The Silo Effect

by Gillian Tett

  IN THE SPRING OF 2008, a few months after the reforms had started, Cosgrove addressed all the staff at a town hall meeting. He brought along Kara Medoff Barnett, the young woman who had first challenged him on the stage at Harvard. “So Kara, tell me why your father did not go to Cleveland Clinic for his operation?” Cosgrove asked in a genial manner as he sat on stage. During the first few months of his tenure as CEO, Cosgrove’s speeches to staff had been stiff and stern; he did not find it easy to exude a natural air. By 2008, however, he had learned to become more approachable, and was wearing jauntier ties. “What didn’t your family like about Cleveland?”

  Burnett, who had graduated Harvard a year earlier61 and was then working in New York, cited her criticisms: the hospital had excellent technology and skills but lacked empathy. Cosgrove nodded humbly. “So we are at fault here—we need to change!” he declared.

  This public exchange startled Cosgrove’s colleagues. “People who knew Toby before would not have expected him to ever talk about empathy,” observed Seth Podolsky, a doctor who worked in the Emergency Services Institute.62 Surgeons worked in such a high-pressure, competitive field that they rarely admitted to any weaknesses or emotion. “I started as a medical student in Boston [in the 1960s]. In those days medicine was a very different world in terms of our skills. We sometimes lost five children [on the operating table] in one day,” Cosgrove explained. “It’s hard to do that and come back to work if you are thinking about emotions. Patients didn’t expect a hug. They were just happy to have survived.”

  But Cosgrove had taken Barnett’s message to heart. In his view, talking about empathy was not just a touchy-feely issue. It represented another aspect of his desire to break down silos. Instead of looking at health in terms of biology or emotion, Cosgrove wanted the doctors to look at the two issues in tandem. That, after all, was how patients experienced medicine; unlike doctors, most sick people did not draw distinctions between science and feelings. “Very few patients can judge the quality of clinical work—even if they watch me they wouldn’t know if I was a great surgeon or not,” Cosgrove observed. “But they do know how they were treated.”

  So Cosgrove appointed James Merlino, a colorectal surgeon, to act as a “chief experience officer,”63 or CXO. All of the 43,000 staff were told to attend a half-day training course on empathy.64 Some surgeons objected. “When I heard about the office of patient experience I said ‘what is this?’ Klein, the urology surgeon, said. “I said: ‘We are not a hotel—we don’t need to meet and greet people and check them into their room and check they have the right pillows!’ ” But Cosgrove and Merlino insisted that everybody who worked at Cleveland had to attend the course, on the same terms, in mixed teams. Some surgeons and doctors were also sent to Disneyland for lessons in customer service.

  Architecture was used as another tool of reform; although Cosgrove had never heard of Pierre Bourdieu’s concept of habitus, he was convinced that it was crucial to understand how culture reflected physical space, and vice versa. In earlier decades, the hospital buildings at Cleveland Clinic, like most of those in America, had been decorated with heavy oil portraits, dark wood panels, and carpets. But in the 1990s the hospital started to adopt a simpler, cleaner design, and under Cosgrove this trend intensified. Modern art was placed throughout the buildings.65 Dress designer Diane von Furstenberg remodeled the patients’ gowns.66 To encourage people to feel relaxed in the hospital lobby, a giant hologram of a tree was installed, designed by artist Jennifer Steinkamp.67 A piano was also placed in the lobby to be used by patients or (on occasion) professional musicians. Three dozen “Red Coats,” or concierge-style porters, were hired to meet and greet patients in a cheerful way and provide a calming influence.68 “This originally started because Cleveland Clinic was having so much construction work that we needed to find a way to direct patients to where they needed to go,” Cosgrove explained. “But then we realized it worked really well to have the Red Coats. The patients like them.” Cosgrove’s piece de résistànce, though, was the hospital entrance. In the early years of the twenty-first century, the managers of Cleveland Clinic had decided to overhaul the front of the building as part of another expansion plan. Initially they planned to install a fountain. But Cosgrove vetoed that idea: spurting water would create images of blood, he declared. Instead, he asked the architects to create a Zen pool of still water, to project serenity and the all-important mood of empathy.

  The hospital architects looked at the corridors too. A vast web of interlinked, elevated covered walkways had initially been installed in the 1970s to ensure that patients and nurses could move between the buildings easily, even during winter blizzards. They seemed purely functional, if not dull. But as the doctors discussed how they interacted with each other, they realized that these walkways had an unexpected side benefit: because patients and medical staff were forced to walk along these long corridors each day, channeled into a small space, the hospital had inadvertently created a way to force medical staff to constantly collide with people from other teams. So the architects made them bright and airy, decorated with inspirational art and slogans, to encourage people to linger and chat.69 As with Facebook, physical space was being used to encourage people to silo-bust. Moreover, the corridors—like Facebook’s Hacker Square—often forced interaction as effectively as any formal town hall. “You set off walking to do one thing, and next thing you know, you end up seeing people and talking to them,” explained Modic. “Getting anywhere can take a long time. But you get ideas, and news, so it isn’t really a waste of time at all.”

