. It is not so far-fetched to imagine that a brand-new Mayo flagship could not just be built in another part of the U.S. but someplace else in the world.

Crann: Can Rochester, Minn., compete with Dubai then?

Parente: Well, not with weather.

Crann: You don't see many Airbus 380s coming in and out, either.

Parente: No, no, but give it time, give it time. But Rochester does have some advantages in terms of, if you want to have a family there, if you want to foster a culture of innovation. It has a lot of existing building blocks that you don't have to build from scratch.

I mean, Rochester has a lot of natural assets and human capital. It has IBM there. Some of the work that's being done on the human genome there is really one of a kind.

And so I think Rochester is by no means starting from scratch at this, but it is different. It is not a major metro area. Six-billion dollars will not turn it into the equivalent of a Baltimore or Washington, D.C., but it could make it more attractive to have the human capital stay and grow and really make it a destination city.

(Interview edited and transcribed by MPR reporter Madeleine Baran)