Azar addresses value-based transformation at FAH

March 6, 2018

Alex M. Azar II, Secretary of Health and Human Services, in a March 5 speech at the Federation of American Hospitals, noted that one of the key commitments President Trump has made across this administration has been to see the private sector as partners, not just entities to be regulated or overseen.

Following are some condensed highlights from that speech:

HHS sees stakeholders, including the nation’s hospitals, as part of the solution to our country’s many healthcare challenges. They recognize that it’s not just government that wants better healthcare for all Americans. HHS partners in the private sector want the same.

Advances in science are transforming medicine. It seems like it’s every other week that FDA is approving some novel therapy, or NIH announces a finding that revolutionizes how we think about a key piece of biology.

But innovation in payment and delivery systems is simply not proceeding at the same pace. At the beginning of this millennium, concepts like personalized medicine and cell therapies for cancer were in their infancy. Now, personalized medicine has come to life, and cell therapies are receiving FDA approval.

Meanwhile, on the delivery side, in the first decade of the 2000s, shifting to a value-based system was just getting going as well. And yet here we are today—and value-based payment is still far from reaching its potential.

Today’s healthcare system is simply not delivering outcomes commensurate with its cost.

While many health challenges have been conquered in recent decades, chronic diseases remain a painful, expensive burden on Americans’ lives. In many cases, the system is poorly set up to treat them. The opioid epidemic facing our country is one of our greatest public health challenges, stealing tens of thousands of lives from us every year—even though addiction is a treatable disease.

On top of that, the current trajectories in health spending are both unsustainable, and unmatched by increases in quality. Since 2001 the HHS budget has expanded from just under $400 billion to $1.2 trillion today. The idea of coming back to run a hospital system that’s three times as big as it was when you first started may be appealing, but that is not how we feel about the federal government.

Federal spending on major healthcare programs is projected to rise from 5.5% of our economy in 2016 to 8.9% of our entire economy 30 years from now. By themselves, these programs will consume almost all of the income taxes collected by the federal government. It would be one thing if this were accompanied by increasing quality—spending 20% of GDP on healthcare to boost our life expectancy to 100 sounds like a pretty good deal!

But it’s not the deal we’re getting right now. As all of you know, part of the problem happens to be the equation that we’ve used for healthcare in this country for decades now: Paying for procedures and sickness.

For over a decade, we have been on a journey to replace that equation with a new one—paying for outcomes and wellness—but that transition needs to accelerate dramatically.

Imagine a day when healthcare delivery in the United States functions the way other parts of our economy do. We, as patients, would pick providers with the level of information we have when using Amazon or Yelp. Consumers would drive quality and cost-effectiveness with information, competition and genuine choice.

Some argue that healthcare is simply different and is—and should be—immune from market forces. Real competition, in the economic sense, has never really been fully tried in our third-party payer system.

Using the value-based transformation of our entire healthcare system is one of the top four priorities for the HHS. The others are combating the opioid crisis; bringing down the high price of prescription drugs; and addressing the cost and availability of insurance, especially in the individual market.

HHS has the original remarks

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