HFMA VIEWS

Scott MacStravic, PhD

It has long struck me that paying employees in general for their measured or even estimated performance value makes eminently good sense. For example, when a windshield repair firm shifted from traditional hourly wages to P4P based on productivity and revenue production, it found performance improved by 44% in the first year of the new system. Moreover, turnover among low performers increased, while it dropped by 21% among high performers, promising even greater improvements in future. [E. Lazar “Performance Pay and Productivity” American Economic Review 190:5 Dec 2000 1346-1361]

As an added benefit, for employees who are not “place-bound,” such as contact center staff and phone health coaches, P4P, when it includes reliable measures of performance enables organizations to let employees work at home, which has been shown to increase their productivity and reduce their turnover, both dramatically. When Best Buy permitted this, its corporate staff productivity increased by 35%, while turnover dropped from an average of 16.6% per year to zero. [M. Conlin “Smashing the Clock” Business Week Dec 11, 2006 (www.businessweek.com)]

When HCOs merely measure their employees’ productivity or performance, in objective, valid and reliable ways, they automatically enter the forefront in any employee health management (EHM) investments they are thinking of. P4P information can not only be used to track the objective impact of EHM initiatives, but to quantify the ROI from EHM investments, when employee performance measures include reflections of the value of their performance, not merely its amount.

For example, whenever HCOs are subject to P4P revenue bonuses or penalties by payors, the amounts of both will vary primarily due to the efforts of its employees, including employed physicians as well as other professional and non-professional staff. To the extent that the performance of individual employees can be linked to P4P bonuses or penalties, the dollar differences they make can be directly computed, and compared to any and all investments in improving their performance.

The impact of P4P on professional performance has already been demonstrated with physicians, and it would be absurd to think that the same effects would not be available with other professional staff as well, and with non-professionals, as well. Managers and executives are routinely offered performance bonuses, for example. When the UK’s National Health Service began offering physicians P4P bonuses in 2003, they found that rates of improvement in both asthma and diabetes increased markedly, while the rate for coronary heart disease kept improving at the same rate. [S. Campbell, et al. “Quality of Primary Care in England with the Introduction of Pay for Performance” New England Journal of Medicine 357:2 July 12, 2007 181-190]

Paying physicians on a performance basis has been largely responsible for the renaissance of HCO employment of physicians, when this practice declined after its boom years in the 1990s, thanks to its changing this strategy from a money loser to a solid producer. One ’97 study, for example, found that owned practices lost an average of $97,000 per physician per year for their HCO investors. Now, thanks to the vast majority of HCOs switching to performance-based vs. guaranteed salary (only 21% now offer the latter), employment is proving an attractive option for physicians and HCOs alike. [“Facilities Are Learning from Past Physician Management and Compensation Mistakes” Physician Compensation Report 8:10 Oct 2007 1-3]

Physicians, themselves, as well as employees in general have often resisted the idea of performance-based payment. “Piecework” compensation has long been resisted as a device to force workers to produce more in highly stressful conditions. Subjective performance ratings and annual increases are rarely considered true reflections of employees’ worth – by employees, at least. But the same method useful in converting physicians from salary to P4P would probably work well with other professional, and perhaps even non-professional employees.

One example is the approach used by LexMedical, Inc., the physician practice arm of Lexington (NC) Memorial Hospital. It had found that its salary compensation method led to a decline in performance of its primary physicians compared to their peers in the state. With only a modest 10% bonus incentive available, from productivity levels significantly greater than were enough to keep them satisfied with their salaries, only one physician had even earned the bonus since its inception. By contrast, the new P4P method was aimed at creating a congruence between physicians’ compensation and the hospital’s earnings.

When the idea was first proposed, physicians saw little to like in it, with many dead set against it. The 16 primary physicians in 7 practices warned that many would likely leave, threatening the hospital’s survival as well as community service mission. By taking a full year to “test” the new method, physicians were gradually brought on board, and by the time the year was over, all had converted to the new compensation system, and none had left.

The “secret” to this total success was creating a “shadow” compensation report that described for each physician how much each would have made in each month of the trial year, had they been compensated under the new system compared to the old. This meant that those physicians who were already high performers were told how much more they could have made if they had been in the new system, and they began converting to the new almost immediately. Those who were lower performers could compare themselves to the higher compensation available from increased performance, and how much they would lose if they didn’t increase their productivity by the time the new system was in force.

The combination of natural competitiveness causing them to strive to gain higher compensation, and peer pressure from those who converted early, improved the productivity of all the physicians to the point where they would make more in the new system, so all converted. All still get a pre-set monthly draw to gibe them predictable cash flow, though it one month’s draw is less than they merit under the P4P system, the next month’s draw will be lowered accordingly. Now each of the physicians earns more than they would have under the former salary arrangement, while each performs well above the peer average for each’s specialty. Before, all were paid above median for their peers, while performing at less than their peers, on average. [“NC Hospital Turns Practices Around with Productivity” Physician’s Compensation Report 8:10 Oct 2007 7-8]

Engaging physicians as “partners” in a problem-solving effort to achieve mutual goals, e.g. better care, improved financial performance -- while recognizing the mutual advantages of a continuing relationship, helps to improve working relationships between HCOs and physicians. It seems likely that the same approach, aided perhaps by ideas such as “shadow” reporting of the specifics of how P4P compensation would affect them, before it actually does, would work equally well with at least some, most, and even all HCO employees, with significant gains for all.

