Monday, September 14, 2009

Health Innovators: Another employed, capitated physician group makes headlines

Modern Physician recognizes Physician Entrepreneur of the Year George M. Rapier III, M.D. for the creation of WellMed Medical Management which provides care for 83,000 patients in 29 clinics

This is a repost of an article written by Elizabeth Gardner
of which recently announced their Physician Entrepreneur of the Year. The award went to George Rapier III, MD who founded a large group practice founded on a capitated, physician employed, centralized group practice approach. It is yet another example of the type of quality, cost, and outcome improvements that can occurs when care becomes organized, coordinated, goal directed, and incentives are aligned with good outcomes. This article foreshadows for me the many variations of "Kaiser-light" that I expect to see evolve over the coming years.

By Elizabeth Gardner on September 14, 2009

George M. Rapier III, M.D., became a gerontologist because he liked old people. And he became an entrepreneur, somewhat inadvertently, because he thought there was a better way to take care of them. After almost 20 years, his better way seems to be paying off for everyone. The medical management company he founded, WellMed Medical Management, takes care of one in five seniors in its native San Antonio, and a total of more than 83,000 patients through 24 clinics in Texas and five in Florida. About 35,000 of its patients come through the managed-care option Medicare Advantage.

WellMed provides extras such as free transportation to appointments that helps patients show up consistently, free vaccinations to keep the flu away, and help with medication copayments and deductibles that have increased WellMed patients' prescription fill rates from 17% to more than 90%.

More than 12,000 WellMed patients wear bracelets or carry key fobs with a USB device that lets providers access their electronic health records. WellMed patients with chronic conditions such as diabetes or congestive heart failure have health coaches who contact them regularly and make sure they're getting the care they need to stay as healthy as possible, through a disease-management subsidiary called HealthRight. WellMed took in more than half a billion dollars in revenue last year. While the company is privately held and doesn't release profit figures, its revenue has more than doubled in the past three years. For his central role in creating a company that takes better care of patients and makes money doing it, Rapier is the recipient of Modern Physician's Physician Entrepreneur of the Year award for 2009. He was chosen from a field of 37 nominees in the second annual competition.

Rapier, 56, saw his entrepreneurial opportunity in 1990 when the HMO PacifiCare (now part of UnitedHealth Group) came to his previous practice, the multispecialty group Diagnostic Clinic of San Antonio, with a proposal to expand the amount of primary care in the metropolitan area. “There was not enough primary care even then, and it was already apparent that you have to have a good primary-care base that's incentivized to manage care,” he says. PacifiCare was willing to put up the money for the expansion. The practice wasn't interested, but Rapier himself (who was at the time the practice's president) certainly was. “It sounded like a no-brainer to me, so off we went,” he says. The resulting joint venture, funded with $1 million in PacifiCare seed money, opened Trinity Medical Group, specializing in primary care for seniors.

That first clinic grew, fueled by a model for primary care that wasn't built on volume. WellMed prefers to operate on the basis of capitation and delegation: that is, it receives a fixed sum from the insurer for the care of each patient, has sole responsibility for figuring out how best to spend it, gets to keep what's left over, and thus benefits directly from keeping its patients as healthy as possible. Its 60 employed physicians and 20 physician assistants are paid a base salary plus a bonus based partly on profitability and partly on hitting specific quality targets that vary from year to year. WellMed also contracts with about 150 primary-care physicians.

Recruiting physicians has been one of the relatively easy parts, because patient loads are at a civilized level. “We've never focused on high volume,” Rapier says. “That's not the way we do business. Most primary-care docs have to see 35 to 40 patients a day to make a decent living. We've operated under capitated risk arrangements since day one, and have put more focus on managing patients than on volume. Those are mutually exclusive.”

Rapier bought out PacifiCare's interest in the business as soon as he was able to, and changed the company's name to WellMed Medical Management. He grew it relatively slowly, keeping its clinics within the borders of Texas until last year, when WellMed expanded into Florida. WellMed also operates Physicians Health Choice, a Medicare Advantage health plan that's offered in Austin, Harlingen, Corpus Christi and El Paso, Texas, plus Little Rock, Ark., Fort Lauderdale, Fla., and Las Cruces, N.M.