  IN LATE 2013, COSGROVE received a cheering accolade. A survey of patient satisfaction, as measured by U.S. News & World Report, showed that Cleveland Clinic was the top-ranked hospital in America in terms of patient satisfaction. It was a startling turnabout. A decade earlier, when Cosgrove had been challenged at Harvard Business School about his lack of empathy, Cleveland had been at the bottom of patient satisfaction tables. But in the decade that Cosgrove had overseen the hospital, its position in the league tables had improved dramatically; indeed, by 2012 the hospital was consistently ranked among the best in the country in terms every survey of patient sentiment.70

  There was other good news too. The U.S. News & World report ranked Cleveland Clinic in the top three positions in almost every medical speciality in terms of technical skill. However, insofar as there was comparative data available for the cost of care at different hospitals (and national statistics on this are shockingly poor), Cleveland Clinic’s seemed lower than those of many rivals.71 Cosgrove attributed that to incentives. In the usual “eat what you kill” system used in most American hospitals, the cost of treatment has been (and is) high because each specialist team has an incentive to order as much medical care as possible. That, after all, is how they get paid. But the Cleveland structure, which gives doctors a fixed salary, removes some of the incentives to prescribe overlapping treatments. “Let’s take prostate cancer,” Klein, the head of the urological unit, liked to explain. “There are five ways you can manage that in the early stages—surveillance, open surgery, robot surgery, brachytherapy, or external beam radiation therapy. In other hospitals, the specialists will push whatever they are specialists in—the one that costs the most is external beam radiation therapy, and other hospitals will often push that. But since we all work together we offer all five [treatments] equally. We have data on brachytherapy which suggests that cure rates are better there, and costs are dramatically lower, so we tend to use that.”

  Indeed, the results were so striking that they won praise from President Obama. In a speech about American health care he championed Cleveland Clinic as a place “where patients’ care is the number-one concern, not bureaucracy.”72 Or as he observed in a national radio broadcast, talking about his own health care plan: “Some of these costs [in health today] are the result of unwarranted profiteering that has no place in our health care system . . . and yet we know that there are places like the Mayo Clinic in Minnesota, C
leveland Clinic in Ohio and other institutions that offer some of the highest quality of care in the nation at some of the lowest costs in the nation.”73 Not everyone inside and outside the hospital was as enthusiastic as the president about some of Cosgrove’s reforms. Like Cleveland, the Mayo Clinic operated with a partnership structure. But unlike Cleveland, the doctors at Mayo continued to work out of the traditional departments, not institutes, and they did not see any reason to reorganize themselves. “You can get dysfunctional silos in institutes, as much as departments,” one senior Mayo doctor argued. “You don’t need institutes to get more collaboration or lower costs.”

  However, Cosgrove and his team remained defiant—and proud. They believed that breaking down the traditional silos had not only encouraged them to take a more holistic approach to medicine, but it had also made them more innovative. The way that doctors handled muscular and joint problems was an example. Traditionally, these illnesses had been dealt with different teams of rheumatologist and orthopedic surgeons. But after the new Orthopedic and Rheumatology Institute was created, orthopedic surgeons had teamed up with rheumatologists for the first time, and discovered—to their surprise—that if they jointly monitored levels of calcium after surgery it produced better results. “Orthopods have never checked the calcium metabolism of people with fractured hips before, but then the rheumatologists suggested that they should look at calcium and it made a big difference,” Cosgrove explained. Or as Abby Abelson, the new institute head, observed: “Before, we had patients getting osteoporotic fractures but didn’t realize why. Now we collaborate in post-fracture management.”

  Similarly, in the Urological and Kidney Institute, surgeons had started working with nephrologists for the first time to understand how metabolic balance could affect the formation of kidney stones. They hoped this would enable doctors to develop nonsurgical (and cheaper) ways to control kidney stones and cancers.74 “Most patients with early-stage kidney cancer are seen by urologists but now we discuss all these cases together and we have developed protocols to just take out part of the kidney, not all of it,” Klein explained. “We haven’t broken down every silo, but it works differently than before,” Bruce Lytle, the head of the Heart and Vascular Institute, observed. “Do we have problems? Yes, all the time! But there is a mechanism for resolving those problems. Every Tuesday morning we have a meeting of the department chairs and myself and we deal with the issues as a group.”

  One of the most striking changes of all, however, had taken place in the Emergency Services Institute. At most American hospitals, doctors working in Emergency Services are not allowed to admit patients into specific hospital departments without the permission of the specialists there. This delays treatment. However, specialists tend to insist on having control over the process, since it affects how they will be remunerated. But in 2012, Cleveland turned the system upside down. Emergency department doctors were given admission rights. So were some ambulance medics and paramedics. It was a controversial move. “We had been wanting this change for years, but thought we would never ever see it!” Bradford Borden, a doctor at the Emergency Services Institute recalled. The new system did not always work as planned. “We get the patient to the right clinical specialist within the hospital about 93 percent of the time, according to our research,” Borden reported. “But if we get the patient to the wrong clinical specialist, we fix it the next morning.” The changes produced some tangible results. Before 2012, the Emergency Services teams had typically taken around two hours and forty minutes to admit a patient to the hospital; by the spring of 2013 that had fallen to two hours. “What is going on here is about a change in operation and a change in culture,” Seth Podolsky, another Emergency Services doctor, observed. “It doesn’t happen overnight. But it is now changing.”