Heidi Taylor, Ph.D., R.N.
Interim Dean and Associate Professor, College of Nursing and Health Sciences, West Texas A&M University

As a nursing education administrator married to a health care finance man, I look forward to reading HFMA's journal when it arrives. Over the years, I have been disappointed by how little attention nursing issues get in journals focused on the financial health of health care organizations. Your cover story in the October 2007 issue by Lutz and Root ("Nurses, Consumer Satisfaction and Pay for Performance") was a welcome read. The authors accurately describe the complex issues impacting the nursing shortage, with one minor exception.

To suggest that nursing education models have not changed much in 50 years is inaccurate. As a nursing education professional who evaluates baccalaureate and graduate nursing programs across the country for accreditation purposes, I can say with confidence that innovative models of nursing education abound. Many nursing programs have incorporated curricula that offer accelerated learning for persons who hold degrees in other disciplines, on-line programs, clinical simulation instruction to ease the burden on our clinical agency partners, and many other examples too numerous to list.

I strongly urge the professions in hospital management and administration to embrace the concept that nursing care IS the primary business of hospitals. Most services offered in a hospital could be done on an out-patient basis were it not that patients need to be nursed by well-educated professionals. My real dismay is that the HCAHPS patient satisfaction survey is used so heavily to evaluate nursing care.

Patients have a great awareness of the “comfort” care they receive from a variety of health workers, not all of whom are nurses. But patient satisfaction of comfort care is only a part of the quality nursing care story.  Patients usually never know when nurses catch errors on medical orders, assess subtle changes in status that require swift intervention – and then intervene, coordinate members of a multi-disciplinary team to assure efficient care, advocate for patients when physicians argue over courses of treatment, figure out ingenious ways to administer multiple medications, ordered by multiple physicians, that are incompatible with one another.  Oh, and in the meantime, answer call lights, educate patients, manage pain, listen carefully, keep the area quiet…and do all of these things for 8-15 patients at a time.

There is no simple solution to the nursing shortage and the quality care problem.  But if you asked most nurses what they need to feel more satisfied with their work, my guess is that you would get a fairly consistent answer: “I need time to care for my patients in the ways they deserve to be cared for.” The moral distress experienced by nurses when they go home every day knowing they couldn’t do everything they wanted to do for their patients causes severe burn out, very quickly. It is no wonder that 50% of nurses leave their first job after two years.

Scott MacStravic, PhD

When Medicare evaluated its Coordinated Care Demonstration project after two years, the results joined the growing list of disease management (DM) programs that failed to live up to its expectations. Of the fifteen HCOs that participated, exactly none achieved the net five percent savings expected; in fact, only one failed to produce a net loss over the study period, once the fees for the HCOs’ DM efforts were included, only one, Quality Oncology, managed not to cost Medicare more than it saved, though two others, Georgetown University and QMed added only 1% to Medicare costs. [See www.mathematica-mpr.com/publications/PDFs/mccdfirsttwoyrs.pdf]

The fees that these HCOs charged had been negotiated with each of the HCOs, based on their estimates of the costs of their interventions. If a 20% savings compared to projected costs would not have been enough to offset the costs of the intervention, either the HCO reduced the target population to higher-risk patients, or CMS reduced its payment to enable a 20% savings to achieve this offset. Yet despite this preparation, only one of the fifteen HCOs even achieved a breakeven or “cost neutral” outcome.

The challenges were pretty clear, and the diseases being addressed including most of the more expensive chronic conditions. Six of the HCOs included congestive heart failure, which has frequently been the source of savings in the range of 30-50% through effective DM. Six more included other heart conditions, and chronic lung diseases, including COPD, diabetes, asthma, cerebrovascular disease, cancer, neurological conditions, mental illness, renal failure, Alzheimer’s disease, moderate to severe hyperlipidemia and hypertension were included by at leas tone of the HCOs.

Baseline monthly costs per Medicare beneficiary involved in the DM programs ranged from as little as $507 to as much as $3299 per month, or from $6080 to $39,588 per year. The HCOs’ monthly fees ranged from $80 to $444, or from $960 to $5328 per year. On average, none had to achieve greater than a 20% reduction in expenses to cover their fees, though Medicare expected a 5% net savings, so that meant they would have to do better than breakeven. The trouble was that the highest percent savings achieved by any of the HCOs was 13%, achieved by Mercy Medical Center, with two others. Georgetown and QMed achieving a 12% reduction before counting their fees.

Once their fees were counted, Mercy Medical Center, for example, added 8% to Medicare expense, while three of the HCOs achieved no savings at all even prior to counting their fees, and added 9%, 10% and 17% to Medicare costs once those fees were counted. Only Quality Oncology, which cut overall Medicare costs by only 2%, but charged only $140 per month, was able to avoid adding to Medicare’s costs once its fees were counted.

Altogether, seven of the fifteen HCOs added double-digit percentages, ranging from 10% to 44% to Medicare’s costs, once their fees were counted. The overall effect of all fifteen was to reduce Medicare’s costs by only 2%, before their fees were counted, and increase costs by 11% after fees were counted. While only six of the HCOs yielded statistically significant results, all six were in the double-digit increase range. Altogether, the first two years amounted to digging a fair-sized hole for the entire demonstration to attempt to fill in subsequent years.

