Will Republicans Be Spoilers or Problems Solvers in Health Care Reform?

Will Republicans Be Spoilers Or Problem Solvers on Health Care Reform?


In theory Congress’ return from recess next week could offer a new beginning to the health care reform process, giving everyone a chance to take a deep breath and recalibrate the components of change.

Nine months into the wrangling around a new Administration, the talk-show right has seemingly hijacked the discussion on health care, Democrats’ signature issue, with the standard tools that demagogues have always used: leveraging popular prejudices with oversimplification, hyperbole, and distortion. The die-hard GOP faithful’s leaders – Gingrich, Palin and others (see this off-the-deep-end speech by Rep. Mike Rogers (R-Mich)) – are of course playing spoilers, independent of the cost. They hope to goad centrist voters into abandoning the Democrats so they can retake power. Witness South Carolina Republican Jim DeMint’s comment, “If we’re able to defeat Obama on this, it will be his Waterloo. It will break him.”

The problem with this approach is that we’re still early on in our national discussion about change and about health care. An increasing number of Americans may be frustrated with Democrats, but after 10 years of Republican rule, few Americans see them as a party of fresh ideas or having an interest in helping anyone but the wealthy and powerful. Americans may have short memories, but they likely still recall that Republicans were just thrown out for a multitude of significant sins. So if everyone you know sends around Obama-as-Hitler arguments, heckling and hoping the Dems will quickly self-destruct may seem like a reasonable strategy. It is doubtful, however, that the other 75 percent of us buy into that thinking.

Of course, the Democrats’ health care reform offerings haven’t particularly helped. As we recently pointed out, now that they’re in power the Democrats have taken enormous contributions from the industry, and their health care proposals show it, dramatically expanding entitlements but conspicuously doing little to drive out waste and cost.

This has alarmed some influential groups that otherwise might be supportive. For example, the non-partisan Committee for Economic Development, a business collaboration focused on social issues, issued this July 20th press release excoriating the bills:

“The House of Representatives and the Senate HELP Committee proposals are unacceptable. They would expand coverage without controlling costs, leaving future generations with a system even worse than what we have today. We cannot afford the government and the health-care system we have now, much less this bloated alternative. Lawmakers have bowed to political pressure at the expense of sensible policy. The business and policy community cannot stand behind these bills,” said W. Bowman Cutter, Managing Director, Warburg Pincus.

And the Mayo Clinic, often cited by President Obama as a national model for higher quality, more efficient care, issued this strongly-worded response to the House Tri-Committee Bill:

Although there are some positive provisions in the current House Tri-Committee bill – including insurance for all and payment reform demonstration projects – the proposed legislation misses the opportunity to help create higher-quality, more affordable health care for patients. In fact, it will do the opposite.

In general, the proposals under discussion are not patient focused or results oriented. Lawmakers have failed to use a fundamental lever – a change in Medicare payment policy – to help drive necessary improvements in American health care. Unless legislators create payment systems that pay for good patient results at reasonable costs, the promise of transformation in American health care will wither. The real losers will be the citizens of the United States.

Over the weekend, Senator Mike Enzi (R-Wyoming), a staunch conservative and a member of the Senate’s “Gang of Six” working on a health care bill, joined this chorus. He claimed that the Democrats’ proposals “will actually make our nation’s finances sicker without saving you money,” would “raid Medicare” and intrude “in the relationship between a doctor and a patient.”

It is important to distinguish this criticism from most of what we’ve previously heard from the right. Unlike many of his colleagues, and certainly contrary to conservative talking heads, Sen. Enzi’s comments here are not so political as factual. They reflect the legitimate concerns of reasoning, mainstream conservatives who worry about simply throwing more money at health care without fixing anything.

Which constitutes the real health care reform opportunity for Republicans. The time could be right for centrist Republicans to pragmatically wrap their heads around this issue. After all, the approaches that are known to drive down costs and improve quality can easily be embraced by true conservatives who clamor for market-based solutions. Now, out of power and longing to demonstrate that they can produce substantive answers to our problems, the challenge will be to turn against their traditional industry benefactors and act on behalf of the American people.

On August 24th, Bob Laszewski posted an important column, There Will Not Be Health Care Reform in 2009 Without Republican Leadership, that listed four major areas of health care change that should come easily to centrist Republicans.

  • Bulletproof Health Care Security. This is the idea that everyone would have significantly improved access to care, that the employer-sponsored system would remain available for those who like it, and that Congress would be required to use the same system that they pass for the rest of us.
  • Medical Malpractice Reform. The Republicans have the Democrats where they want them on this one. There is no good reason why our current Med Mal system, as capricious and ineffectual as it has been, has not been revised with expert systems, except that the trial lawyers, in exchange for hefty financial support, have received protection from the Democrats. It’s time to fix this problem that pervades our health care provider community.
  • Paying for It. This is acknowledging that subsidies will be required for those who can’t afford health care at its current cost level, and that there are ways to structure the new cost that are more sensible. As Bob points out, the nearly forgotten Wyden-Bennett bill would be cost neutral in its second year.
  • Tough Cost Containment. As we said above, this has been the Congressional Democrats’ proposals’ most glaring and conflicted flaw. It is an area that, with a focus on primary care, paying for results instead of piecework, and cost/quality transparency, could dramatically drive down cost while improving quality, rightsizing our health system and going a long way toward ameliorating the most pernicious drag on our larger economy. Bob tackles cost control most effectively in his Health Care Affordability Model, a plan that would use tax incentives to encourage the industry to focus on driving out waste.

