The Jet Set
Amadeo Marcos was the first surgeon to take a piece of liver from a healthy living donor and successfully transplant it into an unrelated critically ill patient. In the nine years since, he’s done more of these complex surgeries than anyone. Topping his vitae is his current position, chief of the transplant division at the University of Pittsburgh Medical Center’s prestigious Thomas E. Starzl Transplantation Institute.
If that isn’t enough to distinguish him in the field, there is this: For the past four years, he has routinely endured one of the longest commutes to the operating room made by any surgeon anywhere.
It begins in the afternoon with a drive to the Allegheny County Airport, where a private jet is fueled and waiting. He spends the remaining hours of daylight and the entire night in the air until, some 4,800 miles later, he touches down at 6 the following morning in Palermo, Italy, the principal city of the Region of Sicily. From the airport, he is driven to ISMETT, an acronym from the Italian for the UPMC-managed Mediterranean Institute for Transplantation and Advanced Specialized Therapies. There, Dr. Marcos begins a full day of surgery, the first of three or four day-long living-donor liver transplants he will work before jetting back home to Pittsburgh.
Living-donor transplantation is a growth industry on the rocky island, which is starved for usable cadaver organs to transplant. “Now when we arrive,” Dr. Marcos says, “they are already telling us about the next three or four pairs of patients who are scheduled for the next time we come.” Six weeks later, he will make the trip again.
Transcontinental commutes have become part of the job description for an increasing number of UPMC administrators, physicians, nurses and others as the western Pennsylvania health-care giant expands its specialty care abroad, realizing profits far greater than what it can hope to earn in the U.S. while establishing its brand on foreign soil. In the past 10 years, its presence across the Atlantic has grown to include a deal to manage a biomedical research center financed by the Italian government, a network of cancer centers in Ireland, a contract to help improve emergency medicine in Qatar and arrangements to sell the services of several companies UPMC has a stake in, most of which are based in Pittsburgh.
In doing so, UPMC joins the short list of American health-care systems that are actively exporting their expertise and/or brand abroad, including the Mayo Clinic, Harvard Medical Center, Cleveland Clinic and the University of Texas M.D. Anderson Cancer Center.
“You usually need to have the elite reputation to do this,” says Peter Temes, president and founder of the ILO Institute, a Connecticut-based organization specializing in research related to new markets and innovation. “Underlying that, you must be able to deliver world-class medical treatment. There are few institutions that can do both. The Mayo Clinic can do it, for example, because the fact that it is the Mayo Clinic makes it a powerful draw anywhere in the world.”
The UPMC brand, on the other hand, was not as widely recognized overseas when it launched its first major international venture. What UPMC had going for it was a highly regarded domestic transplant program that, over more than two decades, had trained a cadre of surgeons from other nations. ISMETT evolved from a 1995 conversation that took place on a beach along the Tyrrhenian coast between one of those surgeons, Ignazio Marino, and a Palermo liver specialist, Ugo Palazzo, who wanted an established transplant program like UPMC’s to set up shop in Palermo. The local joke that the best transplant service in Sicily was Italy’s national airline, Alitalia, was too close to the truth to be funny. The island’s capacity to perform organ transplants was so underdeveloped that the government — the chief provider of health care — was spending upwards of $220 million a year flying transplant patients to foreign operating rooms. Worse, thousands of patients unable to get a transplant were dying.
Although UPMC had no official strategy at the time for global expansion, interest in the idea of branching out into Europe had been brewing. Hospital physicians, particularly transplant surgeons, were already treating patients from some 30 countries in Oakland. That population would thin following the Sept. 11, 2001, terrorist attacks and bombings in Europe and elsewhere when fewer foreign patients began entering the United States for medical care — a development of no small consequence given the fact that most of them arrive at American hospitals able to pay the full cost of expensive procedures in cash. Also, new rules governing how U.S. donor organs are allocated tightened the supply available to patients coming from abroad.
“I wish I could say we had the foresight to realize how things would change in the way in which patients could travel,” says Chuck Bogosta, executive vice president for UPMC’s Strategic Business Initiatives and its cancer centers. “But we basically took the philosophy that it was better to keep patients in their home country and treat them there. And it was profitable enough that we could bring back the revenue and invest it in our western Pennsylvania health care system.”