WellMed's general approach is “doing well by doing good.” For example, the company picks up patients' excess prescription costs because they're strapped for cash and other bills always get paid first. “It was driving us crazy trying to manage them,” Rapier says. The company also augments a basic vision benefit that on its own covered only half a pair of glasses a year. “That didn't do them much good,” he says. Bryan Grundhoefer started with WellMed 11 years ago as chief financial officer, coming from Anthem (now part of WellPoint) in Indiana. His last job with Anthem was a physician joint venture similar to the one WellMed had had with PacifiCare, and Grundhoefer was intrigued by the potential for better care.

When Anthem decided it no longer needed to own any physician relationships, Grundhoefer called Rapier, whom he had met when Anthem was considering contracting with WellMed. Rapier just happened to need a CFO and Grundhoefer quickly found himself in San Antonio. He also took over the role of chief operating officer within a few months, and became president of WellMed Medical Management about three years ago. Grundhoefer was attracted to WellMed's approach, and to Rapier's particularly. “Every decision I've ever seen him make, the very first thing he considers is the impact on the patient,” Grundhoefer says. “The second is the impact on the physician, especially the primary-care physician. He believes that if he takes care of the patients and the physicians, everything else will work itself out.”

Bill Connolly has been with WellMed for three years as senior vice president of shared services, an umbrella title that takes in community relations, marketing, sales and a number of back-office operations such as claims processing, credentialing and purchasing. He came from PacifiCare shortly after its acquisition by UnitedHealth Group. “I really liked the model, the vision and the messages that I saw from WellMed when I worked with PacifiCare,” Connolly says. “I was just impressed with what they were doing.”

Connolly vastly prefers WellMed's active approach, including the patient and focusing on prevention, to the reactive way that many healthcare organizations work. “It's amazing how many people in this organization understand that if you do the right thing, good things happen,” Connolly says. “Dr. Rapier has been able to create economic incentives that combine the best interests of the patient, the payer and the provider in one model.”

As part of his mission to promote preventive care, Rapier gives lavishly back to the San Antonio community, both through a personal charity, the Blake, Kymberly and George Rapier Charitable Trust, and through the WellMed Charitable Foundation. “George is quite a hero in this community, and WellMed has set high standards for what a medical group should do,” says Fernando Guerra, M.D., San Antonio's director of health for the past 22 years. “If we didn't have them, some things would go without support, and there wouldn't be such opportunities for a public-private collaboration. We would do what we had to, but it wouldn't be anything as comprehensive as what WellMed's charitable foundation and their network can do.” For example, the city has received “formidable” amounts of help from WellMed in getting adequate supplies of flu vaccine, Guerra says.

Henry Cisneros, former mayor of San Antonio and secretary of Housing and Urban Development during the Clinton administration, runs a real estate investment company in San Antonio, and also chairs an organization called BioMed SA, devoted to developing the health and biomedical sector of the city's economy. He has known Rapier for about five years. The senior health center funded by the WellMed Charitable Foundation opened earlier this year and is named after Cisneros' mother, Elvira. “I've had the good fortune to see a number of really capable entrepreneurs, and Dr. Rapier has been one of the most impressive,” Cisneros says. “WellMed is one of the larger and more successful healthcare providers in our community—it's well-respected, doing creative and innovative work, and growing, even beyond San Antonio.”

Rapier is watching the current payment reform debate with great interest—particularly when it focuses on controlling costs with Medicare cuts. While he'd never go back to pre-Medicare days, Rapier thinks the focus of the program, and of healthcare in general, needs to come closer to managing care the way WellMed does. “To run a system effectively, you have to have someone coordinating care, and other than the primary-care physician, no one's trained to do that,” he says. “And there aren't enough of them. I would have hoped the legislation would have done something meaningful about that.”

Medicare Advantage payments are currently out of whack, he adds. “I think we'll see a reduction in Medicare Advantage funding, and I'm OK with it,” Rapier says. “I'm probably the only person in the industry that will tell you that.” Rapier quit seeing patients about six years ago because the company demanded his full attention, but he misses them. “I just like old people—I like dealing with them,” he says. “They grew up in a different time, went through the Depression and World War II. Most of them are so appreciative of what you do for them and really respect it.”

Elizabeth Gardner, a former reporter at Modern Healthcare, Modern Physician's sister publication, and is a frequent contributor to the magazine. Reach her at

Friday, September 11, 2009

Thought Leaders: Arthur Chernoff's advice for the President on Health Transformation

Dr. Arthur Chernoff shares his thoughts on how he would advise President Obama prior to his speech to both sessions of congress.

