Med Mart Version 2.0

The original plan isn't going to work. What about the latest one?

It wasn't a tough sell. A medical mart in Cleveland would showcase high-end wares — the latest in medical technology and cutting-edge equipment. When Cleveland Clinic CEO Toby Cosgrove put forth the idea more than a decade ago, he intended a kind of one-stop shop for hospitals and doctors looking to buy. And they would come here from all over the world.

Companies will clamor to rent space in the shadow of Cleveland Clinic, University Hospitals, MetroHealth, and Summa, the logic went. In turn, a sleek new building full of shiny new medical tools will attract medical trade shows in droves to a new, state-of-the-art convention center that replaces the weary, woefully outdated existing one. Hotels will fill to capacity, restaurants will boom, and out-of-towners might even fill the empty seats at Indians and Cavaliers games.

The concept was said to be new and untested, so Cosgrove brought mart experts in to talk about the plan in 2005. Two years later, the Chicago firm Merchandise Mart Properties Inc. — equipped with taxpayer money that would balloon to an eventual sum of $465 million — was eyeing sites, drawing up plans, and negotiating terms with the county. Quick progress was needed too: Nashville and New York were planning med marts of their own, and the pivotal advantage would go to the one that opened first.

The City of Cleveland, suburban mayors, and economic development types shouted their support. But for naysayers who tried — but failed — to put the issue before voters, the med mart was just another false hope for a desperately depressed city. And they had reason to think so: The med mart concept Cuyahoga County bought into on behalf of taxpayers is not revolutionary and it's not untested. In fact, it has failed before.

Perhaps more disconcerting, the man newly charged with bringing the project off the drawing board and onto the corner of Mall Drive and St. Clair has this to say about the original med mart plan: It probably won't work.

"You can't insert the mart model that you have in other industries into the medical industry," says Brian Casey, MMPI's general manager for the project since May. "[Hospitals and doctors] don't go mall shopping for things."

On the job just five months, Casey chooses not to comment on whatever med mart strategy MMPI sold the county on before he arrived. But he's swapping it for a very different approach.

A Flawed Model

The original med mart concept that promised to fill the convention center and area hotels bears a striking resemblance to a med mart proposed before — in Cleveland, in 1984. At the time, developer Forest City planned to create one in the old post office portion of Terminal Tower. Cleveland City Council was gung-ho on the plan as a means of driving traffic to the newly planned Tower City shopping district and hotel development, according to Plain Dealer reports at the time.

But Forest City quickly scrapped the med mart idea, saying it wasn't necessary to draw people to the new hotel. Just as Cuyahoga County and MMPI feared competition if a larger med mart in Nashville were to open first, Forest City at the time expressed concern that several other cities were further along in planning med marts of their own.

Birmingham, Alabama, was one of those other cities, and it became the only one to follow through. Its 10-story Medical Forum opened there in 1992, with seven floors intended for showcasing medical equipment and supplies, and three floors designed as laboratories where manufacturers could demonstrate how their equipment worked. The Medical Forum would bring convention-goers to Birmingham and fill its hotels and restaurants.

But the venture flopped. Within the first year that leases for med mart space were available, it was clear that medical manufacturers had no interest in the concept. The building was converted into regular offices and is still used that way today.

Perhaps the most stunning fallout of Birmingham's med mart collapse was revealed to Clevelanders in September 2007, a few months after Cuyahoga County commissioners plowed a quarter-cent sales tax hike through without voter opinion in order to finance MMPI's med mart here.

According to a report in Crain's Cleveland Business, MMPI's vice president at the time, Mark Falanga, had no knowledge that a med mart had already been tried in Birmingham, with disastrous results.

"In and of itself, this is not enough to cause us to hesitate," he told Crain's after studying the Birmingham debacle.

And indeed, no one hesitated.

