1 National Press Foundation Why Pursue Health Reform – One Provider’s View Robert K. Smoldt Mayo...

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National Press FoundationWhy Pursue Health Reform –

One Provider’s View

National Press FoundationWhy Pursue Health Reform –

One Provider’s View

Robert K. SmoldtMayo Clinic

November 14, 2007

Robert K. SmoldtMayo Clinic

November 14, 2007

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Fundamental Issuesfrom a Provider’s Perspective


• Uninsured• Uninsured

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Ian Morrison*Ian Morrison*

“The U.S. is the only country where

owning a gunis a right and

getting health care is a privilege”

“The U.S. is the only country where

owning a gunis a right and

getting health care is a privilege”

*Ian Morrison quote from Mayo Clinic/RANDHealth Reform Forum, March 6, 2007

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• Uninsured

• Variable quality

• Uninsured


70.270.2MinnesotaMinnesota Mortality Amenableto Health Care

Mortality Amenableto Health Care

International variation, 1998International variation, 1998

Deaths before age 75that are potentially

preventable with timely and appropriate

medical care

Deaths before age 75that are potentially

preventable with timely and appropriate

medical care

Source: Commonwealth FundNational Scorecard on U.S. Health

System Performance, 2006

Source: Commonwealth FundNational Scorecard on U.S. Health

System Performance, 2006

Deaths per 100,000 populationDeaths per 100,000 population

8181

8484

8888

8888

8888

9292

9797

9797

9999

106106

107107

109109

109109

115115

129129

130130132132

7575

114.7114.7

00 5050 100100 150150

FranceFrance

JapanJapan

SpainSpain

SwedenSweden

ItalyItaly

AustraliaAustralia

CanadaCanada

NorwayNorway

NetherlandsNetherlands

GreeceGreece

GermanyGermany

AustriaAustria

New ZealandNew Zealand

DenmarkDenmark

U.S.U.S.

FinlandFinland

IrelandIreland

U.K.U.K.

PortugalPortugal

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• Uninsured


• Disintegrated,fragmented care

• Uninsured



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Why is coordinated,integrated care needed?

Why is coordinated,integrated care needed?

• Medicare patients with 4+ chronic conditions are what % of total cost?

68%

• Yearly per person average• 13 physicians• 50 prescriptions

• Medicare patients with 4+ chronic conditions are what % of total cost?

68%

• Yearly per person average• 13 physicians• 50 prescriptions

Sources: WSJ, Feb 8, 2006; Archives of IM, Nov 11, 2002

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Efficient Resource UseICU Days for Decedent in Last Six Months

Efficient Resource UseICU Days for Decedent in Last Six Months

% changeRegion Number integrated

avgIntegrated systems

Temple, TX 1.8Rochester, MN 2.5Salt Lake City, UT 2.1

Integrated avg 2.1 Base

U.S. 3.3 +57%

Miami 6.6 +214%

LA 6.4 +204%

Philadelphia 5.3 +152%

Houston 4.3 +105%

% changeRegion Number integrated

avgIntegrated systems

Temple, TX 1.8Rochester, MN 2.5Salt Lake City, UT 2.1

Integrated avg 2.1 Base

U.S. 3.3 +57%

Miami 6.6 +214%

LA 6.4 +204%

Philadelphia 5.3 +152%

Houston 4.3 +105%Source: Dartmouth Atlas of Health Care website, Sep 26, 2007

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• Uninsured



• High cost

• Uninsured



• High cost

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Is U.S. only place where health care costs are rising?

Is U.S. only place where health care costs are rising?

Health spending per person in “real terms,”average annual % increase 1970-2002

Health spending per person in “real terms,”average annual % increase 1970-2002

Source: “The Health of Nations,” Economist, July 17, 2004

4.0%4.0%OtherOECD

countries

OtherOECD

countries

4.4%4.4%

00 1.01.0 2.02.0 3.03.0 4.04.0 5.05.0

U.S.U.S.

