While industry leaders agree that transformational change needs to take place in U.S. healthcare, exactly which elements of the healthcare system need to be fixed and how they can be successfully fixed, were questions in high relief on Monday morning at the Marriott Wardman Park Hotel in Washington, D.C., as the annual World Health Care Congress kicked off with its opening keynote session, “Policy and Market Forces Impacting Health Care,” on Monday morning, May 1.
Ceci Connolly, president and CEO of the Washington, D.C.-based Alliance of Community Health Plans, led a very robust discussion of the incentives in U.S. healthcare and how they can be modified to improve patient outcomes and community health, lower costs, and transform the system, to everyone’s benefit. She was joined on the panel by Robert Pearl, M.D., executive director and CEO of the Oakland, Calif.-based Permanente Medical Group, co-CEO of the Permanente Federation, and the author of the just-published book Mistreated: Why We Think We’re Getting Good Health Care—And Why We’re Usually Wrong; Chet Burrell, president and CEO of the Baltimore-based CareFirst BlueCross BlueShield; Charles Sorenson, M.D., emeritus president and CEO of the Salt Lake City-based Intermountain Healthcare, and founding director of the Intermountain Healthcare Leadership Institute; and Paul Grundy, M.D., chief medical officer and director, healthcare transformation, at the Armonk, N.Y.-based IBM.
“So, we’ve got a very crazy situation here in Washington,” Connolly said, referencing the ongoing drama over whether the Affordable Care Act might be repealed and replaced, or modified in some way or another. But, she pointed out, the percentage of insured Americans who receive their health insurance through the ACA-established health insurance exchanges is between 4 and 6 percent of the total insureds, whereas, she noted, the vast majority of Americans still receive insurance either through employer-sponsored insurance, or through the Medicare and Medicaid programs. Focusing the discussion on private health plan-paid healthcare, she asked each of her panelists, “What do you see in the private sector that’s working and that’s not working?”
“Let me start with the reality that our American healthcare system is simply broken,” Kaiser Permanente’s Pearl began. “We spend 50 percent more than any other [national healthcare] system, yet our outcomes are half. The American healthcare system is broken—it’s fragmented—it’s a nineteenth-century industry; it’s paid on a piecemeal basis, with 20th-century technology. I wrote the book to help suggest solutions,” he said.
“In the book,” Pearl said, “I talk about the fact that what’s broken isn’t the doctors or the insurance industry per se; it’s simply the context. And context shapes perception, which changes behavior. Think back to the Stanford Prison Experiment. One half become the jailers and one half the jailees. Within 48 hours, the jailers saw the jailees as being dangerous criminals; they started to impose debasing treatments. The jailees saw the jailers as imposing wardens. It makes no sense, but It changes behavior. And we have to understand this as we’re trying to change the delivery system,” he said. “If you integrate care, horizontally among physicians and vertically among the pieces of the continuum of care, all of a sudden, the physicians start to coordinate and collaborate, and you get the results you need. As soon as you capitate, all of a sudden, prevention, and early care become more significant, and you can see the care gaps. So it is not about what we think, but how we see. And if you can change perceptions, you can change behavior.”
“Chet, from the perspective of a health plan?” Connolly asked. “I would build on what Robbie said,” Burrell responded. “We cover northern Virginia, D.C., and Maryland. And we see the health systems developing into a system of oligopolies, usually under an academic medical center. And that congealing has resulted in care that is increasingly focused on academic medical centers. And federal healthcare policy has been hospital system-centric. And that’s increased cost, usually with 250-300 percent higher costs than in community-based care.” The solution, he said, is for health plans to work in conjunction with primary care physicians to force changes to patient utilization of medical specialists and hospitals.
We have not found it to be true that ACOs [accountable care organizations] have created more community-centered care.” Instead, he asserted, hospitals have only consolidated their power and continued to increase costs to the overall healthcare system. Instead, in working to bring down utilization costs and improve care delivery, he said, “We thought, who are the most important players in the system? Primary care physicians, not because they do everything, but because they make the most value-laden decisions in the system—when to refer, and to whom. We were looking for independent primaries in the system who were free to shop the specialists. The result has been a profound effect, when the primaries become the buyers. They become fussy about what happens. They’re not locked into systems. The difference between the big-system costs and community-based costs, are something between 22 and 27 percent in this market,” he said. “And I’ll be glad to talk about how we structured incentives. I agree with Robbie that if you change the context, you change what you do. And we cover 1.7 million people in this market.”
