Argyle Conversations. by Argyle Executive Forum SM Argyle Conversation: David Rowan, Chief Legal Officer, Cleveland Clinic

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1 by Argyle Executive Forum SM Argyle Conversation: David Rowan, Chief Legal Officer, Cleveland Clinic

2 Page 2 Argyle Conversation: David Rowan, Chief Legal Officer, Cleveland Clinic by AEF - Wednesday, JOHN HUBER: Could you please provide an overview of the Cleveland Clinic. DAVID ROWAN: Cleveland Clinic is a multi-specialty, academic medical center located in Cleveland, Ohio. We are a tax-exempt, not-for-profit corporation with a mission that includes patient care, research and education activities. It s a large institution with over 42,000 employees. Our flagship facility is Cleveland Clinic, which is located in the city of Cleveland. We also have 9 community hospitals in Northeast Ohio, and a hospital in Weston, Florida. In addition to our main campus, the community hospitals and 16 family health centers, we operate an executive health facility in Toronto Canada, the Lou Ruvo Center for Brain Health in Las Vegas, and are opening in 2012 Cleveland Clinic Abu Dhabi. Cleveland Clinic is a physician-led group practice, the second-largest group practice in the world. The CEO and president, Dr. Toby Cosgrove, is a cardiac surgeon who leads a staff of 2,700 employed physicians. In addition to our employed physicians, we work with more than 3,000 independent physicians in our community hospitals. Our guiding principle is patients first, and the lawyers help support that mission. By the way, we are celebrating the ninetieth anniversary of the Cleveland Clinic in Given the size and complexity of the Cleveland Clinic, how do you employ technology to help process the vast amount of information that your legal department is responsible for? We have access to a broad range of technology systems to help us perform the legal work of Cleveland Clinic and coordinate information with our clinical and business operations. Cleveland Clinic generates thousands of contract arrangements every year, and every one of these must be approved by the Law Department. Fortunately, our contract management system enhances our control over every aspect of this process, from negotiation to expiration dates. For instance, when we re negotiating a new contract with a current vendor, our system enables us to retrieve the provisions of previous contracts for comparison and review. The system is essential to maintaining the quality of our high-volume of contract activity. Healthcare, of course, is a heavily regulated business, and we use information systems in all matters of reporting and compliance. They help us to manage the conflict of interest process that goes along with being a tax-exempt, academic medical center involved in significant research. We draw on extensive databases to gather information in real time, analyze regulatory issues, and make determinations on conflict of interest and related issues. As another example, Cleveland Clinic as a tax-exempt, not-for-profit corporation is governed by a board of directors comprised of community leaders. These leaders actively participate in our governance and Board activities. We use a board portal system to keep them apprised of what s going on at the institution. We have over 60 affiliate organizations, so keeping all that information in a format which is usable for all of our business and clinical operations is a challenge. How does your legal team promote innovation within the Cleveland Clinic? Innovation is a cornerstone of Cleveland Clinic, along with quality, teamwork and service. We have an environment that encourages caregivers at all levels to develop new processes and techniques to improve patient care. Innovation at Cleveland Clinic involves everything from new treatments to novel medical devices. We have a large research institute and an in-house technology transfer arm, called CC Innovations. The Law Department works closely with CC Innovations to help our inventors patent their ideas, acquire licensing, and spin off new businesses based on their ideas and inventions. Over the past ten years, we ve helped CC Innovations start 35 businesses, transact hundreds of technology licenses, and file well over 1,500 patents.

3 Page 3 Our lawyers are heavily involved in structuring new healthcare arrangements brought about by the ever-changing regulatory environment. The introduction of the electronic medical record is transforming our business, along with telemedicine, e-radiology, and the constant evolution of patient care techniques. We have new technology, new ventures and legal structures growing up inside traditional facilities like hospitals and doctors offices. Cleveland Clinic insists that lawyers be involved in the early stages of any new medical venture. This speeds up the process and ensures regulatory compliance. Cleveland Clinic s Law Department has a very creative group of experienced lawyers who put together transactions to facilitate these methods of treatment. In a heavily regulated industry, we find ways to achieve Cleveland Clinic s goals while working collaboratively with medical and business leaders. Speaking of the medical environment changing rapidly, how is the legal team helping the Clinic adapt to the Healthcare Reform Act? As everyone knows, the Healthcare Reform Act will have a significant impact on the system. Our lawyers are part of an interdisciplinary team that has been formed at Cleveland Clinic to understand all the nuances of new law, and address its challenges and opportunities. For example, the law encourages providers to cooperate for efficiency through Accountable care Organizations (ACOs), which requires careful legal structuring to comply with antitrust laws and Medicare s fraud and abuse and Stark requirements. We think Cleveland Clinic is well-positioned because of its physician-employed model that integrates with our independent physicians in our community hospitals. The lawyers have been very active in determining how Cleveland Clinic can operate in this new paradigm. In addition to healthcare regulation oversight, what statutes and regulations both domestic and foreign, are focal points of your office? Our Law Department is called upon to deal with statutes and regulations in a variety of jurisdictions. Most of our facilities are in Ohio, but we also have busy practices out of state, including a full-service hospital and clinic in Weston Florida, the Lou Ruvo Brain Institute in Las Vegas, Nevada. Internationally, we have an executive health facility in Toronto, Canada and expanding medical operations in Abu Dhabi in the United Arab Emirates. Aside from facilities and proprietary medical practices, we have an array of other affiliations and partnerships, ranging from consulting relationships, distance radiology services, and the management of thoracic and cardiovascular surgery practices of other hospitals. These relationships help enhance patient care through the sharing of best practices and management strategies. Of course, out-of-state and out-of-country affiliations require careful analysis of, and compliance with, licensure requirements specific to medicine as well as general requirements applicable to any other business activity, such as local tax and labor laws. Our Law Department helps Cleveland Clinic to structure its expanding breadth, structuring arrangements in telemedicine, e-medicine and remote consultation to comply with licensure and other regulatory requirements. What are some of the best practices you use in coordinating the efforts of inside and outside counsel on compliance? Our business model involves attorneys in transactions at a very early stage in order to spot issues and comply with applicable rules and regulations. Our executive administration supports this approach and Cleveland Clinic lawyers serve on a wide range of committees. We have an excellent in-house legal function that consists of 30 in-house lawyers and a comparable number of paralegals. We ve modeled our department to cover all of the legal areas where there are repetitive needs. We have been able to attract and keep excellent lawyers, paralegals, and administrative staff. We try to use that model so that when we do need outside counsel, such as for litigation, our inside lawyers are working side-by-side with them. Our outside counsel actively participate in efforts to limit our legal spend and to utilize inside legal resources. We use a full range of alternative billing arrangements as well as hourly rate structures, and value suggestions by outside counsel to deliver services more efficiently. I believe our outside lawyers appreciate situations where they are viewed as valued-counselors and we enjoy working with lawyers who help support the mission of Cleveland Clinic. We frequently bring lawyers together from several law firms who are subject matter experts in a particular field to develop best practices and share experiences. This has worked well for Cleveland Clinic and has been well received by our law firms. We also participate in groups where we share best practices. One finds many situations where lawyers are struggling with common issues in other law departments both in healthcare and general industry.