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Variability in EfficiencyVariability in Efficiency

Leapfrog’s Honor Roll 39 U.S. teaching hospitals (based primarily on process measures)

Dartmouth data on cost per Medicare enrollee in last 6 months of life*

• Most efficient hospital

$15,800• Least efficient

$45,600

Leapfrog’s Honor Roll 39 U.S. teaching hospitals (based primarily on process measures)

Dartmouth data on cost per Medicare enrollee in last 6 months of life*

• Most efficient hospital

$15,800• Least efficient

$45,600*Dartmouth Atlas, 2006(?)

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A view that health spending does yield benefits…


NY Times, August 22, 2006:“Making Health Care the Enginethat Drives the Economy”

“By 2030, predicts Robert Fogel, Nobel Laureate at the University of Chicago, about 25% of GDP will be spent in health care ‘making it the driving force of the economy.’ Dr. Fogel is not alarmed. Americans can afford it. He explains,“At the end of the 19th century, food, clothing and shelter accounted for 80% of the family budget. Today it is about a third.”


“By 2030, predicts Robert Fogel, Nobel Laureate at the University of Chicago, about 25% of GDP will be spent in health care ‘making it the driving force of the economy.’ Dr. Fogel is not alarmed. Americans can afford it. He explains,“At the end of the 19th century, food, clothing and shelter accounted for 80% of the family budget. Today it is about a third.”

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Says Robert E. Hall (Stanford) andCharles I. Jones (University of California, Berkley), “We have to spend our money on something.So we get older and richer, which is more valuable: a third car, yet another television, more clothing—or an extra yearof your life?”


Says Robert E. Hall (Stanford) andCharles I. Jones (University of California, Berkley), “We have to spend our money on something.So we get older and richer, which is more valuable: a third car, yet another television, more clothing—or an extra yearof your life?”

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Mayo Clinic Health Policy CenterMayo Clinic Health Policy Center

Goal

• Influence stakeholders to implement substantive health care reformbefore 2011 that will preserve quality and availability of health care for all patients

Goal

• Influence stakeholders to implement substantive health care reformbefore 2011 that will preserve quality and availability of health care for all patients

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Top Issues from SymposiumTop Issues from Symposium

Baker Center – Univ. of TennesseeBaker Center – Univ. of Tennessee• Health insurance for all Americans• Health insurance for all Americans

• Improving effectiveness and efficiency

• Improving effectiveness and efficiency

• Improving integration of care• Improving integration of care

• Pay for value• Pay for value

Harvard Kennedy Health Policy CenterHarvard Kennedy Health Policy Center

RAND CorporationRAND Corporation

Dartmouth Evaluative Clinical SciencesDartmouth Evaluative Clinical Sciences

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Individual Ownershipof Insurance for All

Individual Ownershipof Insurance for All

Provide health insurance and access to basic health care for all Americans – regardlessof their ability to pay

• Require individual ownership of insurance

• Provide sliding-scale subsidies for those in need

• Create a simple mechanism (FEHBP) to coordinate insurance offerings

• Appoint an independent health board to define essential health care services

• Allow people the option to buy more coverage

Provide health insurance and access to basic health care for all Americans – regardlessof their ability to pay

• Require individual ownership of insurance

• Provide sliding-scale subsidies for those in need

• Create a simple mechanism (FEHBP) to coordinate insurance offerings

• Appoint an independent health board to define essential health care services

• Allow people the option to buy more coverage

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Are there models of this approach?Are there models of this approach?

NetherlandsNetherlands

FEHBPFEHBP

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Effectiveness and EfficiencyEffectiveness and Efficiency

Increase quality and patient satisfaction.Decrease medical errors, costs and waste.

• Develop a common definition of value

• Measure and display outcomes, patient satisfaction scores and costs as a whole

• Create a trusted mechanism to synthesize scientific, clinical and medical information

• Reward consumers for choosing high-quality health plans and providers

• Hold all sectors accountable for reducingwaste and inefficiencies

Increase quality and patient satisfaction.Decrease medical errors, costs and waste.