Looking at the healthcare system as a whole, IBM’s Grundy said, speaking of transformational change in healthcare, “There are really three things that are driving this, and I have the privilege of seeing this globally. The fist is unsustainable cost. And that’s everywhere, but more here than anywhere. The second is data. The third thing is this,” he said, holding up a smartphone for the audience to see. “We’re going to be able to a lot remotely, and I’ve seen that globally. So there are two things going on globally, reformation and transformation,” he said. “Reformation is about who pays.”
Continuing, Grundy said that, with regard to transformation, “Most people agree they’d like better and more affordable care. I had the privilege of being on a couple of calls with Price,” he said, referring to Tom Price, M.D., who recently became Secretary of Health and Human Services, and who had served as a Republican congressman from Georgia before that, “and he reminded me that we did a couple of videos on the patient-centered medical home,” whose model he sees as an essential component in transforming care delivery. “It’s not just how you pay for it, but whom you’re paying,” he said. “I’ve had the privilege of traveling around the country, and what’s great is building on the kind of work that they’ve done at Kaiser; and building on the patient-centered medical home and robust primary care.”
What’s more, Grundy said, there are several key elements to transforming the delivery system from the ground up. First, he said, “Practices have to be redesigned so that primary care is at the base of it, and primary care is on your side, not the hospital’s side. Then there’s payment redesign: start paying for episodes of care. Capitation, outcomes, value, service level, they’re all dials we’ve put in place. We’ve done that in Denmark. So one dial is paying the specialists to answer the emails of the primary care physicians. I’ve also been in 12 communities across the country,” he said, “including Alexandria, Louisiana and Lynchburg, Virginia, where the local employers are gathering together and working with local primary care, and when they do that, all of a sudden, you have data, and good primary care on the side of the patient and not on the side of the hospital, and we’ve seen decreases in cost. We’re in year 10 in Alexandria, Louisiana,” in that experiment, he said.
“Frankly speaking,” Grundy continued, “I can only buy integrated care from Kaiser or Intermountain for about 6 percent of our lives, because we’re everywhere. So some of this has to be rebuilt. The last is really benefit redesign. How do you put skin in the game for patients? The worst is to have a high-deductible benefit plan where your patient has no incentive to get preventive care, such as a diagnostic scan. So, payment redesign, practice redesign, and benefit redesign, all have to happen. But all three have to happen at the same time. I’ve talked to employers across the country doing benefit redesign, but all three things have to happen at once.”
“I’d like to start with the question, what do we really want as individuals?” Intermountain’s Sorenson said. “I don’t think anyone wakes up and says, I hope today is the day where I get great care for a ruptured aneurysm; or great renal dialysis. We want to live healthy lives. And talking about healthcare sometimes gets us focused on the wrong thing. About 20 years ago, a hospital CEO said, we’re not in the business of healthcare, we’re in the business of sick care. So, the incentives need to change. The financial incentives in the fee-for-service system encourage us to wait and delay. So, changing the fee-for-service system, moving to population health management, where health insurers, providers, and patients, all benefit,” is going to be a key shift for U.S. healthcare.
“The good news that we’ve found at Intermountain over the past 20 years,” Sorenson went on, “is that physicians want to do the right things for their patients, cost and clinical outcomes, and if you can incentivize that, you get better clinical outcomes and lower overall costs. The problem in the fee-for-service system is, if you prevent renal failure, prevent a cancer, etc., the health system gets paid less in fee-for-service. So we’ve got to change those incentives and track the outcomes, both clinical quality and cost, so engaging the caregivers and the patients. The good news is that when people are informed properly, they make good choices both about treatment options and healthy behaviors. And that’s true in our health plan, which serves about 20 percent of our patients at Intermountain. And this urge to merge, it’s often stated that that’s done to achieve economies of scale, but really, that just aggregates into a larger health system that has bigger clout with payers, and it really focuses leadership, I think, away from the bigger and much more critical job of changing how we deliver care and changing from a system that only fixes problems to one that also prevents problems. And that can’t be done by Washington, D.C.; that has to be done by the healthcare system.”
