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.

Thursday, August 20, 2009

Virtual Health Insurance Exchange - Utah Goes Live

The State of Utah has embarked on a multi-year, multi-stage health reform plan. They recently introduced their new Utah Health Exchange, a virtual health insurance exchange with several novel twists

There have been several interesting health finance innovations that have been announced recently which have relevance to health reform in general and the Healthcare X PRIZE specifically. I wanted to first start with an announcement from the State of Utah that their version of a Health Insurance Exchange is now “open for business”. The Utah Health Exchange is based on a multi-year, multi-stage health reform effort in the very progressive but conservative state (is that possible?). The plan has three main components:
  • Defined Contribution
  • Virtual Health Insurance Exchange
  • Risk Adjustment
Each element is described in a detailed communication from Edmund Haisimaier, a Senior Fellow Research Fellow in the Center for Health Policy Studies at the Heritage Foundation. Before you dismiss this effort as some conservative schtick from the right, you should actually look at what they are doing and how they are doing it. It is actually a fascinating read.

My take: BRAVO! What Utah is doing in health financing is something we should be seeing alot more of in the future. Couple points of comment:
Defined Contribution. I also love the notion of a “defined contribution” coming from employers. This is also a no-brainer - let the employees both see how much you are contributing to their health as well as give them the flexibility to make their own choice. These ideas were made popular by Definity Health, and I love seeing this concept move forward. For me, this will be the “death knell” of employer based insurance if this concept takes off - which I see as a very positive outcome. I have already ranted about Employer Based Insurance in the past and the sooner we decouple this unnatural relationship the better off our country will be.

Virtual Health Insurance Exchange. Leveraging a technology platform (eInsurance in this case) to bring together all the disparate information to make an apples to apples comparison of various health insurance options. This allows the consumer to make rational choices based on their own preference sensitivity of price, features, benefits, and other metrics. I love that insurers, and the brokers who push their products, will have to do more than convince an HR manager who makes a company wide decision, but rather have to compete consumer by consumer by offering the best value. The technology makes it possible to compare dozens of different plans based on age and family status simultaneously. The agent role turns much more into that of a value added advisor.

Risk Adjustment. This is actually much harder to follow. Essentially, Utah is laying the foundation to create a state wide pool with everyone who has insurance being a part of a single pool. On the “front end” when the consumer purchases the insurance there will be some variation in pricing based solely on age and family status. However, on the “back end” the insurer taking the diabetic will actually get a little bit more of the premium. Furthermore, any insurer who has an inordinate amount of large expenses or wide variations in claims will receive additional credits from the other insurers. This innovative wrinkle can actually entice other insurers to participate as these “adjustments” further minimizes the risk that their “pool” performs worse or costs more than others. Essentially, the Utah Health Exchange pools premiums from all the consumers, each insurer provides coverage during the year, and at the end of the year they redistribute a portion of their premiums to any insurer who took an excessive hit during the year. The details of how this will work in practice were not included but the concept is very interesting.
This is exactly the type of health financing innovation we need to be seeing. New ways to pay for insurance, new ways to acquire insurance, new ways to spread and pool risk, and new business models that will allow these concepts to flourish.

Tuesday, August 18, 2009

Healthcare Innovators Series: Ginny Proestakes, Director of Health Benefits at GE

Ginny Proestakes RN MPA, Director of Health Benefits at GE, shares her insights on the health care challenges faced by large, multi-national employers based in the United States.

What are the challenges you face in providing healthcare or insurance to your employees?

The challenges that GE faces in providing health insurance to its employees and retirees are the unpredictable, ever growing costs. We have to offer benefits to be competitive as an employer. However, because we compete in a global environment, we definitely see and feel the exceptional high health care costs in our US markets. These costs are increasing at an unsustainable rate.

What are some of the competitive challenges you face in terms of cost?

Specifically, when purchasing benefits it becomes a supply chain management game, and just like any other purchase in a corporate environment, you’re trying to buy the highest quality for the lowest cost. We always find it interesting that it is only health care costs that go up year after year; nearly every other expense area sees lower per unit prices each year. We are therefore constantly re-engineering and looking at ways of getting increased efficiencies out of the system. This includes directly employees to best care at lowest prices. This is very challenging because we are not talking about widgets, but human relationships that are very personal and there are some boundaries that we choose not to cross as an employer in this area.

How have you attempted to address this problem?

We have actually attempted to apply Six Sigma to our sourcing process, but I think the real opportunity is helping employees better manage their own health by providing advisory services to employees as they consumer health care. This would include directing them to the best clinician or facility when they are sick for their particular illness. This has actually proven very difficult because not only is this information difficult to obtain but health care is so personal with so many personal preferences to take into account.