Many of the factors favoring business in Italy were UPMC-friendly enough to become part of the blueprint the health care system today uses to assess new opportunities in other countries.
There was a clear demand for transplantation, a UPMC specialty. The Italian and Sicilian governments were solidly behind the venture, willing to commit public funds to cover the cost of renovating a temporary home in an existing public hospital and, a few years later, put up $58 million to build a new 70-bed high-tech facility. UPMC was given complete clinical control. And the Italian government agreed to assume the risk on the operational side and pay UPMC a largely fixed fee to manage ISMETT, as well as per-case royalties.
Last year, ISMETT surgeons performed 152 solid organ transplants of all kinds — liver, kidney, heart, lung and pancreas — pushing their seven-year total above 600. More important to patients, the center’s survival rates for all organ transplants exceed the national averages. Ninety percent of their liver transplant patients survive at least one year, higher than Italy’s average one-year survival rate of 86 percent. Also, fewer transplant candidates die while waiting for their surgeries. Those outcomes, along with the hospital’s marble floors, soaring atrium, private bathrooms and plentiful televisions — amenities patients cannot find anywhere else on the island — have helped make ISMETT the place to go for the seriously ill, so much so that openings are scarce and the waiting list is long.
There were plenty of bumps in the road. ISMETT was three years late moving into its new home, in part, because of a lawsuit brought by the winning contractor who was replaced when he could not demonstrate to the satisfaction of Sicilian law an absence of ties to organized crime. “One of the things you have to always worry about when working in this part of the country is the possible infiltration of organized crime, which would like to put its hand on any activity that has a strong economic value,” says Dr. Bruno Gridelli, ISMETT’s medical and science director.In what was more of an annoyance than a setback, a truck full of computers for the new hospital was hijacked and, two days later, a truck laden with lamps met the same fate.
Clinically, ISMETT surgeons deal with a shortage of donor organs more severe than that found in the U.S., where there are roughly 30 donors per million people. Italy’s donor rate is 22 donors per million citizens. Sicily’s rate in 2003 was only 7.9 per million people. One way ISMETT has worked around the problem is to develop a living-donor liver transplant program.
More than 40 percent of ISMETT’s liver transplants are of the living donor variety. By comparison, such procedures account for about 20 percent of the liver transplants done by UPMC’s Pittsburgh surgeons. This complex process is made possible by the liver’s capacity to regenerate and involves two major operations: one to remove 50 to 60 percent of the donor’s healthy liver; the other to transplant that section into the ailing recipient. Unlike the United States, Italy requires that living donors be related to the recipient and they get court approval before going under the scalpel. Despite such legal protocols, doctors say, there is no shortage of donors willing to offer a piece of their liver to a family member, which has helped ISMETT’s living-donor liver program to become the busiest in Europe.
Much of the strategy UPMC officials use today to assess new opportunities abroad was informed by their experience in Italy. They provide only the specialty services UPMC excels in, demand clinical control and insist on installing clinical models that have proven successful in their western Pennsylvania hospitals. They lean toward countries where they’ve developed local advocates who understand both the medical and political realities, place their own people overseas and only in nations where it is safe for them to live and work. They favor projects with the potential to generate additional business ventures. And they require a clear and reliable path to reimbursement, preferring to work with governments, particularly in Europe, where public health care systems rule.
Even when all of their conditions are met, setting up an American-style hospital in a foreign culture has presented challenges. One has been introducing computer-based records systems to operations that have long relied on paper. Another is staffing. At ISMETT, for example, they struggled early when they tried to adopt a Pittsburgh-based staffing model without taking into account that, in Italy, workers are given 35 days of vacation, in addition to a number of sick days and holidays.
UPMC officials have one more guideline they use to determine whether or not to pursue an opportunity overseas: They must be convinced they can make a profit, which in the nonprofit world means a healthy “margin.”
For fiscal 2007, UPMC reported an operating margin of $220 million, or 3.5 percent of its operating revenues. In contrast, says Bogosta, its overseas ventures typically generate revenue above $100 million with margins ranging between 10 and 15 percent. “In western Pennsylvania, we can’t improve our margins unless we become more efficient because reimbursement is not going up anywhere in the United States. And improving efficiency of services is very much dependent on making capital investments in information technology and infrastructure. Whereas overseas, you can get a multiple of those numbers on a percentage basis.”