  Could the experiments be taken further? Could they be replicated elsewhere? It was a question that the doctors themselves often wondered. They did not have clear answers. They knew that the circumstances in which their experiment had been born was somewhat unusual. After all, Cleveland Clinic had always had a relatively collectivist ethos, relative to other American hospitals. It also had a more experimental spirit to start with. “Pay matters hugely. Our system of pay is one reason we were able to break down silos. You cannot do this with a fee-for-service model,” Lytle said. “Long-held allegiances and habits only change when they have to change. Harvard doesn’t have to change—they are Harvard, with a long history and the largest endowed institute in the world. But we are a not-for-profit institution in a Rust Belt city on the shores of Lake Erie with a declining population. We have to be better and more creative.”

  But the crucial point about Cleveland Clinic, the doctors argued, was that it showed the value of thinking about classification systems. When people inside businesses or government departments were encouraged to reimagine the world—say, by looking at the world from the perspective of consumers, not producers—they could often become more innovative and effective. If journalists were to start organizing their work according to how readers (not reporters) perceived the world, how would that change the media? Or if manufacturers started organizing their departments based on what customers (not salespeople or designers) thought was important, would they sell the same things? The key point, in other words, was that looking at business processes or services upside-down, or back-to-front, could change an institution’s perspective. Or it could if everybody was willing to take a risk, even without knowing where that mental exercise might lead. “A couple of years ago at Cleveland Clinic we thought we could develop a consultancy business by exporting our model—but then we realized that was a stupid idea,” Modic, the head of the Neurological Institute, observed as he sat in his office in May 2013. “The point is that you cannot buy our system for breaking down silos. You have to build it yourself. It is the process of building a new system and talking about it that transforms you.”

  8

  BUCKET-BUSTING

  How Breaking Down Silos Can Produce Profits

  “One man’s loss is another man’s gain.”

  ON MAY 11, 2012, JUST after the financial markets had closed in New York, Jamie Dimon, the chief executive officer of JPMorgan Chase, called an impromptu telephone conference with investment analysts. For several weeks, rumors had circulated that the mighty American bank had suffered massive losses as a result of badly judged trades made by its London traders in the credit derivatives markets. That development had come as a surprise to many observers, since JPMorgan had “consistently portrayed itself as an expert in risk management,” as a Senate report noted.1 It weathered the credit crisis of 2007 and 2008 better than most of its peers, and Dimon was well regarded on Wall Street, known for being a control freak who tried to monitor all the risks that the bank was running. When the rumors had first emerged about the losses, Dimon dismissed the speculation as a mere “tempest in a teapot.”

  But on May 11, Dimon was forced into a humiliating U-turn. In a curt statement, he admitted that the bank had lost several billion dollars, due to unwise trades made by a group of its traders that included men such as Bruno Iksil, operating in a unit of the bank called the Chief Investment Office. The hitherto unknown Iksil had placed a series of massive bets in the credit markets about the health of a collection of American and European companies. But he had not done this by buying bonds issued by those companies, or even by purchasing derivatives linked to those separate companies’ bonds. Instead, he bought trading positions on an index known in the market as IG9. This product was a derivative (called a credit default swap) that essentially provided bundled insurance on the debts issued by 125 different American companies, such as Macy’s, Walmart, Wells Fargo, and MBIA. Iksil also placed bets with similar instruments linked to European companies. This was normally considered to be an obscure backwater of finance. However, Iksil and his colleagues in the Chief Investment Office department had made such massive investments that the team had earned the dark nickname of “the London Whale.” When pr
ices turned, his losses tallied at least $6.2 billion.2

  When the news erupted, this sparked huge recriminations both inside and outside JPMorgan. In many ways, the tale seemed uncannily reminiscent of the problems that had plagued the big banks such as UBS and Citigroup during the financial crisis. Back then, as I described in Chapter Three, managers at banks such as UBS failed to spot the problems with mortgage-linked CDOs because traders were working as self-contained desks, or silos, and they were trading instruments that were so technically complex that they were hard for outsiders to understand. This time around, the losses had been on credit derivatives linked to companies, not subprime mortgages. But, as with UBS, few people had realized the risks that were being taken. The unit dabbling in these dangerous bets was widely perceived to be risk-averse and thus safe. The Chief Investment Office team was a self-enclosed group, semi-detached from other units such as the investment bank. And the IG9 index sounded like gobbledygook to non-bankers (and many mainstream bankers too). Once again, the curse of silos had reared its head.3, 4