MMPI, founded by the Kennedy family, who developed the company's expertise in mart-style buildings as a means to showcase furniture, gifts, home furnishings, and interior design — but not medical equipment — forged ahead with its med mart plans. At the helm was Chris Kennedy, the son of Robert Kennedy. Representing the county was then-Commissioner Tim Hagan, reportedly a close family friend of the Kennedys.

By the fall of 2010, commissioners started finalizing Cuyahoga County's 20-year deal with MMPI, and contracts that cemented the financial arrangements were approved before the county's new government came onto the scene. In the end, the commissioners issued bonds for the project that obligate the county to pay more than $800 million, including interest, for its med mart.

Through it all, MMPI had said it has procured potential med mart tenants, but declined to reveal who they were. It also claimed to have attracted trade shows committed to planting roots in Cleveland, although it wouldn't say which ones.

When construction crews broke ground in January, MMPI finally released the lists. Absent were large, multi-national makers of cutting-edge medical devices. Instead, furniture and design companies — MMPI's stock in trade — were featured prominently as med mart tenants, as were various Ohio-based outfits: everything from information technology to security systems to aromatherapy. Among the 30-some conferences announced, only a handful were medically related.

By May, Brian Casey was on the ground in Cleveland, bringing with him years of experience with a company that manages membership, educational conferences, and trade shows for medical organizations. A month after Casey's arrival, Chris Kennedy announced that he would be stepping down as president of MMPI. Replacing him at the helm: Mark Falanga, the man who knew nothing of Birmingham's med mart fiasco.

But Casey does know a thing or two. For one, he knows that hospitals don't actually shop for things the way Cleveland's original med mart planners assured us they would.

Beginning in about 1990, shortly before the Birmingham Medical Forum was built, hospitals across the nation started responding to government pressure to lower costs. One way is to join one of more than 600 group-purchasing organizations that contract with suppliers on behalf of large groups of institutions to get discounts — sort of like a warehouse club for medical buyers. The process makes shopping malls stocked with supplies and devices unnecessary.

"More than 70 percent of what a hospital buys is through a group-purchasing organization," says Curtis Rooney, president of the Health Industry Group Purchasing Association, whose members include the nation's largest medical purchasing groups. "Everything from cotton swabs to laundry services to CT scanners."

Further, nearly all hospitals belong to at least one such group.

"In addition to purchasing, they evaluate the products and compare them for the hospitals, and they work closely with physicians to evaluate the products," he says. "If it's really high-end, the hospital develops a relationship with the manufacturer, who makes a one-of-a-kind device for them."

In these cases, a hospital already knows what it wants — there is no comparison shopping.

The Casey Effect

An unassuming Chicagoan who now calls downtown Cleveland home, Brian Casey stands up straight but casually as he makes conversation. He chuckles easily when something strikes him funny, and any observer can see that he is genuinely impressed with Cleveland.

Casey's more serious, professional side knows that politics happen anytime two people are in the same room. He says he is staunchly honest. He is definitely frank.

"The concept within the medical mart — I think people may have had it upside down, where the tenants in the building are going to drive the traffic," he says.

In Casey's med mart concept redo, medical conferences and trade shows — not permanent tenants — will drive the traffic. The focus will be on medical education required by doctors and nurses. And he aims, at least at first, to target relative locals, not those far-flung enough to rack up endless nights in hotels here. Casey speaks only rarely in specific terms, but he hints at collaboration between local institutions that might eventually make Cleveland a Mecca for medical education.

As for med mart tenants? The original promises called for displays of high-end equipment from the likes of GE, Phillips, and Siemens, which may or may not still be in the works. Indeed, as MMPI begins turning mere letters of intent into signed leases, the first takers are shaking out more along educational lines. That, says Casey, is by design.

What Cleveland will get under the new plan is a convention center that features advanced, easily expandable IT capability and all the bells and whistles needed for live surgery feeds and hands-on medical and laboratory training. For the past two years, MMPI has routinely promised to bring in 50 to 60 medical meetings a year, amounting to 300,000 visitors spending more than $300 million on hotels, food, and nightlife annually.