What challenges are faced by the healthcare industry as a whole?

There are a wide variety of problems in health care. First, it is a highly fragmented industry. It’s not what we would call in Six Sigma a “wing to wing” process. There are many little processes that get rolled up into a large process and they not only don’t fit well together they often times don’t even connect. The second is it’s not a very flexible system. Change is very difficult, not only for providers but for the health system infrastructure as a whole. I’ve worked with plans and institutions that have had systems in place for over 20 years. Third, I think it is exceptionally difficult to find, purchase, and receive value. The way we pay providers, pay hospitals, and all the various suppliers in healthcare needs a major overhaul. What we’ve been doing is basically rewarding people for units of service and not total value, and I think we need to take a fresh, completely new approach to solving this issue.

Given the recent economic challenges, how do you think we should approach healthcare differently?

With the recent economic challenges, it’s really a very different era to be managing benefits for large employers in the United States. I think we should take a completely fresh approach. I think we should look for every opportunity to drive down inefficiencies, to try new things and to pilot different initiatives and not be afraid to restructure them or retool them as we go along. I think the time is right for innovation and bright, new ideas and really big imagination, which is why the X-Prize is so important to us at GE.

Why do you think the X PRIZE model is a good way to address these challenges?

A prize is a good way to address these challenges because it might attract people who wouldn’t normally get involved in solving this issue. I think it brings in multi, or cross-disciplinary, approaches to solving the problem. We have got to try new and innovative approaches, and we’ve got to reward people for the value that they create. I think the prize approach, and X PRIZE in particular, can be a great catalyst within the health care marketplace.

Why do you think a test or pilot is so important?

The real world test and the pilot always important to any innovation process. We’re taught Six Sigma at GE, and the last toll gate you pass through is the pilot because it is so different than the laboratory, or controlled setting. Whenever you put things in the rela world with real people, you learn a tremendous amount. I also don’t think there will be a single solution in healthcare; it is far too complex and as a result I don’t think there should even be a single prize. As a result, we are really excited about what might come out of this effort.

What outcomes do you want to see from this process?

First and foremost, any solution that comes out has to drive down cost but also improve quality in the process. I believe it has to impact value for all the stakeholders involved in the healthcare value chain. These stake holders include not only employers and plans but also providers, facilities and patients. I also believe a winning solution will need to drive down inefficiencies of information, process, and administration.

Anything else you want to add?

GE is certainly attracted to the X PRIZE and WellPoint partnership around this health care effort. In particular, GE’s well known tagline is “imagination at work,” and it’s embedded in our culture and everything that we do. We’re encouraged to come up with what they call imagination breakthroughs and attempt to pilot them and evaluate them, implement them with Six Sigma precision, and as a large employer to demonstrated how they allow us to increase efficiency, reduce costs, and improve outcomes. As a corporate entity, we have taken the lead in several other industry wide initiatives - including LeapFrog, Bridges to Excellence, and the medical home project. We really look forward to what can become of this partnership.

Monday, August 17, 2009

Health Innovators Series: Herbert Pardes, CEO of New York Presbyterian Hospital System

Herbert Pardes shares his thoughts on the power of healing relationships and how the PRIZE model can be a catalyst for innovation within healthcare

In 1999, Dr. Herbert Pardes was elected President and Chief Executive Officer of NewYork-Presbyterian Hospital. As the former director of the National Institute of Mental Health and Assistant Surgeon General of the U.S. Public Health Service, he was well positioned to assume the top leadership role of one of the largest hospital based systems in the United States. He has also served as Vice President for Health Sciences and Dean of the Faculty of Medicine at Columbia University College of Physicians & Surgeons. Prior to this he was the Director of the Psychiatry Service at Presbyterian Hospital. For over three decades he has played a major role in the affairs of NewYork-Presbyterian Hospital and understands the challenges and opportunities within the current health care reform era. The X PRIZE team caught up with him earlier in the year to get his take on how to improve the health care system.

Can you give us your background?

My name is Doctor Herbert Pardes. I’m president and CEO of the New York Presbyterian Hospital in New York City. We are one of the largest hospital systems in the world and consist of a complex of institutions in the city as well as in Connecticut, New Jersey, and an affiliate in Texas. We deliver about 20 to 25 percent of the healthcare in the greater New York area which consists of clinical care, health education, and medical research.

What challenges do you face in providing care to your patients?

We can do so much more in healthcare today than we could just a short 20 to 30 years ago. Those of us who are in healthcare find our greatest pleasure in being able to help people and this has been very satisfying progress. As a result, many more people are living longer and the demand for complex healthcare is very substantial. As a result, the cost of healthcare has become very expensive. So our biggest challenge is how to provide the greatest amount of help to human beings while being sensitive to the cost issues for the nation and the population in general. This is a very difficult balancing act, and we attempt to find the way to extract maximum benefit for the dollars being spent.

