Some healthcare leaders, driven by the desire to improve the healthcare system, are putting into action the theories and philosophies they believe in. One example is Ezekiel Emanuel, M.D., Ph.D., vice provost for global initiatives at the University of Pennsylvania, and whose office sits inside the Department of Medical Ethics & Health Policy at the university. Dr. Emanuel, who was a key policy adviser to President Barack Obama during the time that he and congressional Democrats were developing what would come to be called the Affordable Care Act (ACA), has for many years been passionate about creating change in the U.S. healthcare delivery system. It is in that context that a little over a year ago, Emanuel, along with colleagues Amol Navathe, M.D, Ph.D., an assistant professor of health policy and medicine at Penn and a Commissioner of the Medicare Payment Advisory Commission (MedPAC), and Simeon Schwartz, M.D., president emeritus of the Westmed Medical Group in Miami, led the creation of Embedded Healthcare, a spinoff created at Penn’s Transformation Institute. Embedded Healthcare is unusual, in that it is not a software company in any traditional sense, though it leverages a software platform; instead, its customers are health plans whose leaders want to influence physicians to change ordering and referral behaviors. Conceptually, it falls somewhere between a consulting firm and a utilization management company.
As Embedded Healthcare’s website explains it, “Embedded Healthcare is a health care platform that makes it easy to engage and motivate providers to make decisions that deliver better care at lower costs. We draw upon cutting-edge behavioral science to help payers set up innovative payment models and deliver targeted nudges and incentives to providers working in an open network. Our turnkey solutions require neither new investments in health IT nor disruption of physician practice, making it easier for providers to give the most effective and efficient care to their patients. Embedded Healthcare strives to engage front-line providers in the success of value-based care because they are vital to a lower cost, higher quality US health care system.”
Then, on August 1, the leaders at Clarify Health, a cloud analytics and value-based payments platform company, announced the launch of Clarify Advance, which came on the heels of Clarify Health’s acquisition of Embedded Healthcare. As the Aug. 1 press release explained it, “Clarify Advance provides payers with an important tool to accelerate the shift from fee-for-service to value by creating the incentive framework and behavioral nudges that drive meaningful change into the daily decisions of providers, regardless of the payment model they are in today.” And the press release quoted Emanuel, speaking in his capacity as a strategic advisor to Clarify Health, in saying that ““We know prices for identical services vary tremendously among providers,” said Dr. Ezekiel Emanuel, Vice Provost for Global Initiatives at the University of Pennsylvania, Co-Director of Healthcare Transformation Institute, and a strategic advisor to Clarify Health. “Providers have no insight into the rates of facilities and the numerous specialists in their network, or which ones provide the best outcomes at the lowest cost. This has contributed to the inefficient and unsustainable process in which we operate, and why the adoption of value-based care has lagged. With behavioral science and micro-targeted incentives, we have a proven approach to accelerate adoption of high-value clinical behavior, which in turn, can lower healthcare costs and improve outcomes.”
Shortly after the announcement of Clarify Health’s acquisition of Embedded Healthcare, Dr. Emanuel spoke with Healthcare Innovation Editor-in-Chief Mark Hagland about the current landscape around value-based care delivery and payment, and where everything is headed. Below are excerpts from that interview.
In your case, your academic work actually led to the creation of a company focused on motivating behavioral change in physicians. How did that emerge?
Based on my academic work, we developed this idea about how to change physician behavior; and we knew as academics that we couldn’t scale it, and the only way to scale it was to create a company; and then the company got bought by Clarify, because it’s a good company. We had been out in the field for a year now, and we’ve been developing a good store of data.
What were you seeing in the value-based contracting world that shaped your vision for Embedded Healthcare?
I would start with the fact that, for nearly the past 20 years, I had the view that what would sink the healthcare system was not the poor quality, but costs. Costs are really sinking the system; but I came to believe 14, 15 years ago, that the only thing that would change things was physician behavior. And in working on the ACA, I was involved in looking at ways to incentivize behaviors. You know, I worked on bundled payments, I put it in the bill. And we know that it works in some areas, such as bundled payments; I put that in the bill. But the uptake has been uneven. Fee-for-service remains the dominant form of payment. And a lot of value-based payments are still based on a FFS chassis. So that led us to think, what can we change in the FFS world? And one of the things we’ve done is to move primary care doctors to capitation, and that’s been successful. But we want to work in the FFS system to improve quality.
And on the commercial side, we know that one area where we’re wasting a lot of money, is on site of service. You go for a diagnostic imaging procedure, and it’s a commodity—I know radiologists hate it when I say that, but it’s true—and yet the price difference can change five-fold based on site of service. The same is true for a procedure. But no one’s cracked the nut, which is, how do you get doctors to change site of service? And how do you get rid of low-value service?
So you need three things. First, you need information; second, you need infrastructure; and third, you need an incentive. And so we put the three together in what’s now called Clarify Advance. And if you give a doctor the information after they’ve made the referral, it’s too late. And the infrastructure has to be there. And a surgeon won’t switch to an ASC if they don’t already know the surgeon; and they have to get credentialed. So have them switch to an ambulatory site they already know. So those are the kinds of insights we’ve brought to bear. And that requires a certain level of information about the docs. And a certain level of technology, to find out who’s made a particular referral. For the labs, it won’t even be the doctor, I might be the front-office person.
So we’ve put it all together and shown we can switch site of service about 15 percent of the time. And we can get doctors to move, and we’ve added in an incentive to it.
There’s such a huge lift around cultural change in terms of getting physicians to shift into value-based contracting and change behaviors.