Shifting care away from hospitals?
A segment of the discussion focused on the shift that all the panelists agreed needed to take place in terms of focusing on primary care-based interventions in order to improve patient outcomes and health status and reduce costs over time in the U.S. healthcare system. “I was thrilled that a few of you mentioned primary care. Tell folks about your patient-centered medical home-based initiative, Chet?” she said, turning back to CareFirst’s Burrell.
“Well, we’re in our seventh year,” Burrell said, “and our program covers about 1.2 million people, and about $5 billion flows through the system” every year. One key element in CareFirst’s program, he noted, was that while primary care physicians order and direct so much care delivery, “they only manage about 5 percent of services. So we created everything by contract, not employment. The average panel is about 10 primaries. And 10 primaries in this region, with our market share, deal with about 1,000 members. And we did a very simple thing,” he went on. “We looked at all the care by specialists, for example, repair of your meniscus. And the average range of cost was 100-200 percent. And was that correlated to quality? Not in the slightest. And we said to the primaries, why are you always going to the highest-cost specialists? And their jaws dropped. And now they become fussy, under our incentives. So that set into place a dynamic. If you are a primary who is owned and controlled by a [hospital-based] system, you’re hermetically sealed into your high-cost system. But by empowering the primaries, that was landscape-changing. We caused the panel as a whole to be accountable for the whole. And we gave them a complete profile of what the patients’ expenses looked like. And we shared the savings with the panels. And this has produced rewards on average—50 percent increases in income to the ‘winning’ panels.”
“I was about to ask you what was in it for the primary care docs? It seems like lots of extra work for them,” Connolly said.”
“It is extra work,” Burrell conceded. “They need to focus on multi-chronic patients. We paid them 12 percent more just to come into the program, but we also said, if you perform well as a panel, we will share it; and we included no downside risk. And the reason we chose that as incentive-only—this was a 50-percnet incentive. That’s the average award, 40-50 percent—is that, if you ever get that, you’ll be incentivized to do it again. We said that a primary care physician taking 5 percent on the dollar, shouldn’t be accountable for 100 percent risk. Because when we talked about their taking risk, it drove them into the arms of the health systems.”
With regard to incentives for primary care physicians, IBM’s Grundy said, “I was sitting recently in a primary care practice in West Virginia. And he said, you know, there’s one hospital in town. It’s in my interest to keep that hospital alive, even though it costs much more to do a CT scan there. There’s enormous variation in costs. But when you get the GP on your side things, change. Honestly, though,” he said, “if a hospital employs everything, you’re probably going to have to employ your own.”
“Shouldn’t we be closing more hospitals in America?” Connolly asked bluntly. “Yes,” Intermountain’s Sorenson responded. “We’ve looked at that for many years in our market, which is mostly Utah, with a few hospitals in southern Idaho. We’ve been very conscious to only grow based on population growth. And we need to recognize that anything built with bricks and mortar is at high risk financially.”
“Why are there still so many hospitals?” Connolly asked Kaiser Permanente’s Pearl. “I’ve heard some CEOs say that hospitalization is a failure of the system.”
“You’re asking exactly the right question, Ceci,” Pearl responded. “Let me start with the reality that if you lower costs, you’ll have fewer hospitals and fewer clinicians. Between San Jose and San Francisco, where I live in Silicon Valley, 10 hospitals do heart surgery; three of them do fewer than 300 cases a year. That means there are 50 days a year when those hospitals aren’t doing that surgery. What business would work on that model? Until there are fewer hospitals, and fewer specialists, we’ll still have high costs. Chet talks about the medical home being the base; that works on quality, but it’s harder to fix cost. The ACO does some things better. But how do you right-size it? You need to move to a fully integrated delivery system, paid on a capitated basis. You need the quality, the cost control.”
Indeed, some visits don’t need to be in-person visits at all, Burrell asserted. “We found that the majority of routine office visits are for follow-up visits for chronic disease,” he said. “And we’ve found you can do that much more effectively and productively through televisits. And it’s a more efficient use of physicians’ time. And more convenient for patients.”
The panelists went on to agree that precision medicine, information technology, and advances in care management, will all help to push the U.S. healthcare industry forward towards greater efficiency and cost-effectiveness, and towards improved patient outcomes, in the coming decade.