How has the burden of administering the health care system changed during that same time?

I think one of the things that could help a lot would be a reduction in administrative requirements and the excessive oversight. I am not trying to minimize the value of oversight, but I believe it can be done in way to minimize the energy and the effort required to respond to oversight. As an example, in a recent study of nursing care, it was found that when you measure the amount of healthcare a nurse provides at the bedside, that the average nurse spends only 28 percent of their time at the bedside and 72 percent on other work. My feeling is that is imbalanced and should be corrected by taking off some of the unnecessary demands and freeing up the nursing staff to be more available to the patients.
In terms of reimbursements issues, what challenges do you face?

Well, reimbursement is an enormous problem for people in healthcare. There are a very large number of people in this country who are uninsured; there are a large number who are underinsured. Even people covered by Medicaid and Medicare represent an entire population whose reimbursement does not meet the cost of their care. So a hospital like ours loses money on Medicaid, loses money on Medicare, and in addition provides healthcare for people who are either underinsured or uninsured. While we do receive a modest subsidy from the government to compensate for our care, we lose money on everyone of these patients. We offset these losses by how we charge for our commercial care and in this sense we are a microcosm of the country. Our current payer mix is 30 percent Medicaid, 30 percent Medicare and some 30 percent or so commercial care. The remainder is people who pay for themselves or are uninsured. Reimbursement has been the toughest nut for all of us to crack and remains a very big, unresolved problem in healthcare.

What do you think about issues like pay for performance and incentives?

I’m in favor of pay for performance and I actually helped to draft the initial principles the joint commission used to create the current pay for performance efforts. I do not, however, favor reducing people’s revenue if they can’t meet the performance because what you’ve often got is an institution that may have limited resources, can’t do the job, and by taking more resources away from them they get into a vicious downward cycle. On the one hand, I think that having goals, setting targets, and having people strive toward better performance for quality, safety, and efficiency are very good. I am for incentives just as I am in favor of competition but we need to be careful that what looks like a good program does not become twisted as a means to artificially cut dollars for health care.

What are the greatest challenges we face in terms of the healthcare industry as a whole?

Well, first of all, I think that our country needs to once and for all move toward total coverage and total access so everybody can access the benefits of healthcare. That can sound like it’s gonna cost more money, and it probably will cost some more, but it’ll have more total savings associated with it. There are a lot of people who come to emergency rooms after their disease is well along, and as a result they’re suffering more and we are all paying more and our opportunity for success is also diminished.

I’d much rather see a system wherein a healthcare professional looks after your general health, pays attention in a preventive way to good health practices, diet, exercise, regular colonoscopies, etc, etc. This style of health care should results in a life of less major illnesses and less time suffering from major illnesses. I believe we could create a much healthier population but its foundation is in universal health care coverage.

We should not have the current disparities and inequities between different populations. We should focus on investments that have a clear health benefit, as well as a clear improvement in population health that can work more, contribute more, and produce more. This clearly helps the economic welfare of the country as well as the health interest of the country.
Why do you think a prize or competition is a good way to address these issues?

I think this country is built on competition, and I like competition. It stimulates people to do more, to try harder, and provides a built in rewards system to people who have done a good job. A prize creates some interesting competitive dynamics as well as the motivation for many people to strive for the prize. I think the catalyzing effect of the X PRIZE model can have a very stimulating effect on driving innovation. I commend the people behind the concept of the X PRIZE and am eager to see how it can be applied to health care.

What outcomes do you hope to see from this process?

I would like to see more innovation in healthcare. I would like to see particular attention to the interpersonal nature of healthcare, and a significant reduction in the preventable problems that are currently plaguing our system. Let me give you an example. One of the most common illnesses in the United States is diabetes. It’s known that if a person having diabetes handles themselves in such a way as to keep their blood sugar within normal bounds, the likelihood of the complications of diabetes is dramatically reduced. Now, in our hospital right now, if you and I went for a walk through, we would probably find something in the neighborhood of 1 in 4 people having diabetes, and the reason they’re in the hospital is not necessarily for the diabetes itself but for vascular problems, eye problems, heart problems, kidney problems, surgical problems, or vascular problem related to the underlying disease. If we could get people to handle themselves as they should, despite the fact that they have diabetes, the likelihood is the number of patients with those various complications would be dramatically reduced, and the nation would save considerable money.

My feeling is that if we can introduce both the most personal, responsive and sensitive healthcare system, it can have a dramatic impact on how people handle their health care problems. Think about a patient walking into a forbidding institution, with professionals they don’t know, who are not friendly or supportive, and it makes the person feel terrible; if you didn’t feel terrible before you will as you travel through this type of health care journey.

