There’s a scene from “Monty Python and the Holy Grail,” in which Eric Idle plays a corpse collector making the rounds of a plague-ridden village in the Dark Ages, crying “Bring out your dead, bring out your dead.” One peasant tries to pass off an old fellow as dead. The old guy moves, saying “I’m not dead.” “He says he’s not dead,” says Eric Idle. “Yes, he is,” says the peasant. “No, I’m not,” says the old guy. “Well, he will be soon,” says the peasant. “He’s very ill.”
That scene brings to mind the late lamented healthcare reform package. For the most part, all that remains to do is clear away the bodies. But it would be a big mistake if we hauled every single piece of the legislation off to the pauper’s grave.Some parts could make genuine, if limited, contributions to improving quality and addressing long-term costs.
I would hope that Title III of the Senate version of the bill, entitled “Improving the Quality and Efficiency of Health Care Act,” could be resurrected as a stand-alone bill. I believe it would gain bipartisan consensus and quickly win passage. Perhaps Sen. Mark Warner, who took a special interest in this aspect of reform, could lead the effort. Here is a section of a chapter from “Boomergeddon” that describes the benefits and limitations of Title III.
Bending the Cost Curve, Obama-Style
President Obama and his Congressional allies had two major preoccupations in approaching health care reform. First, they wanted to extend medical coverage to the 15% of the population that lacked it, a liberal Democratic priority since World War II. Second, they had a keen understanding that the nation could not long afford medical care if the cost continued to escalate some 2.5% a year faster than the general inflation rate over the next 40 years as it had for the past 40 years.
The tumultuous debate that ensued revolved mainly around the question of how to achieve universal insurance coverage, how to pay for it, and what impact the legislation would have on the federal budget. Different versions of the legislation were estimated to cost in the vicinity of $800 billion to $1 trillion over a 10-year period. Congress spent months identifying one group after another — the rich, the young and healthy, beneficiaries of high-cost health plans, consumers of soft drinks, cosmetic surgeons, tanning parlors — that could be shaken down for enough money to make the initiative “budget neutral.” But lawmakers faced a hard reality in this zero-sum game: For every winner (someone who gained access to medical insurance), there was a loser (someone else who paid for those benefits). And the losers raised hell.
The O Team cut deals with Big Pharma, Big Insura, Big Labor, the hospitals, doctors and even senators from Nebraska and Louisiana to buy their acquiescence. But in the end, it wasn’t enough. Health reform sputtered as Congress tried to reconcile the competing visions of the Senate and the House of Representatives. After the January election of Republican Scott Brown to the Massachusetts Senate seat previously occupied by Teddy Kennedy, the initiative collapsed. It was clear even to members of Congress: Far more Americans saw themselves as loser than winners from the legislation.
It’s a shame that the Obama administration tied the fate of the controversial universal-care provisions to the productivity-and-quality reform elements of the bill. Had those components been carved out in their own bill entitled, “Improving the Quality and Efficiency of Health Care Act” (as Title III of the Senate version the bill actually was slugged), it likely would have won bipartisan support and sailed to easy passage. The measures enumerated in Title III were not in themselves sufficient to “bend the curve,” as I shall explain, but they would have moved the U.S. health care system in the right direction and set the stage for the next round of market-oriented reforms.
Under the Obama plan, the commitment to efficiency and quality would start at the top. The Secretary of Health and Human Services (HHS) would develop a national strategy to measure results, identify best practices and goad hospitals, doctors and other providers into changing the way they practice medicine. In place of the current fee-for-service system, which reimburses providers on the basis of how many procedures they perform, regardless of the outcome, Medicare would reward them on the basis of how successfully treat the disease. Superior results would get more money; sub-par results would get less. Additionally, Medicare would pioneer the “bundling” of payments so that teams of medical specialists with different disciplines could be paid for delivering coordinated care over the course of a patient’s entire cycle of care, from prevention and diagnosis to treatment and recovery. These ideas are very similar to those propounded by Michael Porter and Elizabeth Teisberg, the business school professors whose analysis I have quoted admiringly [elsewhere].
In the same vein, the national health care strategy also would tackle the problems of costly medical errors, infections acquired in hospital settings, and the all-too-frequent problem of patients being readmitted to the hospital for the same medical episode. These are all areas where cutting costs and improving quality go hand in hand. Another important initiative would devise more effective ways to deliver care to patients with chronic conditions, which account for more than half of all medical spending. To carry out the Quality & Efficiency strategy, the president would convene a working group, the Interagency Working Group on Health Care Quality, to coordinate the activities of some 23 federal agencies and departments and work with the private sector.
Among the specifics identified in the bill, HHS would establish a “hospital value-based purchasing system.” Each hospital would be assigned a “hospital performance score” based upon its quality and performance metrics. Medicare payments would be raised or lowered in tandem with the score, rewarding excellence and punishing failure. Scores would be posted on a “Hospital Care” website, where it would be accessible to the public.
Likewise, the bill would create a physician quality reporting system. Physicians would be required to submit quality data to HHS, which would massage the data and then inform physicians how their “patterns of resource use” compared to that of other physicians. To avoid punishing docs who took on the hardest cases, the data would be adjusted for the severity of the patients’ conditions as well as demographic factors such as income and ethnicity.
A Center for Medicare and Medicaid Innovation would create cutting-edge payment and service-delivery models with the potential to improve the quality of care for patients at less cost. Such experiments would include sending doctor-nurse teams to elderly patients at home rather than waiting for them to arrive in the emergency room, medical homes focused on women’s unique health needs, and primary care physician groups that took lump-sum or salary-based payments in lieu of fee-for-service reimbursements. Another idea, Healthcare Innovation Zones centered around teaching hospitals, would deliver a “full spectrum of integrated and comprehensive health care services” while incorporating novel methods for training future health care professionals.