Yes, there’s a big switch involved, and what physicians are worried about is that that switch to capitation is simply a surreptitious mechanism with which to take money away from them. And they know about the 90s capitation. And they feel capitation was dumped on us, they didn’t provide any incentives or information, and simply took money away. So you have to convince them that these value-based mechanisms are not just taking payment away from them. In fact, we always encourage payers to add to the value-based payments to convince them. But once these things work, you go from paying 7 percent to 8 or 9 percent of your premium, but you’ll save money by designing incentives correctly. You can’t simply make things work by reducing payments to individual physicians. Second, one of the elements of designing incentives right is putting the doctor and payer on the same page, aligning them.
And one of the elements we’ve done with Clarify Advance is to say, alright, Doc, you switch to an ASC [ambulatory surgery center] and save $10,000 per procedure, and you’ll get an incentive and make more money, and we’ll save money. And you have to make the money big, it can’t be a small fraction. In some cases, we’ve been able to raise the payment to the surgeon by 50 percent, because of the shift of site. And once you’ve got doctors seeing that they can make money by switching, you can then convince them to participate. And then they become much more receptive. Part of the problem, I honestly believe, is that most payers have not really thought through their design of these incentives and structures, to build on the savings.
The other thing that I would say to you is that it’s very hard to make big savings on small pilots: you haven’t scaled or justified the investment in technology. So you have to view pilots as helping you towards scale, including scaling across Medicare Advantage, Medicare fee-for-service, and commercial, to justify the investment. What you really want to do is to change physician habits: change site of service, change lab, etc. If you do 10,000 tests a year, and some are, as for immunological markers, and you’re saving $50-$500 each time, for example—well, it begins to become habit-forming for the doctor. And that’s the key.
How do we accelerate the value journey in healthcare? Many ACOs [accountable care organizations] still involve relatively small numbers of patients, and most patient care organizations are still struggling with the “one foot in the boat, one foot on the shore” problem.
There are two questions here, and I want to distinguish them. There are two different timelines. The first one is, how do we get everyone into value-based payment, and not avoiding it? I had been all for mandatory, not voluntary, demonstration projects. I pounded on CMMI [the Center for Medicare and Medicaid Innovation], about making the lower-extremity joint replacement model mandatory. You need that in order to do proper analysis. It took me a long time to convince them that you need the data, and you’ll have skewed data if you only get people to volunteer who know they’ll do well. If you structure it right, it will go well, and if you make it mandatory, well—you can’t be an orthopedist or do cataract surgeries and leave Medicare. So, we should make it mandatory. And second, once you’re in, how long should we wait to expect change to happen? John Cotter has written a book, Leading Change. If you really want transformation, that’s a ten-year process, not an overnight process. We need the right timeline and you find that you tend to get change around the four-year point. What is the highest point of groups making money and getting payouts? It tends to be three-and-a-half, four years. Some groups move faster than that, and some, it takes longer. Four years is what the change literature says. And to really get it institutionalized, takes that amount of time, and you’re really humming.
What’s going to get hospitals and health systems into the deep end of the pool?
Unless we put some financial screws to them, we won’t change the equation. Eliminating beds is one way. Otherwise, they’re just going to increase their inpatient capacity. Why would I implement hospital at home, if all I have to do is to raise my rates on the commercial side, or even Medicare? Hospitals lobbied for a bailout during COVID, and got an increase in rates. I don’t want hospitals to go under, but they won’t look at efficiencies unless they’re required to. And I’m pro-Maryland, because they have a cap, and when they move patients into the outpatient sector, add the outpatient sector to the cap. Partially, it’s prices, but partially it’s also, this is a budget, and we’re not going over the budget, and if you go over it, you get 85, 90 cents on the dollar. That’s a form of discipline, and you need discipline. And they won’t adopt some of the efficiencies unless they have to. You can hire a more junior surgeon and tell them, your operating day is Saturday. Frankly, if you could make a fair amount of money operating in the OR on a Saturday and take time off during the week, some would do that, with incentives. You’re making your facilities more efficient; but we haven’t been doing that. Only Japan has more MRIs per capita than we do.
But can’t global budgeting can distort the system? Canadian and European healthcare leaders have cited distortions created by global budgeting.
I don’t think there’s a free lunch with any system; someone’s going to pay. If organizations are successful in MSSP, someone pays; for example, there are fewer hospitalizations. But you can do hospital at home. And hospitals could respond by becoming more efficient and lowering their prices. There are going to be externalities. And some might be challenging. And you might require your surgeons to start surgeries ten minutes earlier in the morning. So there are lots of things that can be done that haven’t systematically be done yet. You should be looking at outliers among your surgeons and complication rates. It turns out that the surgeons who operate the most often, also tend to have the best clinical outcomes.
How do you see things evolving forward over the next few years?
We’re not seeing a lot of innovative programs coming out of CMMI and CMS [the Centers for Medicare and Medicaid Services, CMMI’s parent agency]; the main focus has been disparities, which is an important area. But I’d like to see a lot more aggressive delving into mandatory programs and other approaches. They need to address upcoming, and address some fundamental poor outcomes issues. My biggest issue is hypertension; we could be doing a much better job in that area. And at the turn of the new administration, I was on several panels making recommendations. I actually thought that when Donald Trump came in, CMS and CMMI would not do a lot, and in fact, Price [Tom Price, M.D., who served as Health and Human Services Secretary from February through September 2017] immediately cut back the number of MSAs [metropolitan statistical areas] in half for the [mandatory] lower-extremity joint-replacement program. One other thing I’m super-frustrated by: the bundle for radiation therapy—we’re probably never going to end up with it. They should make the radiation therapy bundle mandatory. There aren’t that many radiation oncologists, but they’ve got a lot of political influence.