We wanted to highlight some aspects of President Obama's speech as they related to the X PRIZE. In reviewing a wealth of the information available, I noted an interesting article from Dr. Arthur Chernoff (anyone with a mugshot like the good doctors must be interesting!), who currently serves as the Division Chair of Endocrinology at the Albert Einstein Medical Center in Philadelphia, PN. This was written prior to his speech and provides at least one physicians perspective on health and health care reform. I highlighted a few areas in red that highlight the work the X PRIZE is trying to accomplish as part of its lofty objectives.

Prior to President Obama’s address to Congress on health reform, I asked myself, “What would I tell the President?”

First and foremost: go for it. All of it. Health care in America is too important, both economically and morally, to be left adrift in its current state. Its focus is wrong. It costs too much. And not everyone who needs it is able to have it.

Two rules that have served me well during 30 years of practice apply here. Rule #1. Make no assumptions. Rule #2. Always challenge authority. Accordingly, I challenge the very notion of health care reform. The word reform sends the wrong message to a public that by and large is happy with what they have and are afraid of losing it.

Reform is divisive; it implies that there is a wrong that needs reform. What is needed is not reform but transformation. Transformation is a process that can take place over time. Transformation invites cooperation among stakeholders; it is an evolutionary, adaptive process. We need to transform our notion of what health care is, how it should work, who should have it, and how its success is measured. We need to move to a system that focuses on improving the health of the individual and our communities. We need to learn to value knowledge-based care as much as the technology of care. We need to move from a system that values rescue care more than preventive care. We need to move from a system that is built to deny care to one that embraces those who are in need of care.

Universal health care must be a priority. The cost of not being inclusive is simply too high both on economic and moral grounds. Imagine if sanitation worked like health insurance: “I am sorry; you cannot have sewage or sanitation this year because you have a pre-existing condition.”

Single-payer health care would unify a disjointed system but it may not be feasible. This does not mean that the patchwork of private and government insurance that now exists can’t be brought to function as a unified system. This can be fostered by adopting unified standards for performance, processes and benchmarking just as other industries do.

Health care needs to function like a utility. It must be the same in Alaska as Alabama and it must be portable. And, like a utility, it has to be there when it is needed and it has to be easy to use.

Electronic medical records are a focal point for change. More important than having electronic medical records is to have electronic medical records that are fully integrated and compatible with each other. The Mayo Clinic record not only needs to be readable in the Cleveland Clinic, but in any clinic. Privacy is a concern. However, I worry more about gaining continuity of care in a population that is mobile and values choice. It has not gone unnoticed that fully integrated electronic medical records provide a key resource for the scientific tracking of treatments and their outcomes.

Research has received scant attention in the current debate; yet research is the heart of medical progress. We need research to power the transformation of care. Funding for basic science is critical to understanding normal biology and disease processes. There needs to be support for the research that brings discoveries made in the lab to the bedside. The process of medical care needs to be examined scientifically so that both doctors and patients learn what works and what does not.

Comparative research will determine which treatments are most efficient and which are wasteful, which medications are worth a premium price and which are not. Would cholesterol matter if no studies had been done to show that lowering it with statins prevents heart attack and stroke? Treatments need to be tested for their ability to improve our health and quality of life.

For the patient with a chronic disease, medical care is a marathon that is punctuated by sprints of acute care and races over the hurdles that the health care system imposes. In a transformed system, the health care industry would facilitate care and foster the resources to keep it coordinated and on track. Patients with chronic illnesses should have a passport to care rather than a requirement to get referrals for care.

There needs to be access for patient education, support for lifestyle modification as well as the prescribed medications and treatment. Chronic illness provides an opportunity to examine what limits effective care in the current system and why these limits need re-examination. A person at risk for diabetes may understand the need for exercise and healthy food choices but may live in a community where there is neither a place to exercise safely nor a market to buy affordable, healthy foods. Who bears responsibility? It is a health care problem that goes beyond insurance coverage and the affordability of medicines. It tests the limits of what we have traditionally called health care. It calls for a new order; one with broader vision and greater concern. It calls for a step away from acute care and a bold step toward preventive care.