It would seem that the HCO suffered from a surfeit of hubris in taking on their individual challenges under the circumstances. The size of their fees, compared to the size of the Medicare costs per beneficiary in the populations they targeted and enrolled made their challenges severe at the outset. Only Quality oncology, whose $140 fee represented less than five percent of the baseline costs for the patients it served, started with what could be called a good chance of succeeding. If it could cut total costs by 10%, it would have covered its fees plus delivered a net five percent savings to Medicare. Unfortunately, it only cut costs by 2%.

Mercy Medical Center, for example, needed a 19.5% reduction in the $1315 baseline costs among its patients to breakeven, and a 24.5% decrease in order to deliver a net 5% savings to Medicare, but only produced a 13% savings, barely over half the amount needed. Had its costs been $100 per month, instead of $257, it would have needed only a 7.6% reduction in costs to cover the lower fee, and the 13% savings it did achieve would have delivered a net 5.4% savings to Medicare. Quality Oncology would not have yielded a net savings of 5% to Medicare even if it charged nothing, since it only achieved a 2% savings before counting costs.

In general, there was such a wide variation across the cost savings percentages achieved, from 13% savings to a 21% increase, though eight of the fifteen did achieve a reduction of some kind, that there is no single change in strategy that would have made all successful. But reducing their fees would have made the probability of success a lot higher than the levels charged in this example. As it was, the average monthly fee came to $235, while the average baseline costs were $1696. This meant that the average HCO had to achieve a $235 divided by $1696 = 13.86% reduction in costs, plus another 5% for Medicare’s expected net savings, in order to be considered a success.

It may well be that by the end of the third year, more of the participating HCOs will have succeeded, at least in achieving a positive net savings, though achieving the 5% net savings demanded by Medicare will be tough, indeed. In another CMS demonstration project, only two of the large physician groups participating, the University of Michigan’s Faculty Group Practice and the Marshfield Clinic in Wisconsin was able to save more than the 2% set as a minimum savings for the ten groups participating. [“P4P Demo Yields Good Results, Few Rewards” ModernHealthcare.com Aug 20, 2007]

HCOs, in general, are probably handicapped, not only by hubris in having such confidence in their ability to succeed in DM projects, despite the consistently dreary history of federal government evaluations of such projects. They are also handicapped by their tradition of identifying the best, highest quality approach to sickness care, confident that saving lives and restoring patients to good health are worth almost any cost. A similar position may be argued with proactive health management (PHM) efforts, except that they are intended primarily to save payers money, and if the charges made by HCOs make achieving net savings difficult or impossible, this position can only handicap the HCOs.

There are a wide range of DM and PHM methodologies available, and few of them are burdened with charges as high as the $960 to $5328 per year fees that the HCOs in the Coordinated Care demonstrated charged. If HCOs are to succeed and survive in the DM and PHM market, they are clearly going to have to dramatically improve their success rates, reduce their costs, and probably both.

Scott MacStravic, PhD

The recent report envisioning an admittedly optimistic potential for saving as much as $8.5 trillion in combined sickness care and productivity loss costs between now and 2023 left out a major challenge to realizing this vision. How much can we count on consumers, as subjects or objects, to play the part necessary to achieving such savings? [R. DeVol & A. Bedroussian, An Unhealthy America, Santa Monica, CA Milken Institute Oct 2007 (www.milkeninstitute.org)]

Healthcare reformers have a strange ambivalence about consumers. This is perhaps understandable, since any reform that depends on changing the behavior of 300+ million people is necessarily very complicated by the sheer numbers involved. Changing the behavior of a few hundred thousand physicians, a few thousand hospitals, for example, is automatically much simpler because of the much smaller numbers involved.

There has certainly been a major transformation in expectations of consumers over the past thirty years. In 1977, the idea of consumers as healthcare “customers”, to be marketed to by healthcare providers, was in its infancy, with the first book on healthcare marketing, and the first national conference on the subject both emerging in that year. (I was at the conference and wrote the book.) It has been a gradual and often contentious period during which providers have gradually accepted that idea.

More recently, the concept of consumer health “self-service” has emerged as an obvious way to save money. Enlisting consumers as “virtual employees” to help reduce costs is an idea as old as the supermarket, in commerce in general. It has really taken off as the Internet, automated phone systems and websites enable consumers to find desired information by themselves, make purchases without interacting with any human, check themselves on to airplanes, etc. and thereby save billions in customer service expense.

Consumers in healthcare are being asked to complete pre-visit surveys prior to making physician visits, register themselves at emergency rooms, find their own health information, and make their own treatment choices. They are being asked, as patients or family members, to become their own “advocates” in watching out for possible mistakes that providers may make regarding treatment safety and quality in the hospital. And they are the major target for proactive health management (PHM) programs, since they largely determine the outcomes thereof.  And providers often insist that they cannot be held accountable even for sickness care, since consumer “compliance” is key to those outcomes as well.