In contrast, if you have people who care about you, show it, patient-sensitive, friendly, understanding, try to help you, you begin to feel like there is this coordinated, caring team on your side. There is just a dramatic difference on how the patient feels and how they perceive their own health is a key indicator on how they actually do. So for me, I see this personalization of the health care system as having two key effects: 1) getting patients more engaged so that they become better stewards of their health from the beginning, and 2) a system evolves that is personalized, coordinated, and delivers the type of care in the way the patient can best receive it.

Any final thoughts regarding health care?

I think that people who become nurses, medical technicians, doctors, pharmacists are in this area of work for one primary reason: it feels good to help people get better. If you can then aggregate that effort into a systemic concept of improved health delivery that is more patient focused, achieves better outcomes, and saves the nation money in the process you are going to have a lot of people feeling terrific on both sides of the table. I think this is not only an exceptionally useful deployment of the prize model but that the X PRIZE should take enormous credit for stimulating this movement.

Friday, August 14, 2009

Health Innovators Series: Betsy Dietz and the medical home for a global workforce

Betsy Dietz is one of the executive leaders in IBM's Global Business Services Healthcare Practice. She is passionate about improving efficiency and outcomes in healthcare and is a strong proponent of the patient centered medical home initiative.

Can you introduce yourself?

I'm a partner in IBM's Global Business Services Healthcare Practice. I have been the executive managing our WellPoint partnership for the last several years. I'm participating in the X-Prize initiative because I think it will drive innovation that matters in making a positive difference in the quality of people's lives. Innovation that matters is what motivates me and in fact it's one of IBM's core values.

As a very large employer, what challenges does IBM face in providing healthcare?

IBM certainly has a challenge in providing health care and insurance to over 300,000 people in IBM. All too often our employees receive woefully inadequate care from their physicians. The New England Journal of Medicine actually says that Americans receive only about half of the recommended evidence-based care that they require. Our employees get frustrated when they can't get timely appointments with their physicians or when their office experience feels like riding an assembly line conveyor belt. They also get frustrated when they don’t get calls back or their calls returned or when they can't get information like their lab results. We also hear from experts that as much as half of the American healthcare spend provides no benefit to Americans.

We really need - we would love to have - a plan that would provide alignment between incentives and compensation to the value that our employees receive in the medical system. We've been active participants in the Patient Centered Medical Home that begins to focus on the relationships between all the entities involved in care processes -patients, physicians, other providers, payers, and plans. I can imagine that one of these teams might want to compete for the X PRIZE by leveraging a medical home strategy as their approach.

Describe the competitive challenges that you face in relationship to rising medical costs?

As a nation we have the highest per capita healthcare spend among developed nations. We are more than 2-3X most other countries despite our democratic, free-market economy. Unfortunately, this gap is widening which is causing American Companies to lose their competitive edge as we compete in a global economy. IBM has been a pioneer in integrating a global workforce and we are attempting to help our worldwide clients do the same. We understand the challenges of leading multinational and multicultural teams in multiple time zones. We certainly have been taking on the challenge of increasing health care cost in the United States which clearly impacts the price of IBM products and services.

How does healthcare and health insurance impact the productivity of your workforce?

Well I think to address the productivity challenges that we have we really need to move from a healthcare system that is reactive, that only treats people after they're ill, to one that focuses on prevention and wellbeing. We would love to work with our partners to provide coaching for our employees. We believe that we need health coaching to help our employees permanently adopt healthier lifestyle and make the changes they need in their lifestyle and behavior choices. We think we need health value coaches that will help our employees navigate the healthcare system and to find optimal value. This would also include assistance with transparency, including helping employees find high quality providers, alternative treatment modalities, and traditional consumer decision making tools in making health decisions. They need not only to select the best plans for themselves and their families but also begin to plan their health care expenses over their lifetime just like they do with other retirement or financial planning expenses. We hope this focus accelerates that transition to a healthcare system that's centered around the patient.

What are the challenges that the healthcare industry faces as a whole?

Despite having many fine care delivery organizations and caregivers, the US healthcare system is badly broken. I'll assert that our current system is not sustainable. We have high and rapidly rising cost. And there's no linkage between that cost and the quality of care in our system and we have nearly 100,000 people dying each a year from preventable medical errors. We have another 57,000 people dying from inadequate care. And we have almost 90,000 people a year dying from hospital-acquired infections. it must be an absolute imperative that we improve the quality of care in America.