It is clear why the current legislation runs to a thousand pages or more. Solving health care is complex. To do all of what I have outlined still would not meet the full measure of the health care transformation that we as a nation need; but it is a start.

So let us begin.

Arthur Chernoff is Chair of the Division of Endocrinology at Albert Einstein Medical Center.

Thursday, September 10, 2009

Placebo Effect - What about the Health Effect?

An interesting story recently published in Wired Magazine highlights the bizarre finding that the placebo effect is becoming noticeably stronger.

In a provocative story recently published in Wired Magazine the authors make note of the increasingly powerful effect of placebo in the various pharmaceutical studies. This enhanced effect of the placebo arm of the clinical trials is thought to be the collective effect of the aggregated pharmaceutical marketing efforts of the last several decades. When mixed with American's strongly held beliefs about the power of technology, these two influences have synergistically influenced the power of the placebo effect.

This is not only interesting but makes me immediately think what might happen when instead of the placebo effect, we start talking about the "health" effect. What happens when we change our overall definition of what "health" is, or how we collectively think about our health? What would happen if we made a multi-billion dollar, multi-decade investment in promoting the culture of health - what would the societal benefits we would reap. What happens when we actually start making healthy choices, start practicing healthy behaviors, and start having health and fitness become a fundamental component of our culture.

I believe the physical and mental "uplift" from this type of cultural investment would create a powerful double whammy of positive endorphins. Looking forward to see if we can fast forward this effect in smaller communities of 10,000. Hopefully the X PRIZE is coming toward a community near you!

Thursday, September 3, 2009

Team Play - Including the entire care team to improve outcomes

The Ashville Project demonstrates how non-physicians care providers can become highly valuable members of a care team who contribute to dramatic improvements in cost, quality, and outcomes.

I was recently made aware of a demonstration project that has the potential to go viral (ok, maybe that is a strong use of the term) in the quest to dramatically increase health value. I was asked to gather some information on the Ashville Project, a coopaboration (cooperative collaboration) involving adding pharmacist as a core part of the core team. I was very impressed by what I learned and thought the findings (while several years old now) would prove valuable to those interested in care team and care coordination.

Description of Project

Pharmacists are highly specialized, highly educated, and highly influential health care providers who have not historically participated in direct patient care in a meaningful way. On average, patients with chronic medical conditions see their pharmacist 5 times more than then they see their health care providers. These interactions provide significant opportunities for education, encouragement, and increased compliance with medical regiments while improving patient self empowerment and satisfaction with their health care experience.

In 1996, a large cohort of pharmacist across North Carolina embarked on a project to better coordinate their services while attempting to establish the value of the cognitive and coaching services they could provide. Their demonstration project involved having the pharmacist assume a coaching and advocacy role with patients. They received specific training for this expansion of their historical role, worked directly with patients to ensure understanding and compliance with their medical regimens, and followed the outcomes of participants assiduously to ensure efficacy of the program. They were paid directly by the self insured employer a flat fee ($300 / year) to provide these services while at the same time the employer waived the cost of all co-pays, medications, and supplies related to the targeted condition (diabetes).

Patients were provided the opportunity to meet with pharmacists at no cost to set and monitor treatment goals and to receive diabetes education, home glucose meter training, and information about adherence to their regimen. Pharmacists also performed physical assessments of patients’ feet, skin, blood pressure, and weight. Appropriate lipid management was a key component of the educational intervention. In addition, pharmacists referred patients to their physician, as needed. As an incentive to participate, patients received a free home blood glucose monitor and a waiver of co-payments for diabetes-specific drugs and supplies.


The Asheville Project was able to demonstrate tangible benefits and significant costs savings for patients, providers, and employers. Surveys indicated that patients felt more in control of their lives and were healthier. The pharmacists and diabetes educator agreed that the caring and supportive environment fostered by the project made patients comfortable with the process and facilitated their developing the skills necessary to self-manage their diabetes. Managers indicated that the program led to reduced medical costs and lower absenteeism.


The Ashville Project was highly successful in increasing compliance while improving the target clinical objectives. Mean A1c decreased (i.e., improved) at every follow-up. Additionally, at every follow-up, 57.7% to 81.8% of patients were improved, compared with baseline. Further, the number of patients with optimal A1c values (i.e., A1c < 7%) increased. At the first follow-up, 24.3% more patients had optimal A1c values, and increases of 27.2% and 18.2% were noted at the second and third follow-ups, respectively.

