For years, Ohio's Cleveland Clinic has ranked with the top world-class providers of medical care. It pioneered

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For years, Ohio's Cleveland Clinic has ranked with the top world-class providers of medical care. It pioneered coronary bypass surgery and developed the first kidney dialysis machine. King Hussein of Jordan used the clinic, as does the royal family of Saudi Arabia.

Big-name health care institutions like the Cleveland Clinic are after new markets for their state-of-the-art medical care, and are posing a new threat to local physicians. The expansions are also disrupting traditional relationships between physicians and their patients, physicians and their hospitals, and physicians and their fellow physicians.

Like any business, the Cleveland Clinic keeps close tabs on its core market, and the outlook wasn't all that bright. Seven Midwestern states provided 90 percent of the clinic's business, though population growth in that region is expected to be flat through the year 2010. But not so southeastern Florida, where the population is still growing and, in many areas, is highly affluent. Southeastern Florida appeared to be a dream market. Yachts lining the canals of the Intracoastal Waterway and a ubiquitous building boom reflect wealth and growth so palpable that clinic officials have come to call it immaculate consumption. Moreover, about 20 percent of the 3.7 million residents in Dade, Broward, and Palm Beach counties are over 65 years old. About 50 percent of the population is over 45—a potential mother lode of patients. "We felt there was room for us," Dr. Kiser, CEO of Cleveland Clinic, said. "We decided to go on our own rather than wait to be invited."

When the Cleveland Clinic opened an outpatient clinic in South Florida, a war broke out. In a full-page advertisement in the Miami Herald, Dr. Seropian, a local physician, pulled out the stops. He likened the clinic to dingoes (wild Australian dogs) that roam the bush, eating every kind of prey. The clinic filed suit in federal district court in Fort Lauderdale, charging, among other things, that some physicians had conspired to hamper its entry into Broward County.

Famous medical institutions like the Cleveland Clinic and Mayo are victims of their own success. Many of the once-exotic procedures that they invented are now routinely available across the country, reducing patients' need to travel to the medical meccas. For instance, the Cleveland Clinic might once have had a hold on coronary bypass surgery, but no more. In 2000, more than 350,000 patients had the operation at hospitals throughout the United States.

"These clinics used to be the court of last resort for complex medical cases," says Jeff Goldsmith, national health care advisor to Ernst & Young, the accounting firm. "Now, the flooding of the country with medical specialties and high technology equipment has forced them to adopt a different strategy."

Their expertise and reputation mean formidable competition for the local medical community. "On one level," says Jay Wolfson, a health policy expert at the University of South Florida in Tampa, "it's like bringing in a McDonald's. If you're a mom-and-pop sandwich shop on the corner, you could get wiped out."

Discussion Questions

1. Compare the Cleveland Clinic to traditional retailers.

2. What was its retail mix?

3. What factors in its environment resulted in it changing its retail mix?