If you look at America compared to other developed countries, out of the top 30 countries we're actually 22nd in life expectancy out of 30; 28 in infant mortality; and rock bottom last in obesity. These are serious problems that have to be addressed. We also see a fourfold variances in cost for the similar or same outcomes being achieved by others. Can you imagine buying a car that is four times as expensive for the same level of function and quality as an alternative? This happens every day in healthcare because we have no idea where to turn for quality. I also think that these problems can't be solved by just turning to government intervention. Certainly can't be solved by throwing more money at it either. I think this is an "all hands on deck" urgent call! We are going to need radical innovation in order to make this happen. Again, this is where I really believe that an X PRIZE competition can create an environment for this radical transformation to occur.

Given the recent economic change that we've had how do you think we should approach healthcare?

The economic difficulties in the United States and the world are gonna affect possibly all aspects of our lives and certainly healthcare is no exception to that. We will continue to see the high number of Americans who are uninsured today, and those numbers could go higher. This highlights again that there has never been a greater need for innovation. We need to see, um, major reform on several fronts. We need to see individuals accept responsibility for their own health and well being and start making those healthy lifestyle changes they know they need to make. We need to enable our primary care physicians to treat the whole person and to provide the medical home that we've been talking about. And with these economic conditions above all we must find a way to deliver higher value, higher quality and safety at an affordable price.

Why do you think the X PRIZE model is a good way to address those challenges?

I think an X-Prize is an excellent way to address these challenges because incremental innovation is not adequate to meet the demands that we face as a nation. Historically companies have focused on innovation at the product and services level. And we have seen tremendous advances as a result: 3D imaging, advanced pharmaceuticals, new devices, etc. We have more recently seen companies innovate at the business process level. E-prescribing is a great example of that. It really streamlines the process between the patient and the provider and the plan while providing measurable gains in quality and cost containment.

But today plans really need to innovate at the business model level to redefine how healthcare is provisioned and financed in this country. I think that the X-Prize is an excellent way for us to drive radical innovation forward in these revolutionary times. I believe we can create a forum for employers and providers, health plans, government leaders and individuals to come together to not only define these challenges issues but foster the innovation solutions that will help us overcome this incredibly complex issues. X PRIZE has as demonstrated history of using prizes to reward revolutionary change.

What kinds of outcomes do you hope will result from this process?

I am delighted to be working with key WellPoint leaders on the Healthcare X PRIZE iniative. I can envision a system wherein primary care physicians treat the whole patient and where an individual's information is collected and analyzed for insight that can power the entire ecosystem. This will require care continuity between physicians, more more aligned incentives, and compensation based on outcomes versus volume. The X PRIZE provides a framework in which we can really drive to higher quality and safety at a significantly lower price. I am confident that the Healthcare X PRIZE competition can actually accelerate our transition to a sustainable healthcare system that is centered around the patient.

Wednesday, August 12, 2009

Health Innovators Series - Simeon Schwartz, MD on the

Dr. Simeon Schwartz is president and founder of The Westchester Medical Group, a 150 physician multi specialty group practice. He is a board certified hematologist and medical oncologist. After receiving his undergraduate education at the Massachusetts Institute of Technology and his Medical Degree from Yale University, he completed his residency at Cornell –New York Hospital and a fellowship at Memorial Sloan Kettering Cancer Center. Under Dr. Schwartz’ leadership, The Westchester Medical Group was an early adapter of electronic health records and has continued to use health information technology to transform the practice’s delivery system. Their unique focus on patient centered, coordinated care has led to dramatic improvements in clinical efficiency, total cost and quality measurements.

Why are you excited about being involved in an X-Prize?

I’m excited to be involved in the X-Prize because the United States has the finest healthcare system in the world, but it has come to a point where the costs are unsustainable, and many patients are not getting the quality and the efficiency of care that they should. In other words, we’re not maximizing the opportunity to get the best care for the largest number of people at a price that we can afford as a society.

What is your general point of view on health care reform?

As a result of our fee for service health care model focusing on acute episodes of care, we have created a cost prohibitive system that fails to deliver evidence based services and high quality outcomes. Reform will require transformation of our payment system with focus on rewarding quality based outcomes, provider incentives for cost control, and enhanced preventative services. Development of national metrics for both cost and quality will allow reimbursement to be tied to value. Accountable care organizations with the governance and leadership to manage significant patient populations should be the focus of a reformed delivery model.

What challenges do you face with the current payment system?

Some of the challenges of the current system of payment is that when the primary model is fee for service, the incentive for the physician is to provide as many services as possible. Unfortunately, many of those services are not reimbursed based on the quality of those services nor on the outcome achieved. Alternatively, some of the markets in the country pay physicians flat fees in the form of capitation. The incentive in those payment models is to minimize the number of services that are provided. A good payment model for any healthcare system would maximize the number of patients getting the right service for the right condition at the right time within the right payment structure. Currently in the United States, the variation on the number of services in different communities and the different patterns of care could not possibly be explained by the biological differences between the patients.

