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Real Health Reform: Ghost of Christmas Past or Future?

Len M. Nichols, Ph.D. Director, Center For Health Policy Research and Ethics

Professor of Health PolicyGeorge Mason University

Texas Hospital AssociationFebruary 2, 2011

Austin, TX

Overview

• Status of PPACA and its progeny

• Realities

• Fears

• (Rebuilding) Trust

• Opportunities among the Chaos

PPACA Status• Many forms of denial

– Ds think opponents misguided– Tea partiers think there is no role for government– R leaders think no one will remember what they did

and said

• Implementation is going faster than it can• Repeal passed the House with 3 D votes

– “replace” is more popular than appeal

• Federal judge score now even, 2-2

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Meanwhile, Around the Country

• Hospitals buying physician practices– Especially cardiology and primary care

• Hospitals studying ACO “handbooks”

• Physicians angry about SGR

• Insurers are bi-polar

• Drug companies happy but worried

• Device companies scared to death

• States are starting to think hard about implementation, worried about budgets

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Realities• We have to pay the Chinese back• Medicare is our largest fiscal problem• Health care costs too much• Rs don’t have a coherent plan• Inertia is too strong for system to reform itself, or

for “free” markets to work magic• No one trusts “government” to solve their problem• Employer community has turned on Obama,

lobbies turning R, again

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What is Reform REALLY About?

• Incentive Re-Alignment• Signaling that “Business As Usual” is over

– We Cannot Afford It– We are a weaker nation as more families fail to cover

themselves

• Changing obsolete business models– Risk Selection helping all find value– FFS pay for volume pay for value

• New business models reinforce each other

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Two Roads to Fiscal Balance

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CUTSRE-ALIGNINCENTIVES

Why Not Just Cost Containment “First” ?

• Delivery system could not stand it– 3/4 of hospitals lose money on Medicare– Need embrace of new payment models, not circle the

wagons in defense of the status quo

• Cost containment with coverage expansion is more likely to succeed– Repeal and do nothing => ?

• Imploding Medicaid programs, brute force caps on Medicare

– Coverage expansion buys time for inefficient to adjust

Incentive Alignment is Multi-Dimensional

Wellness +Co-Payments

DecisionSupport

What We Think We Want• Pay for value, not volume

– Value = quality + patient experience + resource use

• Variations on capitation, 3.0– Changing the unit of payment, Bundled payments global

payments full cap eventually– Patient Acuity-Adjusted cap with quality rewards– Providers gain from:

• Participating in a coordinating organization• Improving health, patient experience, efficient resource use

– Patients gain• Health, better experience, and share of savings

– Payers • Share savings, productivity gains from improved health and patient experience

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Problem: There is no Scotty!

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This Will Not All Be Smooth Sailing

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Close Up of Not Smooth Sailing

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Opportunities for Health Care Cost Reduction

Improved Inpatient CareProcesses Use of

lower-costtreatments Reduction in

Adverse Events Reduction in

Preventable Readmissions

Improved ManagementOf ComplexPatients

Use of Lower-Cost SettingsAnd Providers

LowerTotalHealthCare Costs!

Hospitals and Specialists

Improved Preventionand Early Diagnosis

Improved PracticeEfficiency

Reduction in Unnecessary Tests and Referrals

Reduction in PreventableER Visits and Admissions

Primary Care Practices

Source: Harold D. Miller, “How to Create Accountable Care Organizations.” Center for Health Care Quality and Payment Reform

All Providers

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Opportunities for Health Care Cost Reduction

Improved Inpatient CareProcesses Use of

lower-costtreatments Reduction in

Adverse Events Reduction in

Preventable Readmissions

Improved ManagementOf ComplexPatients

Use of Lower-Cost SettingsAnd Providers

LowerTotalHealthCare Costs!