Mean LDL−C decreased (improved) at every follow-up, although the magnitude of the change was small. The percentage of patients with improved LDL-C values was 50.0% to 66.7% at each follow-up. At the first six follow-ups the percentage of patients with optimal LDL-C increased, with a range from 2.4% to 20.9% increase over baseline.

Mean HDL-C increased (improved) at every follow-up. Similar to LDL-C outcomes, 53.3% to 75.0% of patients experienced improved HDL-C at every measurement. We also observed an increase in the number of patients achieving optimal HDL-C8values at each time.


Analyses of insurance and prescription claims indicated that mean total amount paid for all diagnoses decreased at each followup year. Most of the decrease in total costs was accounted for by a shift from insurance claims for emergency department, inpatient, and physician office visits to prescription claims. Mean costs for insurance claims decreased by $2,704 PPPY in the first follow-up year and by $6,502 PPPY in the fifth follow-up year. During the same periods, mean prescription costs increased significantly, by $656 to $2,188 PPPY, with diabetes-related prescriptions accounting for more than half of the increase. Logistic regression suggested that in the first year of the program patients with type 1 diabetes were less likely than those with type 2 diabetes to see a 10% decrease in total medical costs. The payers realized decreases in total direct medical costs that ranged from $1,622 to $3,356 PPPY.

In addition to these direct savings, indirect costs such as absenteeism were also affected. The mean number of days of sick time used for group 1 decreased at every follow-up year, compared with baseline. Data were available
for 37 patients for the years 1996 through 2001. During the baseline year the mean number of sick days was 12.6 days PPPY. There was a mean decrease of 6.6, 4.1, 5.3, 4.9, and 6.2 days PPPY in each subsequent year. The group 1 employer has estimated the value of increased productivity to be $18,000 per year.

Replicating the Model

The economics and financial model of the Ashville Project have been replicated in many other settings throughout the United States with success. In order for the project to be successful it requires a collaborative team approach, alignment of incentives, financial commitment from employers and/or payers, and agreement on which outcomes will be measured to demonstrate success.


The key factors identified in the programs success were the decisive influence the waived co-payments for diabetes medication and related supplies had as an incentive for patients to participate, the opportunity for patients to establish ongoing relationships with caring and knowledgeable health care professionals, and the improvements in self-management of diabetes brought about by the continuity of seeing the same provider on a regular basis. The program appears to demonstrate a significant return on investment by directly reducing cost of urgent and emergent care settings, which is seen in increasing cost reductions over time (despite increasing prescription costs during the same time). Demonstration projects provide preliminary evidence that these results can be replicated in other settings.

For me, the key learning is how other members of the care team, who are often latent or unaware of their potential impact, can be utilized to share their knowledge, insights, and expertise to achieve significantly greater health value. Think what will happen when all of our providers are working together to incrementally and seamlessly add value to the overall care delivery process.

Tuesday, September 1, 2009

X PRIZE Sponsorship: Team Leaders, Components, and Vendors

The Healthcare X PRIZE contemplates the creation of an innovation ecosystem whereby Team Leaders, Team Components, and PRIZE Vendors compete to win both the larger prize as well as sponsored subprizes.

We continue to receive quite a bit of interest from multiple parties related to the X PRIZE. As the prize continues to work its way through the approval process, a key concept opportunity that continues to emerge relates to sponsorship. WellPoint, as the flagship sponsor, has taken the lead in helping to finance the development of the prize concept and will have their name associated with the prize similar to the Google Lunar X PRIZE and Progressive Auto Prize models. As with both of those prizes, however, there remain a number a "sub-category" or "sub-prize" opportunities. In fact, the ecosystem that can develop from the Healthcare X PRIZE may be one of the most powerful outcomes of the prize process.

As was discussed in the original Design Document, the competition is organized around various teams competing to radically improve the health value delivered to five unique "communities" selected from WellPoint's large employer base. Team leaders will be responsible for paying the registration fee, organizing (identifying, recruiting, signing, and managing) their "team", and then ensuring peak performance from their chosen set of interventions. Many of the additional team members will contribute key point solutions or components that will add significant value to the overall intervention program. We are calling these team members "components" to distinguish them from the Team Leader. Given the different roles, responsibilities, and reporting requirements you can begin to get a gauge of the type of companies and entries who can function as team leaders and who might be able to effectively contribute as component solutions.