What challenges do you face in providing care to patients?

Unfortunately, we’re facing increasing challenges in providing care to our patients. Our goal is to provide coordinated, efficient, quality care, but the current system impedes that goal in many ways. An example is is that it’s hard to provide efficient care when you have to spend a lot of your staff time and money obtaining pre-certifications and pre-authorizations from insurance companies for services that are obviously needed. In addition to that, the patients frequently do not understand their own benefit plans, and physicians have to take time trying to explain to patients why this service or this drug is not covered for or by their insurance company. When you add up all of our costs for administrative activities that are largely wasted, we’re spending more than 20 percent of our revenue dealing with the cost of administering just a small portion of the healthcare system.

Additional challenges that we face include the poor flow of clinical information from one group of proivders to another, even within our own community. Within our practice, which is paperless and filmless, the flow of information all takes place within our IT systems. When patients are seen by outside providers from our practice, which is common, we frequently have a great deal of difficulty getting access to that information or even sharing our own information with them. In addition, although we have a lot of desire to continue to improve our quality programs and invest in additional quality programs, the current fee for service reimbursement model really provides funding for such activities.

What challenges do you face with administration, paperwork and reimbursement?

The challenges of our paperwork and reimbursement from their insurance companies is largely based on the different rules that each carrier has, and in our practice setting, we deal with as many as 50 or 70 different insurance companies. In order to train our staff, our physicians and our patients to deal with that complexity, it adds a great deal of waste to the system that’s not productive. I’m very concerned that we continue to waste this much money; money which could be used toward quality programs and improved access for patients who are not insured.

What are the challenges faced by the healthcare industry as a whole?

Healthcare in the United States is facing many challenges besides the compensation model. In order to deliver excellent care, we need to invest in newer, more modern facilities with more equipment. The capitalization necessary to do that requires a healthcare organizations to be profitable so that they have funds to reinvest. Many of the healthcare organizations in this country at this time, particularly New York state, are not profitable. Very importantly, we need to transition care from the expensive inpatient setting to more efficient, less expensive outpatient settings. This model has been successful in many parts of the United States and in other parts of the world. However, it requires enough money to be able to close some of the older facilities that are less efficient on the inpatient side and construct new facilities. There are substantial investments necessary in information technology and healthcare analytics, which is the statistical analysis of the information so that we know precisely what is going on in terms of whether patients are achieving the quality outcomes of care that we expect.

How do you think we should look at the healthcare system differently?

Given the recent economic challenges, the healthcare system will be under greater stress as patients seek to find more value in healthcare services. In an economic sense, value is usually defined as quality divided by price. As you increase quality, you’re increasing the value of the service if the price remains the same. Alternatively, if you keep the quality the same and lower the price, you also increase value. What the public of the United States wants is really value driven healthcare, and the way you can increase value is both by lowering price while simultaneously improving quality. Our society would be much better off if we were more value conscious in our healthcare purchasing. Patients need access to transparent pricing, and they need meaningful data about quality so they can make informed healthcare decisions. Providers should be rewarded both on quality and on price efficiency.

We’ve watched around the country the success of large retailers such as Wal-Mart with their value based pricing. Their concept was that the consumer, given the opportunity, would be inclined to purchase goods and services where they could buy the same item at a lower cost. Imagine that you have a standard item like a container of Tide detergent. The consumer can go to several stores and see what that price is. They should be able to do the same in healthcare. They should be able to know what the standard product is, and they should be able to know what their costs are for that product. It’s easy to assume that the consumer will not make the right decision, but frequently in healthcare, the consumer has no information that’s useful to make the right decision.

Another notion is the idea of the coordination and organization of care. The United States has a large number of medical practices with one or two physicians. It is analogous to the situation before large scale retailers came to the United States, and some of my friends pejoratively refer to this as the "Walmart-ization" of medicine. But one of the advantages that we’ve seen in many industries, whether it be package delivery like UPS or FedEx or in the auto industry and other service industries, is that the consolidation of the number of players in the market results in improvements of efficiency. In healthcare, we have been impressed by the opportunities for consolidation, for improvements of information systems, for improvements of efficiency, for coordination of service, and part of the redesign of healthcare really should encourage the further consolidation of medicine, not to the level of monopolies and cartels but so there’s meaningful competitions of organizations that are large enough to be adequately funded and capitalized to be effective competitors.

Why do you think an X PRIZE is a good way to address those challenges?