4 Page 4 When you are inside, you not only have to complete a transaction, you also have to build systems to maintain the transaction in a regulatory compliant manner. You have to depend on your business and medical operations to understand the regulatory complexities. This requires a blend of inside and outside expertise and an educational effort with the business and clinical operations. The Cleveland Clinic will soon have a presence in Abu Dhabi. When partnering with multinational organizations and conducting transactions overseas, how do you approach foreign regulation? To answer your question, I ll first briefly describe what we are doing in Abu Dhabi. We began in 2007 to manage the Sheikh Khalifa Medical City in Abu Dhabi, which has 700 patient beds. At the same time, we began working with Mubadala, a wholly owned affiliate of the government, to build a new hospital to be called Cleveland Clinic Abu Dhabi. This will be a 350-bed state-of-the art facility which Mubadala will own and Cleveland Clinic will manage. Mubadala is a very sophisticated entity which is involved in a variety of activities that support the government of Abu Dhabi and its goals, one of which is the improvement of healthcare in the Emirate. Cleveland Clinic and Mubadala have a very collaborative partnership to design, build and operate the hospital. The legal team from Mubadala and Cleveland Clinic work together on a broad range of issues applicable to a project of this size and complexity. It is particularly interesting because the United Arab Emirates is a young country that is in the process of looking around the world to find the best models for delivering healthcare. We have input in that process. It is unusual to be able to be in the design phase of a large healthcare system. The healthcare system presents unique opportunities to provide preventative medicine for the entire population as well as innovative approaches such as genetic medicine. Working with Mubadala s legal team and the government, we will have the opportunity to help shape a healthcare regulatory system that draws on best practices around the world. In dealing with complex legal systems overseas, we have also developed relationships with legal departments of U.S. multinational companies that are established in the local jurisdictions. Typically, our footprint is much smaller, and we benefit from their expertise and experience. For example, we seek various companies suggestions regarding local counsel and experiences with employment law issues. How do you determine what to keep in-house and what to ask outside counsel to do? Good question. I think every general counsel or chief legal officer struggles with this on an ongoing basis. As I mentioned, we try to have inside legal staff in all the repetitive areas where we have significant legal activity. Some of those cover healthcare-related regulatory issues, with others for example, litigation, corporate, finance, employment and HR, construction, and real estate, necessary for a large enterprise such as the Cleveland Clinic. We look to outside counsel for courtroom litigation, but we always partner them with our inside litigators. For example, we try to do as much discovery inside as possible. In regulatory areas that are highly complex for example, Medicare rules and regulations we have very talented inside lawyers who may consult with an outside specialized law firm. We try to complete most transactions in-house. Our basic approach is to try to do everything that we can in-house, but call upon outside firms with experience when needed. How does legal interact with the Clinic s business and medical functions? This is key at a complex organization like Cleveland Clinic. We try to have the lawyers working on a regular basis with the clinical and business units. I have assigned lawyers to each of the key business units and medical institutes. This lawyer acts as a liaison to help them with their problems and also stay abreast of regulatory issues. Speed in execution is critical and part of their role is to keep the executives aware of project status. In a transaction, we pull together multi-disciplinary teams to work on the project and then once it s done, to monitor compliance issues. Again, the key is to be there early in a transaction so that you do not have to redo things because an issue was missed. This interdisciplinary approach helps Cleveland Clinic to adapt quickly, take advantage of opportunities, and address the new challenges in our rapidly changing business. What are some of your goals for the rest of 2011 and into next year? First and foremost, our goal is to support the strategic initiatives of Cleveland Clinic. We will continue to assess and adopt new technologies and systems to do our work more economically and efficiently. Our lawyers will be actively engaged in the legal analysis of healthcare reform not only in the near term, but for years to come. We are also very active with respect to governance initiatives at Cleveland Clinic, so we will continue to look at the best governance model for Cleveland Clinic. The professional development of our lawyers, legal assistants and other

5 Powered by TCPDF ( Argyle Conversations Page 5 support staff is important to us. We have an excellent group and their continued growth and engagement is in the best interests of Cleveland Clinic. Overall, we are determined to serve Cleveland Clinic and its patients with the best practices and outstanding legal services. It is an exciting time to be practicing law in the healthcare area. Thank you David for your time today.