• Develop a common definition of value

• Measure and display outcomes, patient satisfaction scores and costs as a whole

• Create a trusted mechanism to synthesize scientific, clinical and medical information

• Reward consumers for choosing high-quality health plans and providers

• Hold all sectors accountable for reducingwaste and inefficiencies

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Improving IntegrationImproving Integration

Patient care services must be coordinated across people, functions, activities, sites and timeto increase value

• Center care around the needs of the patient

• Form coordinated systems to deliver effective and appropriate care to patients

• Develop incentives to encourage teamwork

• Increase support for health care delivery science

• Provide accurate information so patients can make informed decisions

Patient care services must be coordinated across people, functions, activities, sites and timeto increase value

• Center care around the needs of the patient

• Form coordinated systems to deliver effective and appropriate care to patients

• Develop incentives to encourage teamwork

• Increase support for health care delivery science

• Provide accurate information so patients can make informed decisions

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Mayo/Dartmouth ForumMayo/Dartmouth Forum

Principles for Payment Reform

• Payment systems should be designed to provide patients with no less than the care they need and no more than fully informed, cost-conscious patients would want

• Pay providers based on value –measurable outcomes, safety and service compared to the cost over time

Principles for Payment Reform

• Payment systems should be designed to provide patients with no less than the care they need and no more than fully informed, cost-conscious patients would want

• Pay providers based on value –measurable outcomes, safety and service compared to the cost over time

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Mayo/Dartmouth ForumMayo/Dartmouth ForumProvider scores on the “importance of continuing

development of the payment approach”Provider scores on the “importance of continuing

development of the payment approach”

00 22 44 66 88 1010Score (10 = very important)Score (10 = very important)

FFS with shared savingsFFS with shared savings

Overall capitationOverall capitation

FFS with outcomes rewardFFS with outcomes reward

5.65.6

5.85.8

5.95.9

Mini-capitationMini-capitation

Shared decision makingShared decision making

Chronic disease coordinator (medical home)

Chronic disease coordinator (medical home)

7.57.5

7.67.6

8.68.6

Present Medicare P4P based onprocess delivered by individual provider

Present Medicare P4P based onprocess delivered by individual provider 1.81.8

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Dr. Len M. Nichols(New America Foundation) testimony to U.S.

Committee of the Budget, June 26, 2007

Dr. Len M. Nichols(New America Foundation) testimony to U.S.

Committee of the Budget, June 26, 2007

“The secret is not, however, to re-jigger 10,000 prices in 3,000 counties so that we

get them ‘right’ once and for all (until medical knowledge or technology or input prices change again). The secret is to…

bundle ever-larger sets of services into one payment, which frees clinicians and

providers to find the most efficient way to deliver health.”

“The secret is not, however, to re-jigger 10,000 prices in 3,000 counties so that we

get them ‘right’ once and for all (until medical knowledge or technology or input prices change again). The secret is to…

bundle ever-larger sets of services into one payment, which frees clinicians and

providers to find the most efficient way to deliver health.”

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Hypothetical example of problem with line item pricing emphasis

Hypothetical example of problem with line item pricing emphasis

MDTeam A

$7,200

0.5

$18,000

2,500

$45.0 M

MDTeam A

$7,200

0.5

$18,000

2,500

$45.0 M

MDTeam B

$6,500

1.2

$21,000

4,400

$92.4 M

MDTeam B

$6,500

1.2

$21,000

4,400

$92.4 M

Coronary Angioplasty

Fee

ICU days

Cost per episode

No. per 1 million population

Cost per 1 million population

Coronary Angioplasty

Fee

ICU days

Cost per episode

No. per 1 million population

Cost per 1 million population

Cost of B as % of A

-10%

+17%

+105%

Cost of B as % of A

-10%

+17%

+105%

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Total Cost =Price x Use Rate

Total Cost =Price x Use Rate

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Price Controls: Grayson’s Maxim Price Controls: Grayson’s Maxim

“Add (price) controls and you will see ‘new’ services appear. Expect ‘unbundling’ of services with the price of individual units, when added together, totaling more than the original services.”