In addition to these two entities, there is a notion of tools and technology providers being made available in a equitable way to all entrants in the competition. We are calling companies involved in this way "Vendors" to distinguish their specific role. We are still working out the "rules of engagement" for Vendors, and how we will make their services available in a way that makes sense to everyone, but this has great potential to allow even wider collaboration and participation. Vendors will not be competing for the overall PRIZE purse (at least $10MM), but they may compete for some of the sub prizes that are being contemplated in certain categories of innovation we are interested in incenting (best behavioral modification program, best health finance innovation, best use of personalized dashboard, etc).

This then creates a much wider sponsorship opportunity for those wishing to see specific types of innovation. You can envision which potential companies might want to sponsor particular areas of interest to them, which would create a much more rich and interesting "race" over the three year competition cycle. The singular focus on increasing health care value would be the unifying focus to ensure that the Healthcare X PRIZE does not become disjointed or distracted. Our preliminary conversations with Team Leaders, Team Components, and PRIZE Vendors have all been very positive and reinforced our interest in this line of thinking.

This begs the question - which type of competitor or sponsor are you?

Monday, August 31, 2009

Health Innovators Series - Michael Millenson on "40 years in the making" Health Care Crisis

Michael Milleson is well known in the health policy and health quality for his articulate commentary, sharp wit, and undeviating focus on improving our health care system. His 1996 Book, Demanding Medical Excellence, is a tome that still rings true today.

Can you share with us your background?

I was one of the first journalists to cover health economics and policy for a general interest newspaper, beginning the feat as a financial reporter for the Chicago Tribune in 1982. In 1986, I received an Alicia Patterson Foundation Fellowship, whereby you go into the field for a year and write on a topic. (Newsweek economics writer Robert Samuelson and Passages author Gail Sheehy were Alicia Patterson Foundation Fellows.) My topic, in the post-DRG era was “The Deregulation of the American Health Care System,” which is what Republicans called their regulations. By being out in the field, I learned the difference between in-the-trenches reality and meeting room reality.

My series, “Managing Medicine” in 1987 looked at competition, the dangers and advantages of managed care, measuring and managing quality and “upstairs/downstairs” care of the uninsured. It was nominated for a Pulitzer Prize, one of three for which I was nominated while at the Trib. But the reporting also started moving me into a level of knowledge of health care (and appreciation of areas of gray) beyond journalism. I started covering the meetings of health services researchers, for example. By 1993, after writing a series on quality of care, which had become my main interest, I was ready for something more.

I was given a Robert Wood Johnson Investigator Award in Health Policy Research, the only non-MD or PhD to win this competitive award that first year and for many years after. I became a visiting scholar at Northwestern University and wrote Demanding Medical Excellence: Doctors and Accountability in the Information Age, a peer-reviewed, footnoted book written in plain English. I meant to do a journalist’s book; instead, I did a PhD thesis translated back into English about medical errors, medical informatics and informed decision-making, managed care, patient empowerment and value purchasing. It came out in 1997 and was much, much farther ahead of its time than I would have guessed or wished. I was still na├»ve about the pace of change in health care.

I finished the book while working as a principal in the benefits consulting practice of Mercer, because I believed in the power of employers to change the system to work more effectively. I left Mercer in 2001 and have headed my own firm, Health Quality Advisors LLC, while retaining an academic appointment as the Mervin Shalowitz, MD Visiting Scholar at the Kellogg School of Management. I’d describe myself as a consultant, academic and quality of care evangelical.

How has health care changed since you wrote your book in 1997?

Evidence-based medicine, once a curious important from England, has become so mainstream an idea that it’s inspired its own backlash — even though the actual practice of evidence-based medicine is very far from prevalent. The idea of value purchasing has come back into fashion and managed care has gone completely out of fashion (at least until a new name is invented). But the biggest changes are the end of silence about medical errors and the acceptance of the need for computer technology. The latter, of course, is a little like giving the military credit for accepting the need to replace cavalry horses with tanks by 1941, but at least it’s progress. One more technological change: the Internet was new in 1997. Today, it is giving patients the power to partner with their physicians, generate content and go “off the grid” of the medical establishment in ways that could not have been anticipated then. This grassroots change may end up being the most powerful of all.