I believe that a prize is a good way to address some of the challenges in the healthcare payment system because of the complexity of the system. When you have a system that is in excess of 2 trillion dollars a year, any change causes a large number of winners and losers. In our politically charged world, both of those parties will lobby aggressively both Congress and companies and other entities to make sure that they are not economically disadvantaged by the changes. The only meaningful way that we will achieve fundamental change is to reach a consensus largely supported by the public for meaningful change. I believe that the prize generates a great deal of interest in the redesign. In this political season where much of the conversation has been about payment for the uninsured, and very little of the conversation has been about the redesign of our delivery system, we need to refocus the public on the redesign of our delivery system and on improving the value in healthcare.

What outcomes would you like to see as part of the Healthcare X PRIZE?

There are several outcomes that I’d like to see from this process. First of all, I’d like to see agreement on the metrics of quality care so that there can be a standard benchmark. A lot of progress has been made with the specialty to societies defining what is optimal care. In medicine, there’s still an art, and not everything can be put in the form of a measurement, but a great deal of medicine does lend itself to measurements, and performance and outcomes can be determined for many of our common illnesses and for many of the parameters of good, preventive primary care. I believe that the country will be better off if we’re able to have a value based compensation system. I believe providers should be rewarded for their quality and their efficiency, not for their number of services. And finally, I believe if this project is successful, the United States will continue to have the finest healthcare system in the world.

Tuesday, August 11, 2009

Health Innovators Series - Bill Bradley on the Ethics of Connectnedness

Bill Bradley shares his ideas on the power of the people and how the philosophical divide between Democrats and Republicans can be bridged through the "Ethics of Connectedness"

Senator William W. Bradley is another Healthcare X PRIZE Advisor who needs no introduction. He began his public life as an All-American, Olympic gold medalist, NBA Champion, and ultimately Hall of Fame basketball player. In addition to his athletic prowess, he received his BA degree in American History from Princeton University and an MA degree from Oxford University where he was a Rhodes Scholar. He later served from 1979 – 1997 representing the state of New Jersey. In 2000, he was a candidate for the Democratic nomination for President of the United States. Since his retirement, he has served as a Senior Advisor and Vice Chairman of the International Council of JP Morgan, chief outside advisor to McKinsey an Company, and currently serves as a Managing Director of Allen and Company

Thanks for joining us today.

I am very pleased to be a part of the Healthcare X PRIZE competition that Wellpoint is sponsoring. I believe it is one of those special moments where we can get people together from different elements of the healthcare system, get them collaborating with each other, and try to devise a system that will produce the highest quality healthcare for the greatest number of people at the lowest possible cost. The key to its success will be tapping the creativity of the American people and getting them involved. Anybody who has got a great idea should have the opportunity to put it forward.

What challenges are faced by the healthcare industry as a whole?

Well, I think that the healthcare problem in America is one of coverage. Forty-seven million people don’t have any health insurance in America. It’s also one of costs. It is much more expensive on a per capita basis than any other country by a factor of 10. And to round out the issues we need to be concerned about the quality of care we are receiving for how much we are paying for care. We have too many people in our hospitals for example who die of medical errors that could be prevented if we had the right kind of systems and the right kind of incentives.

What challenges in particular are faced by the federal government in terms of healthcare?

Well, the thing about the federal government is it already spends over half of all healthcare dollars. Between Medicare, Medicaid, civil service retirement, and the gigantic tax subsidy that exists for private sector coverage offered by corporations. As a result, the federal government clearly has a decisive role and it has the same issues related to healthcare that the industry as a whole has - how do you assure quality, how do you assure lowest cost, and how do you assure access to the system. From my perspective, the government currently and will continue to have a major role in any type of reform efforts.

What challenges have you faced in terms of developing broad based healthcare solutions?

Well, the problem is that the healthcare industry reminds me of the Balkans. It is a lot of small groups arguing with each other and fighting with each other, and you’ve never been able to get everybody on the page. This is one of the reasons I find the X PRIZE concept so interesting; perhaps this model will allow everyone and anyone to contribute within an organized framework to actually accomplish something that no one has otherwise. I also think it can be the beginning of a national dialogue on a true national health care system. At the federal level there’s always been the "Balkanization" problem, with the special interest groups at war with each other and everyone.

The problem with the federal level is when you put it in political context, it is so easy to distort the best efforts of people. You can always pick out one small aspect of a healthcare program and attack it politically, and it’s as if that’s the only part of the healthcare program. So what you have to see is the interconnectedness of payment with delivery, of cost and quality, and of best practice and best outcomes, then it becomes much harder to attack.