So far, the going has been slow. Of the 25 conferences lined up to come here between 2013 (when the med mart is slated to open) and 2015, just 9 have something to do with medicine — and only 1 has agreed to hold an event here for two years instead of just one.

MMPI will not divulge how many attendees might arrive with those meetings or how many nights they might spend in hotels. But Positively Cleveland, the visitors bureau that is jointly responsible for procuring convention business for the city, booked 6 of the 25 meetings. And as a quasi-governmental entity, it is obligated to talk.

According to their figures, Positively Cleveland's six meetings will bring in 14,200 convention-goers over three years. In 2010, Positively Cleveland brought in many more attendees to Cleveland's former convention center — some 186 conferences and shows attracting nearly 150,000 people — on its own. But spokesmen for both Positively Cleveland and MMPI say that meeting planners are hesitant to book conventions before the building is finished.

"There seems to have been this almost whacky belief that if they built it, folks would inevitably come in very large numbers," says Heywood Sanders, a convention center expert and professor of public administration at the University of Texas in San Antonio. Sanders says the country suffers from a glut of expanding convention space that sits unused and is unprofitable.

"It was always clear there would never be the 50 medical conventions a year coming out of this thing," he says. "There is nowhere in the country that could do that. Now, Cleveland is faced with turning a convention center into maybe a continuing medical education center with no track record." Sanders considers this a daunting prospect.

But Casey remains undaunted, and he says the yet-to-be-revealed partnership between Cleveland Clinic, perhaps University Hospitals, and other well-known medical institutions will draw meetings to town — and the people will follow.

Even if such a partnership works, the educational offerings will have to attract medical professionals from throughout the country — not just the 200-mile radius Casey is targeting first — before the city can benefit from anything close to the $300 million a year promised, Sanders says.

"Most of the people in a 200-mile radius are likely to be the ones within a 50-mile radius, and they aren't likely to spend the night at all. They buy lunch and park."

Sanders maintains that any new convention facility is bound to fail in this economy, and that the med mart project will end up costing the county money, rather than making it.

"If they're not bringing in overnight visitors, they're not bringing in new dollars," he says. "They're essentially just rearranging debt tiers on the Titanic."

Cuyahoga County Executive Ed FitzGerald says it's too early to worry. "With two years to go until its opening, it's not possible to predict how everything will turn out," he says in an e-mail statement. He adds that the county is monitoring MMPI's progress toward meeting its contractual obligations.

As Casey courts more regional visitors, his compatriots at Positively Cleveland are intent on bringing in overnighters.

"We do not use a 200-mile radius as a guide," David Gilbert, the group's president and CEO, tells Scene. "In fact, the majority of the business for which Positively Cleveland has booked is national in nature."

Filling up the med mart is moving along at a swifter pace for MMPI. Of 60 prospective tenants, 13 of MMPI's top educational picks have signed or are in the process of signing leases. Leases are also being signed or reviewed by 24 tenants that MMPI considers among the second-most-important for the new educational concept.

By all accounts, Cuyahoga Community College and Cleveland State are among the preferred tenants, and MMPI is giving them free rent — a move Sanders says is not surprising or unusual for convention center ventures across the country.

University Hospitals has confirmed it is finalizing details of a lease agreement, but will not comment on any educational collaboration until the lease is signed. Cleveland Clinic's continuing medical education division is on board, as is Cleveland Clinic Innovations.

"Cleveland Clinic's Innovations and Education offices have been in ongoing discussions with the leaders of the medical mart about programs and potential relationships that will be beneficial to the project," says Clinic spokeswoman Eileen Sheil. "We continue to be very supportive of the development of this, as we believe it is good for the city."

As for who the other tenants will be and how they will contribute to the educational theme, Casey isn't ready to say.

"In two or three months," he offers, "it will all make sense."

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