What’s your diagnosis of the current health care crisis?

Well this is a “crisis” that was 40 years in the making. It’s funny because Medicare was created in 1965, took effect in 1966, and the first conference on health care costs being out of control was held in 1967. To be candid, I really don’t see much that has changed since the very beginning of this “system” being implemented.

My diagnosis tends to home in on the underlying drivers of behavior - which are mostly economic. Why do physicians behave the way they do? Why do hospitals behave the way they do? What incentives are driving the behaviors that we see that are placing us into this “crisis”? Immediately, we have to point to the payment mechanisms which incent an increased production of health care widgets as a means of increase payment. The infamous “supply induced demand” highlighted by the recent Atul Gawande article in The New Yorker.

Therefore, the question is how do we align the financial incentives to enable leadership to get true culture change? We certainly see great regional examples of this in Kaiser Permanente, Intermountain Health Care the Mayo Clinic and the Geisinger Clinic, but these appear to be the exception to an otherswise pervasive lack of these qualities in the general health care industry.

What are the specific reform efforts that you believe will yield the greatest results?

First and foremost, the physician is at the center of the system. Any doctor can prescribe any drug or perform any surgery. Compared to anyone else, physicians are given enormous autonomy.

The way we change health care is aligning financial incentives and changing social norms to encourage the with patient and doctor to eliminate waste. At heart, this means a chance in the doctor-patient social contract. The opportunity with the X PRIZE is to do the simple things and complicated things to achieve this kind of new social contract.

So, for example, the problem of unnecessary antibiotic use for children’s ear infections often ran up against the issue of anxious parents demanding a prescription. The solution turned out to be a combination of doctor education and a clever wrinkle in the doctor-patient relationship. Parents were given the prescription, but it was postdated; in other words, they were told that if the infection didn’t go away in a few days, then they should fill the prescription. Result: doctors feel as if they’re providing caring, patients feel cared for and unnecessary drug use — and unnecessary cost — are taken out of the system.

Those kinds of ideas, that blend cost reduction and quality improvement with a true patient-physician partnership, are where we need to focus. Having said that, we also need to ensure that doctors are not penalized financially for this paradigm shift. In my book, I wrote about a four-man family practice that reduced unnecessary tests, stopped having patients come to the office when a prescription could be written over the phone and, in a fee-for-service world, gradually went bankrupt.

It’s also important to spread the word about successful system-improvement efforts in an attempt to make sure they diffuse far more quickly. Under the leadership of its CEO and its senior medical staff, the Ascension Health hospital group has documented that falls, infections and other preventable causes of medical harm can be slashed to a fraction of their previous levels in just a few years. In the process of systematically doing just that, Ascension has saved more than 2,000 patients’ lives at its hospitals. That kind of achievement needs to receive the same kind of publicity as FDA approval of the latest statin.

That won’t be easy. After all, one man’s waste is another man’s profit center, and a pill or device to prevent or cure infections will always be a lot sexier than simply ensuring that everyone who gets close to the patient washes their hands.

How does universal access solve or not solve the issues you raise above?

Access is a fundamentally different issue that efficiency. Other nations that have universal access to care are no better than we are at consistently providing high-value, evidence-based treatments once someone walks inside the doctor’s office or enters the hospital.

Having said that, I don’t think that the question of access to care is a technical problem. As I wrote in an article in the Washington Post Outlook section in June, 2008, to get universal care you first have to care. We’ve had the same stories about the uninsured for decades. The problem is that the American public doesn’t really seem to care that much, perhaps because the uninsured are disproportionately black, Hispanic and poor. And so, we spend hundreds of billions of dollars adding a drug benefit to Medicare, but starting looking into our national pocketbook for spare change when it comes to the cost of covering the uninsured.

Texas, for example, has had the highest rate of uninsurance in the nation for years, reaching as high as 33 percent at a few points, and yet that fact did not hurt George W. Bush one bit either in the Republican primary or when running for president in the general election.

What are the top areas where you believe innovation can be applied to solve for market failures?

There’s a difference between health and healthcare. Health has a lot of environmental, socioeconomic components that are not present in healthcare. Take a look, for example, at the Obamas. Here’s a black family from Chicago’s South Side, where there’s what’s described as an epidemic of obesity. Yet they’re not fat. Why is that? Obviously, it’s not some physical antibody but a combination of education, willpower, genetics and socioeconomics that makes them different.