Some simplistic health reform “hedgehogs” rely on a single solution to healthcare system problems, often putting all their eggs into the basket of shifting healthcare costs and power to consumers. Through “consumer-directed” health insurance and health saving/spending accounts, consumers will get “enough skin in the game” to reform their own behaviors, becoming both prudent purchasers of their own sickness care and careful managers of their own health. This is projected to dramatically decrease the rate of increase in healthcare costs.

At virtually the other end of the spectrum are employers, and some insurers, including Medicare and Medicaid that are not only offering healthcare coverage, but are promoting the health of their “covered lives”. Rather than relying on the cost shift to motivate consumers to a new level of prudence, they are supporting, enabling, even paying consumers to become healthier. Employers are even going as far as integrating all employee benefit programs as a strategic investment in improving employee performance and value to the firm, while improving employee retention as well.

I remember when self-service was new, and seemed okay as long as it was convenient and actually resulted in improved experiences, such as getting transactions completed or finding information faster and better than using a customer service representative was. But in wholehearted pursuit of cost savings, self-service has imposed an enormous cost in time for consumers, who have little to spare, including taking time away from work as employees use working hours to take care of personal business.

Relying on consumers to do part of any job makes sense for businesses and healthcare organizations, alike. But there are limits to what consumers can and will do, before they will take their business elsewhere, or simply refuse to serve themselves, unless self-service elements are treated like products or services. This means they must be convenient, priced fairly, deliver significant benefits, to consumers, themselves, not merely save money for the business.

Dan DeLay
Senior Vice President, Supply Chain Analytics, VHA Inc.

It’s October and college students across the country are hitting the books. It reminds me of my own youth, which I spent on various college campuses in the greater Chicago area to earn multiple degrees so I would have the credentials to be successful in the corporate world.
 
My college years and my professional life came crashing together this week when I picked up a recent BusinessWeek and read the cover story entitled, "The Best Places to Jump Start Your Career.” What caught my eye was not that the top three businesses listed were accounting firms, nor that companies across the country are launching Facebook campaigns to attract new employees. Rather, it was a column next to each of the top companies labeled "most desirable trait." 
 
Listed next to the obvious traits of leadership and communication skills was .... drum roll please .... analytical skills or the ability to think critically. In fact, 10 of the top 50 places for college graduates to launch their professional careers listed analytical skills as one of the most sought after business traits for new employees.
 
The article shows that the business world needs more than blocking and tackling – it is searching for analytical minds to think outside of the box and tackle industry obstacles. According to a report earlier this year by the National Leadership Council for Liberal Education and America’s Promise (LEAP), college graduates need cross-disciplinary knowledge and advanced communication and analytical skills to apply their knowledge to real-world problems. And it's not just technology companies asking for analytical aptitude. These skills are needed for a wide variety of industries, from investment banking and financial services to retail, insurance and telecommunications.
 
The need for analytical data in health care has grown substantially over the past few years, but it continues to have optional buy-in for most health care organizations.  If other industries are eagerly seeking out young analytical stars to join its ranks, why isn't health care?

Scott MacStravic, PhD

To get the most out of employee health management (EHM) programs, whether HCOs buy them or sell them, or both, requires obtaining the highest successful participation rates possible. Voluntary participation (i.e. with no extrinsic incentives) is often no better than 5-10% among those eligible for a particular EHM program. On the other hand, participation can get as high as 60-80% if the right incentives are offered to those eligible and paid to those who participate. [A. vanDusen “Slimming Down the Workforce” Forbes.com Sep 4, 2007]

Both positive (rewards) and negative (penalties) incentives have been suggested as ways to promote EHM program participation. Gordian Health Solutions, according to the above article, recommended that a $30 per month boost in health insurance premiums for those who fail to participate in wellness programs. Positive incentives are more common, though I know of no scientific study that has compared the two to see which works best, overall.

To compare the two, and determine the optimal incentive amount, whether penalty or reward, would require not just measuring the effect of incentives on participation rates, however. It would also have to look at success rates, the percent of participants who actually achieve the necessary behavior or health status changes that yield the desired economic benefits, and thereby justify the EHM investment. One difficulty in the use of incentives is that they might promote merely opportunistic participation, i.e. just enough to qualify for the reward or avoid the penalty, but nowhere near enough to deliver any economic benefit to the employer.

The economic benefits involved can be significant, combining: 1) reductions in health, disability and WC insurance costs; 2) reductions in absenteeism, presenteeism, and turnover costs: and 3) improvements in performance relative to quality, customer satisfaction, new business and other positive revenue, not just cost impacts. Therefore the amounts offered and paid in incentives can be significant as well, while still generating significant positive economic impact for HCOs or their clients.

Participation vs. Success Incentives?
While participation is essential to achieving success, it is not enough, by itself. Participation may involve little more than taking a Health Risk Assessment and being sent frequent customized e-mails coaching participants toward behavior and health status change. Even those who participate by interacting with health coaches by phone, or visiting their physicians appropriately may not succeed in making any significant changes in either behavior or status – effort does not mean success. Moreover, participation incentives always add to the costs of success, whether or not they add to the degree and benefits thereof.

Costs per participant will already include whatever program costs are incurred, and enrollment expenses invested in efforts to gain participation among those eligible for any given EHM program. To these must be added participation incentives, offered to all eligibles in most cases, but paid only to those who actually participate. And these costs are automatically multiplied when compared to the benefits of EHM success, depending on the efficacy or success rate for each EHM program.