If you look at the healthcare system we currently have in America today, and you look at what we need, I think it’s the best example of what I call the ethic of connectedness. In other words we’re all connected, and we need both what I call the ethic of caring - which typically means this shared responsibility toward collective action which is most often associated with democrats. But we also need the ethic of individual responsbility, which is often associated with individual action and the republic perspective. This is ground zero for the philosophical ward we have been fighting for centuries which is perhaps best illustrated by our current healthcare debate.

Sure, everybody needs to be covered, but you need to take care of yourself too. That’s the individual responsibility part, and we need to have a payment system that is rational in this regard. Did you realize that doctors spend 30 to 50 billion dollars a year trying to get paid, and insurance companies spend 30 to 50 billion dollars a year trying sort out incomplete billing records and related information? This is just wasteful nonsense that needs to be eliminated.

How would you compare US healthcare versus that of other developed nations?

Most developed nations have a system of health that is funded by the government in some form. Some are single payers, some are variations on the theme, some are hybrids organized by government but privately run. We have Canadian, German, Swiss, and related models of care that are unique to the cultural and environmental conditions of those countries. What we universally see is that they typically deliver much better public health for significantly less than what we are getting in America. The difference in cost per capita is dramatic, actually astounding, and I think we need to seriously look at that. Having a single system can really drive down some of the wasteful costs that I mentioned earlier.

What do you believe are the differences in quality between private versus public versions of health care?

Well, I think that on primary care, most other countries probably have a better primary care system than we do. When it comes to specialties, we have clearly have the most advanced, most sophicasted, and most expensive specialists in the world. There is really no doubt or question about that. It is an interesting perspective, however, because as a result of our technology, innovation, and breakthroughs our people are living longer lives which introduces a whole new set of questions and concerns. Back to your point, I think you can see in the example that a more public focused health system results in better quality primary care but in a private based system attempting to maximize profits the dollars flow to the highest paying activities which results in increased specialization.

How do you think the recent economic and environmental should shape the way we approach healthcare?

I think it’s still a little too early to know exactly how the finanical crisis will play out. In terms fo the federal budget, we are seeing that it is going to cost alot, which means that funding for other areas will be affected. The hope is obviously that we can recoup some of our healthcare investment fairly quickly by reallocating funding and financing in a much more rational way. My hope is that the looming recession, which will result in large deficits at the federal level, will not dampen the enthusiasm and willpower to complete meaningful reform this year.

This is actually one of the reasons that I think the Healthcare X PRIZE is so important. I think it can be a catalyst in charging and energizing the debate by involving the American people. I really see the American people actively competing in this effort as competition and awards and championships are part of the amerian way. We are all familiar with winnign the NBA Champtionship and getting a championship ring. I can see that same mentality and effort and competition being applied to the Healthcare X PRIZE.

Do you think using incentives like prize competitions will encourage more innovation to address these challenges?

I think it’s very important that people take responsibility for their own actions and their own health. I think that part of that is being attuned to the costs and not just attuned to one’s needs and desires in healthcare - which quickly leads us to something that I call value based healthcare. This requires a completely transparent health system - much like the Healthcare X PRIZE commitment to transparency - in order to work. You should be able to go online and find at the Cleveland Clinic what a hip operation costs as well as the results of the various physicians who perform that procedure and the patients who underwent the procedure. The information should be detailed - how many people, what was the experience, how much pain, when were they able to return to normal, what were the side effects, etc. Virtually every procedure, heart operations, kidney transplants, hip replacements or whatever should have transparent information available about outcomes. Armed with this information, consumers can now begin to make rational choices regarding where and how and when they spend their health resources. Also, think about what happens when large health groups begin to compete on who can deliver the best healthcare outcomes? This would be powerful.

What outcomes do you hope to see as a result of this process?

My hope is that as a result of the Healthcare X PRIZE that millions of people across the country will feel a part of the effort to totally rethink our health care problem in America. I realize that this is a highly complex problem but I also think there are quite a few very smart people in America who could contribute to this effort. I truly believe that we can develop a model in which we can provide coverage for everyone at the lowest possible cost at the highest quality.

I always found in politics, the best thing to do was ask somebody what they thought, and that’s exactly what the Healthcare X PRIZE is intended to do - it is national conversation with the American people saying, "what do you think?". It is unlikely, perhaps inprobably, that a small business owner in Duluth, Georgia is going to conceptualize an entirely new health system but you never know. I think this potential, the vast possibilities, are what make X PRIZE's so fascinating.

Any additional comments?

I think that the key thing is getting information to people, and the more information the people have, the easier it’s going to be for them to influence decisions that will help shape our health care system. As I said before, the ethic of caring is to cover everybody; the ethic of responsibility is for everyone to take care of your own body; and the more information you have to help guide your decisions in both areas help you realize and participate in what I previously mentioned as the Ethic of Connectedness.