The question for innovative solutions to market failures is hot to properly incent physicians, employers and others to attack problems like obesity in the kind of comprehensive, holistic manner that is far more likely to succeed than a narrow, medicalized approach. Too often today, a doctor says that a patient’s compliance is not his problem because it’s not in his control. However, with markets, we can pay someone enough to make it their problem. We’re going to incent you to get things done rather than give up in advance.

At a certain pricepoint you’d stop talking about how unfair it would be to get people to come in and say, how do I sign up? We need to focus, as well, on the financial and social incentives that will enable the innovations that we already know work to diffuse more quickly. We know that giving those who adopt an innovation a very tangible, personal advantage is the key. As the current health care reform debate certainly proves, abstract words like fairness, accessibility, long-term fiscal stability and the like don’t have a great deal of impact on human behavior.

Your thoughts on how the PRIZE model can assist in catalyzing these efforts?

I like to say that we need to build a system based on “Do the right thing (do what’s appropriate) and then do the right thing right (do what’s needed in the most effective and efficient way)”. I really believe you have to build off the current technical and social platform for health. I realize that it is currently a difficult and unstable foundation from which to build, but I don’t think we have the luxury of completely excavating a new system of care. I see that the X PRIZE model can create a framework from which teams can work to use the current system as a jumping off point for radical change. That’s pretty exciting.

Your thoughts on how we can actually pilot the five winning solutions in five markets around the country?

There are markets that are used to innovation and those that are not. An incubator for the X PRIZE should be typical of America in terms of demographic, geographic and other challenges but atypical in terms of cooperativeness and openness to change.

Who else should we be speaking to?

Two people, whom you might not have considered, but who have informed my thinking include Ian Morrison (a futurist) and Emily Friedman (who focuses on access and public health issues). Both of these individuals have unique insights that might prove valuable to the X PRIZE efforts.

Friday, August 21, 2009

Prometheus Payment Model: Igniting a revolution in health finance reform?

Prometheus Payment model is a health financing innovation that groups care into discrete episodes from which all providers receive a single global budget. It is a variation on capitation, which I call Microcapitation, wherein clearly defined "care packages" are created, delivered, and used to determine quality bonus payments.

The second health financing innovation with relevance to the Healthcare XPRIZE was highlighted in the most recent New England Journal of Medicine article. The Prometheus Payment Model has been a longstanding project of Francoise De Brantes (of Bridges to Excellence fame) and folks like Doug Emery who have been beating the “episodes of care based” financing for years. I have had some great conversations with Francois and Doug over the years and I am pleased to see their ideas actually being implemented in some pilots sponsored by the Robert Woods Johnson Foundation.

Prometheus is a payment concept based on clearly defined episodes of care wherein all the services provided can be bundled together in discrete “Care Packages” (not everything fits neatly into this construct as they note). These Care Packages are then assigned a global budget from which all care providers must deliver their services (technical term is Evidence Informed Case Rate). The Care Packages are further adjusted for patient severity as well as for Avoidable Patient Complications (APC). These are things like hospital acquired infections, exacerbation of chronic conditions, or other events that if optimally managed would not have occurred. This payment model rewards providers for organizing along the entire episode of care. It clearly is a move away from independent, discrete payments for disconnected care to a new model of continuous view of all the events that make up the episode. The global budget for a clearly defineable event creates financial incentives toward high performance and quality outcomes.

I was the first to call this new payment model "Microcapitation", and describe further in another post. The article is a good read, and highlights many of the talking points that we believe are fundamental tenets of health finance reform:

  • Rewards for value not volume
  • Rewards for quality not quantity
  • Rewards for the organization and coordination of care
  • Provides a financial integration mechanism for non-integrated providers to work together
  • Provides financial incentives to reward the above
  • Leaves plenty of room for innovation and improvements underneath the global budget.

We hope to see the Prometheus model gain additional traction. A variation of this concept and much simpler to follow is the highly successful “Proven Care” model employed by Geisinger (see their excellent website describing the development process and the elements of their Angioplasty episode of care). We are encouraged to see types of health finance innovations be introduced and are confident that the Healthcare X PRIZE participants will introduce many more.