For example, if the program and enrollment costs generated per participant amount to $100 each, and a $200 participation incentive is offered, this will amount to a total of $300 costs per EHM participant. The success rate for a weight management program, for example, might be 10%, reflecting those who lose a recommended number of pounds or percent of body weight, and maintained this loss for a prescribed period. That for a smoking cessation program, i.e. those who quit smoking and remained abstinent for a year, might be 20%.

With such program success rates, the effective cost per successful participant is multiplied by how many participants it takes to yield one successful one. This is the same as the “number necessary to treat” analysis used in judging the cost efficacy of clinical care. Since at a 10% success rate, ten participants are needed to achieve one successful weight loser, and at a 20% rate, five participants are needed to achieve one smoking quitter, the effective costs per success for these would be $3000 for each weight loser and $1500 per smoking quitter.

These amounts will be a major burden for the HCO, whether in its own EHM program, or in achieving an admirable ROI for its clients. To achieve even a breakeven result in such programs, an economic benefit amount per success of $3000 for weight management or $1500 for smoking cessation would be required. To achieve even a $2.00:1 ROI ratio, benefits of $6000 or $3000 would be required. And of these necessary benefits, 2/3 of these amounts are needed to cover the participation incentive alone!

Another option would be to offer not a participation incentive, but a success incentive. A success incentive is only paid to those who succeed; it only imposes an ROI requirement related to its amount, with no multiplier based on incentive costs of participation. Any program or enrollment costs per participant will be subject to this multiplier, but none of the success incentive.

For example, in the same two kinds of EHM program, where there were $100 per participant program and enrollment costs, with no participation incentive costs, the effective costs per success based on this $100 cost per participant would be $1000 for weight management, and $500 for smoking cessation. If a $500 success incentive were offered for each, the total costs per success would be $1500 for weight management and $1000 for smoking, dramatically less than when an only $100 incentive was paid per participant. The $2.00:1 ROI ratio benefit would be achieved with benefits per participant of only $3000 and $2000, compared to $6000 and $3000 in the participation incentive example.

Moreover, it could easily be that a success incentive would increase the success rate significantly, without harming the participation rate. After all, instead of the prospect of getting $100 in the participation incentive case, eligibles who choose to participate have the prospect of getting $500 for achieving outcomes they control, themselves. This success incentive could easily be offered to teams of participants, who could supply both peer pressure and support to each other in pursuit of success rewards, and increase the success rate that way. In addition to the greater motivational effect of this higher incentive, by conditioning it on success alone, this approach would tend to create positive “self-selection bias,” i.e. attract more people who are motivated toward and confident in succeeding. 

Following is a sample of reactions to the SCHIP veto as political football, including reactions from two hospital executives:

"My hope is this will not be used simply as a political football....We should get down to the business of insuring low-income kids and cut out some of the posturing."
--Sen. John Cornyn (R-Tx) quoted in "Cornyn feeling heat after CHIP vote," The Dallas Morning News, Oct. 5, 2007

"It's unfortunate. The CHIP bill is caught up in the partisan debate, a rhetorical debate, really, about the future of health care in this country.... It really should be considered for what it is, an opportunity to cover more kids."
--Karen Crompton, executive director of Voices for Utah Children, quoted in "Analysis: Bush veto puts proposed expansion of kids' health insurance in peril," The Salt Lake Tribune, Oct. 5, 2007

"Republicans have a reasonable policy argument against the measure, but it sounds complex and abstract....The Democratic argument is simple and strong: 'We want to help kids but Bush and his friends do not.'"
--John Pitney, political science professor, Claremont McKenna College, quoted in "Bush's SCHIP veto could hurt Republicans," Atlanta Journal Constitution, Oct 3

“If they need a little more money in the bill to help us meet the objective of getting help for poor children, I'm more than willing to sit down with the leaders and find a way to do so.”
--President George Bush, quoted in "Political spin in overdrive over SCHIP," The Missoulian, Oct. 6

And leave it to healthcare executives to put things in perspective:

“Unfortunately, that just puts a further burden on the health care system in having to absorb those costs....The fact of the matter is that one of the big costs in health care is the costs to help the uninsured.”
--Mike Scialdone, CFO, Penrose-St. Francis Health Services, Colorado Springs

“What we think SCHIP does...is it encourages those kids to get into our system earlier, hopefully preventing a more serious or traumatic event down the road.... We don’t feel like politics should interfere in providing medical services, really to anybody but particularly to children.”
--John Suits, associate administrator of business and government affairs, Memorial Hospital, Colorado Springs. Scialdone and Suits are quoted in "Health firms push for veto override," Colorado Springs Gazette, Oct 6

Each week, the Health Wonk Review pulls together important health policy commentary from healthcare blogs, including HFMA Views. Take a look at this week's Review, by Jane Hiebert-White, Associate Publisher of Health Affairs, which highlights comments from around the country about President Bush's veto of SCHIP, excerpts a great post on dysfunctional policymaking by Jeff Goldsmith (whose work you've read in HFMA's magazine), and summarizes a number of health reform ideas and challenges, including the recent post from Senator Tom Daschle on HFMA Views.