Two basic business models have also emerged. The one preferred by UPMC officials is the cost-plus model, used in Italy, that allows the health care system to avoid placing any capital at risk while receiving a management fee and per-case royalties. In Ireland, UPMC is involved in more of a traditional joint venture, in which it invested money in the network of cancer centers with other companies in exchange for a 50 percent stake.
Beyond the earnings being returned to its western Pennsylvania operations, the economic impact of UPMC’s overseas operations on the region remains undetermined, including the impact of UPMC jobs related to international operations, money flowing to hotels and other businesses from the more than 200 foreign health professionals who’ve stayed in Pittsburgh for extended periods while being trained and the overseas business gained by local companies, such as D3 Radiation Planning. From its Shadyside offices, the UPMC spin-off offers treatment planning and other services necessary to perform the most advanced radiotherapy on cancer patients, allowing hospitals and clinics — including UPMC’s centers in Ireland — to avoid having to recruit and keep on payroll the scarce and expensive talent needed to use high-end technologies, such as intensity modulated radiotherapy (IMRT), image guided radiotherapy and gated therapy.
When the UPMC Whitfield Cancer Centre opened last year in Waterford, Ireland, it brought such technologies to a region of the country hungry for any type of cancer care, let alone the most advanced.It also attracted considerable coverage in Irish newspapers and on television.
“It’s created a bit of a stir over here,” says Dr. Dayle Hacking, a UPMC Whitfield Cancer Centre radiation oncologist, one of only a dozen such specialists practicing in the country. For D3, it meant a new client and untold possibilities.
“You have a relatively small private hospital in a rural area in Ireland delivering U.S. academic-type IMRT within six months of opening its doors. That’s the kind of thing D3 can do,” says Greg Ross, company president. “What we’re hopeful for is that others want to replicate that success. If IMRT reimbursement is offered in other countries, there will be a tremendous opportunity for us.”
Brightening the prospects for both D3 and UPMC was the Irish government’s decision earlier this year to allow patients with national health coverage to be treated at UPMC Whitfield. About half of Ireland’s population relies on the government health plan. Although it marked the first time that payment for public patients was extended to a private clinic, UPMC officials were not surprised. When Prime Minister Bertie Ahern was running for reelection a few years earlier, several thousand Waterford citizens pelted his motorcade with daffodils to protest the lack of local cancer care. It was a clear sign that there was an emotional demand for what a UPMC cancer center could offer and little chance politicians would deny it a contract. To do so would have meant sending patients with national health coverage on a five-hour round trip to Dublin every day for four weeks to receive treatment — a drive that twice a day would take them past the UPMC cancer center where their neighbors with private insurance were being treated.
“The secret to this is being extremely involved, getting to know all of the local players on the government and medical levels and interacting to the point where you are able to do what you need to do within that country,” says Michael Costello, the managing director of the UPMC Whitfield Cancer Centre who held a similar post with ISMETT. “You don’t try to manage these projects from 5,000 miles away.”
While UPMC’s international experience has deepened and its strategy matured, officials rely on nothing more sophisticated than word of mouth to attract potential business opportunities. Its work in Qatar helping the nation’s largest health care system improve its emergency medical services has roots in a brief telephone conversation more than 10 years ago between a Saudi doctor who had trained in Pittsburgh and Walt Allan Stoy, Ph.D., director of the Hamad Medical Corporation/UPMC Partnership in Qatar.
“He called and said, ‘I’m going to send you a plane ticket. You come over,’” says Stoy. “We ended up doing an evaluation of the emergency medical system of Saudi Arabia. The way things work in the Middle East is that you work for one group; they share information with other groups.”
The Saudi doctor shared with a doctor in Qatar, which led to a consulting contract in that country. That, in turn, led to the 4 1⁄2-year, $100 million contract signed this last year with the Hamad group.
UPMC officials are optimistic that the trend will continue. Chuck Bogosta’s phone keeps ringing with new opportunities. He makes two to three overseas trips a month, mostly to tend to business development. And the Strategic Business Initiatives division he heads is opening offices in Rome and Dublin.
“We’re taking the long-term approach,” he says. “We won’t really see the fruits of what we are doing today for another five to 10 years — when international revenue and margins are going up while domestic reimbursements are going down and domestic margins are being squeezed.”