Hospitals and Specialists

Improved Preventionand Early Diagnosis

Improved PracticeEfficiency

Reduction in Unnecessary Tests and Referrals

Reduction in PreventableER Visits and Admissions

Primary Care Practices

All Providers

MEDICAL HOME

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Opportunities for Health Care Cost Reduction

Improved Inpatient CareProcesses Use of

lower-costtreatments Reduction in

Adverse Events Reduction in

Preventable Readmissions

Improved ManagementOf ComplexPatients

Use of Lower-Cost SettingsAnd Providers

LowerTotalHealthCare Costs!

Hospitals and Specialists

Improved Preventionand Early Diagnosis

Improved PracticeEfficiency

Reduction in Unnecessary Tests and Referrals

Reduction in PreventableER Visits and Admissions

Primary Care Practices

All Providers

BUNDLING

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Opportunities for Health Care Cost Reduction

Improved Inpatient CareProcesses Use of

lower-costtreatments Reduction in

Adverse Events Reduction in

Preventable Readmissions

Improved ManagementOf ComplexPatients

Use of Lower-Cost SettingsAnd Providers

LowerTotalHealthCare Costs!

Hospitals and Specialists

Improved Preventionand Early Diagnosis

Improved PracticeEfficiency

Reduction in Unnecessary Tests and Referrals

Reduction in PreventableER Visits and Admissions

Primary Care Practices

All Providers

ACCOUNTABLE CARE ORGANIZATION

What are ACOs Really About?

• Alignment

• Alignment requires:– Leadership– Data– Care and Financial Management capacities– Trust– Willing patients

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Hospital Margin Elements

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Reform LOWERS

Out of Hospital Control

PayerMix

Adding Physician and Auxiliary Pricing to the Equation

• MD Employees vs. attendings, office based ambulatory, pre- and post-acute clinicians and consults

• Collaborating physician groups

• Technology and drugs

• Post-acute facilities

• No one has patented the math yet20

Fears

• I will make less money

• My (good) access will be curtailed

• Taxes will go up “too much”

• Government that can do this (mandate insurance purchase) knows no bounds

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Remember the Constitutional Convention (1787)

• Philadelphia actions “behind closed doors”• Debated state by state, with game film• There was much distrust of “the betters”• Opponents were accused of self-interest• Basic liberties (bill of rights) not attached• Was “Congress” trying to become a king?

– Terms of office, control of election rules, power to levy direct taxes, keep standing army

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(Re-Building) Trust• Acknowledge it’s been lost

– Washington agreed to be President and he chose to retire after 2 terms

– Bill of Rights drafted and approved right away

• Listen to opponents and debate fairly– No mandate vs. what if no mandate– Malpractice reform – More state flexibility– Budget failsafe– Workforce subsidies

• Determine if we can handle the truth

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Big Questions:

• Are our politicians up to the challenge?

• Do we have to wait for them to be?

• Are our clinician and hospital leaders up to the challenge?

• Can we make community health systems work regardless of partisan warfare?

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Competing World Views

• FREEDOM

• FFS is moral

• Regulation is evil

• People get what they deserve

• Redistribution should be voluntary

• Triple Aim• Channeling self-

interest to serve social ends is moral

• Regulation is a tool

• Markets are not perfect• Voluntary

Redistribution will never be sufficient

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What We Need• A shining City on a Hill

– Why not Austin? San Antonio?– Beacon, How Will We Do That, AF4Q, Regional

Networks for Health Improvement

• Communities will thrive as a unit, or not– Premiums, per capita costs– Quality, safety and efficiency of care– Healthy outcomes, population– Productivity, jobs, income, purchasing power– Transparency to build and maintain trust

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Who is at the Center of the Health Care System?

• Hospital?

• Primary Care Medical Home?

• Specialists?

• Drug and Device manufacturers?

• Insurers?

• Patients?

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Reform Restructures Relationships

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Drug and Device

manufacturers

Drug and Device

manufacturers

Drug and Device

manufacturers

Value-basedBenefit designs