Senator Tom Daschle

(Read Part 1 of this piece.)

How to Fix a Broken System

So our challenge is to overcome ideology with a new pragmatic paradigm for reform. To be sure, there is an important role for vision and ideology in our system. It grounds incremental actions and serves as a compass toward the vision of an ideal healthcare system. But this is not an academic debate: Millions of Americans have suffered; thousands have died due to purely preventable public policy choices while we criticize good plans that are not good enough.

I believe that the way forward is to embrace pragmatism, in both the substance and approach to reforming the health system.

Starting with policy, we have three serious problems in the system: unacceptable access, quality, and costs. Each could be addressed by building on what works.

Although we have 47 million uninsured and growing, we have roughly 250 million insured through some type of health insurance. We can ensure access for all by extending public and private group health insurance to all Americans.

Although we have medical errors that result in nearly 100,000 unnecessary deaths a year, we have some of the best minds and best practices in the world scattered throughout the nation. We need to promote best practices through propagating them, paying for them, and ultimately demanding them.

And although we have the most expensive healthcare system in the world, most experts believe that we can significantly reduce costs without affecting health through:

• Promoting research on what works and what doesn’t
• Prioritizing prevention
• Harnessing the potential of IT
• Reducing administrative costs through simplifications

Such solutions are not perfect, but neither are they radical. They can move toward the ideal system without invoking the fears and partisanship that have been barriers in the past.

There is a difference between a concession and structural compromises. Building support and coalitions to pass legislation requires concessions, even though experts and the press love to hate them. For example, I’m open to some compromise on medical malpractice, some way to keep the drug industry at bay, and other policies that build a larger and stronger coalition. The plain truth is that no major legislation has been enacted without such “gives,” and we need to be tolerant of such policies.

We also must look to new models. In 1991, I first proposed the creation of a federal health board to govern the healthcare system the same way the Federal Reserve Bank governs our banking system and monetary policy. Like the Fed, the Fed Health would be a board composed of independent experts. Its main job would be to develop the standards and structure for a health system that ensures accessible, affordable, and high-quality care. It would, for example, develop model benefits, rules for insurers, and best practices for clinicians. These would apply to federal health programs and contractors and serve as a model for private insurers.

Congress and the White House would relinquish some of their health policy decisions to it. For example, a shift to a more effective drug or service could be accomplished without an act of Congress or White House political support. Delegation of power rightly raises concerns. But imagine the outcomes if Congress revoked the Fed's power to set interest rates and instead took it upon itself to enact them each quarter. It would be a disaster, similar to the consequences of our mismanaged health system.

Last, we need leadership on this issue.

In the SCHIP debate, even with a lame duck president who is verifiably the weakest and least popular in modern history, you are seeing the negative power of the White House. With his veto threats and refusal to engage in a negotiation toward a solution, we may well see millions of children in this country go without health insurance.

I hope with the next president you will see the positive power of the White House to create and act on a sense of urgency on this matter and to forge a consensus for where we go. The power of the White House is unmatched in this regard. But we should also not fool ourselves that there is any one magic bullet here. We could have as many health reform plans as there are Americans, and each would score better on one dimension than another. Yet each of us insisting on our own plan not only fails to advance reform, but could even set it back.

Leadership also means going on the offensive. Advocates for reform cannot wait for the next Harry and Louise ad--they must pre-empt it. They cannot assume that the public recognizes the liabilities of the other side’s proposal--they have to educate the public, for example, about the emptiness of health savings accounts. And we cannot limit the options available for us to act--which is why I am becoming an advocate for using the reconciliation process in Congress to enact healthcare reform. Acting swiftly and in the early--and strongest--days of the next presidency will be the best way to not get caught in the stasis of the status quo.

More than anything, we need to finally put good ahead of perfect. Congress should fulfill its commitment financially to covering all low-income, uninsured and put its money behind this commitment. If it does not take this opportunity, we will be back here debating this issue again in 20 years, still bedeviled by a broken system that is not giving us what we pay for.

Sen. Tom Daschle completed 26 years of public service in January 2005, having represented South Dakota for eight years in the U.S. House of Representatives (1978-86) and 18 years in the U.S. Senate (1986-2005). He served as Minority Leader of the Senate from 1994 to 2001 and from 2003 to 2005, and Majority Leader from 2001 to 2003. Today, Daschle is an adviser to the law firm of Alston & Bird, Washington, D.C., and a Distinguished Fellow at the Center for American Progress, Washington, D.C.

This piece will be published in print in the November issue of hfm magazine.

Senator Tom Daschle

In 1991, the political landscape was changed by a teacher from Pennsylvania who ran--and won--by saying, if every prisoner has a lawyer, every American should have a doctor. I remember being one of the sitting senators who made presentations to Senator-elect Harris Wofford in the hopes that he would work with us on our plan. The excitement was palpable--and optimism was high. I don’t think a freshman senator has gotten that kind of attention from his colleagues since. And it helped set the stage for the presidential election and debate over health reform in 1993 and 1994.

Health care is back again--and it just might be that it is back stronger than before. It is present in full force in the presidential campaign, with all the Democratic candidates, and some Republicans, offering comprehensive reform plans. All the major newspapers have run front-page stories on the politics of health care. The central domestic policy fight in Washington is between Congress and the White House over the State Children’s Health Insurance Program (SCHIP). And poll after poll tells us that health care is typically second in importance only to Iraq for the American public, regardless of their party affiliation.