C. Jackson Grayson Jr. Chair, U.S. Price Commission (1971-1973)

“Add (price) controls and you will see ‘new’ services appear. Expect ‘unbundling’ of services with the price of individual units, when added together, totaling more than the original services.”


Source: Wall Street Journal, 29 Mar 1993

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Annual Rates of Increase in Physician Fees and Expenditures/Fee-for-Service BeneficiaryAnnual Rates of Increase in Physician Fees

and Expenditures/Fee-for-Service Beneficiary

Source: Letter to Medicare Payment Advisory Commissionfrom Herb B. Kuhn, Director, Center for Medicare Management, CMS 4/7/06

as referenced by Dr. Stuart Guterman, The Commonwealth Fund

3.4

-0.7

7.4 7.4

-2

0

2

4

6

8

3.4

-0.7

7.4 7.4

-2

0

2

4

6

8

Fees

SGR-relatedexpenditures/fee-for-servicebeneficiary

Fees

SGR-relatedexpenditures/fee-for-servicebeneficiary

Annual percent change

Annual percent change

1997-20011997-2001 2001-20052001-2005

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Price Controls: Grayson’s MaximPrice Controls: Grayson’s Maxim

“No matter how simply you begin, your controls will get more complex and voluminous.We started with…3 ½ pagesof regulations and ended with 1,534. In an effort to correct one inequity, you create another.”


“No matter how simply you begin, your controls will get more complex and voluminous.We started with…3 ½ pagesof regulations and ended with 1,534. In an effort to correct one inequity, you create another.”


Source: Wall Street Journal, 29 Mar 1993

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Patient/Public Input – Focus GroupsPatient/Public Input – Focus Groups

• Six sessions in Atlanta, Cincinnati,and Los Angeles with chronic disease patients

• Reviewed cornerstones of MCHPC recommendations without identifying them with Mayo Clinic: Insurancefor all, coordinated care, value

• Six sessions in Atlanta, Cincinnati,and Los Angeles with chronic disease patients

• Reviewed cornerstones of MCHPC recommendations without identifying them with Mayo Clinic: Insurancefor all, coordinated care, value

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Public Views OverallPublic Views Overall

• Cornerstones accepted when explainedbut are not self evident

• When changing delivery system,concerned about major shifts• Recommend a phased approach – try

new things, see if work, then put in play more broadly

• People are dissatisfied with U.S. health system, BUT are happy with their providers• Change could make things worse

for them

• Cornerstones accepted when explainedbut are not self evident

• When changing delivery system,concerned about major shifts• Recommend a phased approach – try

new things, see if work, then put in play more broadly

• People are dissatisfied with U.S. health system, BUT are happy with their providers• Change could make things worse

for them

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YOUR VOICE, NEW VISION ProgramYOUR VOICE, NEW VISION Program

• Nine city tour to collect letters and film and record “woman/man on the street” views

• Mayo organized, but other partners:

• Partners• American Hospital Association• American Medical Group Association• Kaiser Permanente

• Nine city tour to collect letters and film and record “woman/man on the street” views

• Mayo organized, but other partners:

• Partners• American Hospital Association• American Medical Group Association• Kaiser Permanente

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Mayo Clinic National Symposiumon Health Care Reform

Mayo Clinic National Symposiumon Health Care Reform

• Brief review of forum principles

• Review/analyze major health reform proposals from presidential candidates

• Identify/prioritize actions that different sectors can take to contribute to positive health care reform

• Begin creating an action plan for change

• Brief review of forum principles

• Review/analyze major health reform proposals from presidential candidates

• Identify/prioritize actions that different sectors can take to contribute to positive health care reform

• Begin creating an action plan for change

March 9-11, 2008Leesburg, VA

March 9-11, 2008Leesburg, VA

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