The legislation also would have endorsed an innovation called “accountable care organizations” (ACOs), which are comprised of a hospital, primary care physicians, specialists and other medical professionals. Accountable for the cost and quality of care for Medicare populations of 5,000 patients or more, ACOs would employ quality and cost measures along with new technologies such as remote patient monitoring to continually ratchet up the quality of care. As incentive, ACOs would be eligible to receive payment for shared savings.
These ideas represent the best thinking of the medical establishment. If enacted, Medicare would evolve over time from its fee-for-service system, which reimburses doctors and hospitals regardless of results, into a system that paid providers based on results over the full cycle of care. Data would be collected, massaged to identify best clinical practices, and spit back to the doctors, hospitals and other health professionals to guide them in improving their results and their public standing.
The Limits to Top-Down Reform
Title III would bring real improvements to the U.S. health care system. But let us be honest. It would not represent a dramatic breakthrough. Many of the ideas embodied in the legislation are being implemented by forward-thinking hospitals and physician practices already, even without the carrot/cattle prod of Medicare reimbursement reform. More significantly, Congress would entrust the Department of Health and Human Services to lead the charge. In other words, reform would be top-down and it would unfold at the same lethargic pace at which the federal government moves.
… After law firms, health care professionals pumped more money into the system than any other industry — $13.6 million. (That doesn’t even include the vast sums donated to the presidential campaign.) One of the advantages of being an established player like a multibillion-dollar health plan, a Fortune 500 pharmaceutical company or a billion-dollar health system is that you have lots of money to hire lobbyists and spread around PAC donations. Start-up entrepreneurs who might challenge your market dominance don’t have big bucks to throw around — they plow every penny they’ve got into growing their business. So, when it comes to translating the law into the fine print of rules and regulations, whom do you think will dominate the process? The big guys with offices in Washington, or the little guys trying to meet payroll on Friday? To ask the question is to answer it.
Here’s the challenge: It does not suffice to collect quality metrics for the nation’s hospitals and doctors, as necessary as that is to building a transparent, market-driven health care system. It is not enough to redesign Medicare’s payment system, although that, too, is an important step forward. Missing from Obama’s health care reform was any recognition of how change is driven by entrepreneurial innovation. As I shall explain in Chapter 11, the only hope we have of “bending the cost curve” fast enough to avoid Boomergeddon is to radically restructure the health care industry, rejecting the idea that hospitals must provide all services regardless of how well they do so, and jettisoning the notion that physicians should organize their practices around functional areas like oncology, nephrology, orthopedics and the like. The way to achieve dramatic gains in productivity and quality is by reorganizing health care providers around medical conditions in multi-disciplinary teams with dedicated facilities that provide focused treatment across the full cycle of care and use data to drive continual quality improvement.
Here are some of the barriers that block the adoption of entrepreneurial business models in U.S. health care:
• The third-party payment system. With employers and insurers acting as intermediaries between patients and doctors, medical entrepreneurs have to gain the acceptance of bureaucratic insurers.
• Lack of price transparency. The Obama plan would have made performance data available. That’s half the value equation. But it’s only half. There is no price transparency in U.S. health care. Without quality and price transparency, patients cannot make informed consumer decisions. Instead, they rely upon referrals, usually from other doctors. If those docs are tied into integrated health systems that feel threatened by the competition, they make not refer patients to interlopers.
• Monolithic health care systems. The players with the most to lose from specialty hospitals are giant hospital systems, which provide a broad spectrum of health care services, usually excelling in only a few of them. As demonstrated repeatedly in the past, they will use their bargaining power with physicians and insurers to freeze competitors out of the market.
• Certificate of public need. Hospital giants can block new competitors in this bureaucratic forum by making the case that there is no “public need” for “duplicative” and “redundant” hospital facilities. They also can argue that the interlopers will “skim the cream,” leaving the unprofitable patients for the hospitals. The argument doesn’t have to be true to be effective.
• The Stark law. The law prohibits physicians from referring patients to a medical facility in which he/she has a financial interest. That could stymie physician/entrepreneurs from taking an equity position in a specialty hospital they set up.
• Tort law. Indiscriminate lawsuits against physicians imposes many costs on the health care system, the least of which is the cost of paying for medical malpractice insurance. A larger cost, as is commonly observed, is the cost of defensive medicine, as doctors order extra tests, often unnecessary, to protect themselves in the event of a lawsuit. The biggest cost may be the chilling effect that fear of lawsuits has on the corporate culture of healthcare organizations. What doctor or hospital would want to systematically collect data on misdiagnoses and medical errors for quality-improvement purposes knowing that it could be used to crucify them in the court of law?
None of these issues were addressed by Obamacare.
The United States has pioneered awe-inspiring breakthroughs in genetics, cell chemistry, medical imaging, non-invasive surgical tools and related technologies. But innovation in business management and delivery models has slowed to a crawl. Labor productivity has stagnated. Despite the massive amount of information that exchanges hands in the course of medical care, implementation of information technology lags that of other industries. And quality control techniques remain in a state of barbaric simplicity compared to best practices like Six Sigma and Total Quality Management in the manufacturing sector.
The corporate culture of the health care industry desperately needs to change. An entrepreneurial revolution that builds new patient-centered and quality-focused businesses from the ground up is far more likely to succeed than diktats handed down by the U.S. Department of Health and Human Services.
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