The Cusp of Change?

But as a veteran of the 1994 battle and a student of previous efforts’ lessons, I view these facts as only suggestive, not conclusive, that we are on the cusp of health reform. A sober political analysis must answer two questions: Are the circumstances any different now than during previous attempts, and are we ready to accept the pragmatic over the perfect solution?

Beginning with the “good news,” some circumstances are now more propitious for reform. On one level this is a bad news-good news story. That is to say, the problems with the system are so bad, the failings of the current administration so monumental, and the thirsting for leadership is so large that there is increased attention to the issue.

That’s bad--but potentially good news.

Unlike the early 1990s, when recession and job insecurity drove concern, today the problem is less about job loss and low-income people. It is increasingly a concern among the educated, middle-income, older, and insured population. It is exacerbated by the chronic disease epidemic that is crippling the nation. And so many people have seen someone they know struggle with the system that everyone fears they are not immune from an underperforming system.

High costs and complexity are driving business leaders’ frustration, which is leading to new levels of mobilization in that community. According to a McKinsey analysis, healthcare costs will exceed profits at Fortune 500 companies by next year, and over the past seven years, we’ve seen wages go up 24 percent, while healthcare premiums have gone up 98 percent. Costs were a problem in the 1990s too, but today legacy costs are new--and crippling.

These costs are undercutting competitiveness, a fact not lost on business leaders. This is why we are seeing maverick CEOs like Howard Shultz of Starbucks and James Sinegal of CostCo buck Wall Street and push not only for generous benefits for their employees but also for comprehensive reform of the system. And that’s why we are seeing coalitions like Wal-Mart/SEIU in “Better Health Care Together” and Safeway and the Business Roundtable demanding comprehensive reform.

At the same time, the media have democratized. The Internet has led to media reporting and political organizing that magnifies possibilities for reform. The 24-hour news cycle, challenged by blogs and other forms of communication, can catalyze anger and pressure for action. At a recent gathering of college students, I was told that healthcare reform is the civil rights fight of that generation--and the new media offer the possibility of virtual rallies analogous to the marches of the 1960s that involve millions more Americans in the debate.

Last, we are in a very unique political situation. About 70 percent of the country is convinced we are on the wrong track. For the first time in 80 years, there is no incumbency, legacy, or trail of policy inertia in the presidential campaign. And the foreign policy failures of the current administration may create a demand for a domestic policy success.

Challenges to Reform

Yet these new positive indicators must confront deep, perennial challenges to health reform.

First is the complexity of health care. Seeking health care is not like buying a car; classic economic theory need not apply. There is an imbalance of knowledge. Clearly, our health professionals are highly trained, and we typically trust them to do the right thing. Yet we have seen that supply can determine demand, most recently with the explosion of sophisticated imaging and tests that may not always be needed. And health care is literally a matter of life or death, making it difficult on the demand side to distinguish what is necessary from what is interesting or optional or, even, a long shot.

This difficulty is made worse by layer after layer of complexity. In the federal system alone, consider the differences in benefits and payments a South Dakotan in a program such as Medicare can expect from a South Dakotan in the Indian Health Service from a South Dakotan in the Veterans Health Administration--and then consider how you answer concerns about each as you walk through a parade on the Fourth of July.

Second, there are special interests. Unlike Social Security or other programs, there is a layer of “intermediaries”: health insurers and providers of care. One person’s savings is another’s salary--or profit. And in terms of political clout, the health industry is second to none. Between 1998 and 2006, pharma and other health product companies spent over a billion dollars on lobbying--twice as much as the oil and gas industry. Not surprisingly, insurers, including health insurers, were number two in spending on lobbyists. These special interests have also created and funded patient front groups, using “human shields” to protect payments and profits. No other industry has done this as well.

Third, we struggle with some myths. Because fear can trump hope, defenders of the status quo oversell what we have now and warn about unforeseen dangers lurking around the corner of reform. Let me give you three of the myths that drive the politics of health care.

One myth is that we have the best health care in the world. You’re familiar with the statistics. Think what would happen to the chairman of the U.S. Olympic Committee if the United States comes in 37th place in the next summer Olympics. Well, that’s where we rank in life expectancy. It is a national shame that on Pine Ridge Indian Reservation in South Dakota life expectancy is 47 years--about 10 years more than in Botswana, where one in three adults has HIV.

The next myth is that the cure is worse than the disease. We are seeing this play out on SCHIP. SCHIP is one of the most popular, bipartisan health programs we have. Yet we are hearing from the president--who gets the best care in the world at Bethesda Naval Medical Center, by government funded-physicians, in a government-built building, and on government-owned machines--that we should not support government-run health care.

And perhaps the most misleading myth is that we can’t afford reform. The most common question asked of all the presidential candidates is, how are you going to pay for reform? Cynics suggest that even the most modest plans are the nose under the tent of a more generous and more expensive solution. Yet at $2 trillion per year and 16 percent of gross domestic product, I fear we can’t afford the status quo.

These myths are easy to exploit. Sometimes it is by special interests whose motivation is crass: that status quo means dollars and cents to them. Other times, it is for political gain. Bill Kristol and Newt Gingrich saw the defeat of health reform in 1994 as a political victory. The same seems to be happening with SCHIP: A sinking White House wants to drag down Congress with it. How else can you explain the awkward attempt to pin ideological concerns on a program that represents a true, bipartisan compromise?

Part 2 of this piece--How to Fix a Broken System--will be posted tomorrow.

Sen. Tom Daschle completed 26 years of public service in January 2005, having represented South Dakota for eight years in the U.S. House of Representatives (1978-86) and 18 years in the U.S. Senate (1986-2005). He served as Minority Leader of the Senate from 1994 to 2001 and from 2003 to 2005, and Majority Leader from 2001 to 2003. Today, Daschle is an adviser to the law firm of Alston & Bird, Washington, D.C., and is a Distinguished Fellow at the Center for American Progress, Washington, D.C.

Scott MacStravic

Waste management in the narrowest sense relates to how to dispose of materials, food, hypodermic needles, outdated equipment, etc., which is a complex challenge in hospitals because of the health risks involved. But in the broadest sense, eliminating “wasteful” efforts, practices, errors, and otherwise minimizing avoidable expenses is even more important. The payors for hospital services are growing ever stingier, and eliminating costs from the system is becoming a national obsession.

One way to eliminate waste is to reduce the large variations in the volume of healthcare prescribed and delivered by physicians and used by patients. There have been estimates that as much as one-third of all care does little or no good, or does no better than far less intensive and expensive options. One egregious example is the care that only becomes needed when errors of omission or commission are made in hospitals, and complications arise that would not had best practices been followed. Not paying hospitals for such examples is perhaps one of the best ways to reduce them.

One of the longest-recognized principles of management is that “what gets rewarded gets repeated”. Its corollary should be that “what is not rewarded, or even is punished should not be repeated.” By not paying for what consumers should not use, and hospitals should not provide, is an obvious application of this corollary. And hospitals seem to be striving to reduce errors and improve patient safety, as both publication of their performance and punishment by not paying for “never” kinds of errors are both being tried. There have been estimates that eliminating avoidable errors could save the economy $17 to $29 billion a year. [R. Lord & M. Buyse “We Pay for Medical Errors” The Boston Globe Sep 12, 2007 (www.boston.com)

Hospitals have justly argued that the value of hospital and medical care, and the positive economic impact that hospitals have on their communities and the nation’s economy are still justified. Of course, even drug pushers and the Mafia contribute significantly to the economy, and the issue is not so much whether there is value, but whether we have to pay so much to get it. Waste elimination is but one answer to that question.

A recent set of guidelines issued by the American College of Chest Physicians, for example, has recommended that lung cancer screening with CT technology and similar expensive methods not be carried out, except in research studies. This will be bad news to the hundreds of CT scan providers, including hospitals and free-standing diagnostic imaging centers that have been generating lots of revenue through these scans. The guidelines, in effect, label them as waste to be eliminated. [“Routine Lung Cancer Screening Not Advised” Yahoo! News Sep 12, 2007 (news.yahoo.com)]

Many hospitals (perhaps the American Hospital Association knows how many?) offer modest programs in proactive health management (PHM), from fitness centers to disease management centers, to executive health programs, to community immunization, screening, and even home visits to fragile patients to prevent their needing inpatient care. These often work to the hospitals’ advantage, as when screening identifies people in immediate need of care, or when home visits prevent admissions that would not have been profitable, but they do help. And most are probably done as part of the hospitals’ mission of community service, though they also help protect tax exemption for non-profits.

But considering that less than 5% of healthcare spending is for prevention, while 95% is for sickness care, it seems clear that hospitals could be dramatically more involved and invested in prevention or PHM than they are today. Arguably, all hospitals should be invested in PHM for their own employees, as a strategy to reduce their costs, as well as improve their overall performance. And it should probably be an almost universally adopted “community benefit” service, even a revenue-generating service line, to enable hospitals to balance both their service to the community and their revenue sources.

The newly developing Centers for Preventive Medicine®, enabled by U.S. Preventive Medicine®, offers at least one approach to reducing wasteful expense in hospitals. It includes a consumer-purchased option for preventive diagnostic testing and coaching, as well as “The Prevention PlanTM”, for employers and their employees. When I last checked, there were only three facilities offering these programs, but that’s a start. The narrow hospital investments in a single disease management program, fitness centers, etc. could be expanded into a PHM strategy.

Moreover, if such a strategy were aimed at local employers, hospitals could see a major transformation in their role and importance to their communities. They would become automatically part of the healthcare cost crisis solution, rather than the largest segment of the problem. They could add a whole new range of services, dealing with employee performance impairment factors such as emotional problems, sleeping difficulties, stress, poor nutrition and inadequate fitness, starting with their own employees and expanding proven programs to local businesses.

Not that this would be easy – hospitals have serious handicaps if they are ever to become competitive-cost options for PHM to employers, or even for their own internal use. But if the total “waste” in healthcare were calculated correctly, to include all avoidable expenses, the vast majority of hospital revenue would disappear, at least in the long run. And planning for a future of waste management, by payors and consumers in their own interests, would be a wise option for hospitals, even if they choose not to join in the effort.