Collaborating with Democrats or, failing that, taking the lead to demand well-understood cost control mechanisms, would send a clear message that some Republicans are actually interested in problem-solving, not simply nay-saying.

It is possible that the health care reform issue has hardly begun, that the conventional back-room deals and horse-trading needed to be sorted through before the real work could begin. It is a profound truth that, town hall protests and nonsensical boasts about American health care notwithstanding, the middle class is terrified that their access to health care is slipping away. Both Democrats and Republicans have a large stake in visibly resolving this crisis. And, as Rahm Emanuel said, a crisis is a terrible thing to waste.

The shame and danger of the health care reform proposals so far is that they would likely do little to actually address the crisis. The question now is whether lawmakers in either or both parties can put aside their partisanship, their petty grievances, and their special interest conflicts to do the people’s work. Pursuing the structural solutions described here would get America’s health care system headed in a new, far more positive direction.

The American people are desperate for meaningful health care change, and are watching this process very closely. Whoever takes the high road and achieves real reforms will win. The opposite is also true.

Brian Klepper, PhD and David Kibbe MD MBA write together and consult on health care market dynamics, reform issues, and health IT. Their collected writings can be seen here.

Health Care Reform’s Deeper Problems

UscapitolindaylightCongress’ health care reform debate has highlighted how American governance is broken and the difficulty of addressing our national problems.

Take, for example, whether health care is in crisis at all. Conservative commentators argue that America’s health system is fine, that our excellent care simply costs more than other countries’ poorer quality, and that most uninsureds can afford coverage. They ask why we should revamp a great system for the two or three percent of Americans who get less.

This misrepresents reality, though. Care and outcomes are often superior in other developed nations. In America, the ranks of the uninsured and under-insured have skyrocketed, from insurance costs that have grown four times general inflation for a decade. Health coverage is employers’ most unpredictable major cost, a threat to their businesses’ competitiveness, and they have increasingly offloaded costs onto employees. So while the marginalized uninsured are an important problem, declining coverage for the mainstream is the greater worry. Most know that, even with insurance, any major health problem can spell financial ruin.

As businesses and individuals have been priced out of health coverage over the last four years, commercial health plan enrollment has plummeted by as much as 20 percent, or about 36 million people. The Kaiser Family Foundation reports that 40 percent who lose group health coverage probably become uninsured.

Fewer people buying coverage means less money to pay for health care products and services, so the industry is experiencing an unprecedented financial decline. With reforms looming, it has fiercely advocated for universal coverage, which would provide stable funding for a larger patient population. Meanwhile, the industry has opposed changing business mechanisms that encourage waste, even though experts agree that one-third or more of all health care cost is unnecessary or inappropriate. But this raises an important question. Why not spend less by recovering wasted dollars, and then improve access?

The industry has pressed its goals through lobbying, which lets special interests exchange campaign contributions for policy influence. The non-partisan Center for Responsive Politics reports that, between January and June, the industry gave Congress more than $260 million. One lobbyist commented, “A person can reach no other conclusion than this is a quid pro quo [this for that] activity.”

The funds have gone mostly to Democrats, the party in power now, and are producing their contributors’ desired results. The current proposals expand coverage, but do little to reduce cost, failing to heed any of health care’s management lessons from the last 25 years. For example, they won’t re-empower primary care, which other nations have found will maintain a healthy populace for half the cost of our specialist-dominated approach. They fail to make care quality and cost transparent, which would let health care finally work as a market, and help identify the best health care vendors. They continue to favor fee-for-service reimbursement, which rewards delivering more products and services rather than rewarding results. And they all but ignore our capricious medical malpractice system, which most doctors say encourages defensive practice.

These problems and their solutions are structural, and are well understood within the industry. If reform does not pursue these structural approaches, health care will continue to drag down the larger economy. Our current problems will remain and intensify, at enormous cost.

Out of this experience, the American people should become aware of a couple of harsh truths.

First, so long as Congress willingly exchanges money for influence, American policy will favor special interests rather than the public interest. We’ll be unable to meaningfully address our national problems: energy, the environment, education, and so on.

Second, so long as partisans distort the truth to discredit their opponents, rather than focusing on our very real problems, America’s future will continue to be compromised.

Which is to say that we have deeper problems than an inability to fix health care.

Brian Klepper, PhD is a health care analyst based in Atlantic Beach. David C. Kibbe MD MBA is a physician and Senior Advisor to the American Academy of Family Physicians.

Why Congress Should Consider Bob Laszewski’s Health Care Affordability Model


ALP_H_BK_0010Over the last few months, I have become increasingly disheartened over the prospects for meaningful health care reform.

First, the process is terribly conflicted, and it shows. In the first quarter of 2009, the Center for Responsive Politics reported that the health care industry contributed $128 million to Congress. Now that the tide has turned, this has gone mostly to Democrats who, as it turns out, are just as receptive as their Republican predecessors.

In turn, the Congressional health care reform proposals so far are mostly about coverage entitlements and access – fair enough – but despite cost containment rhetoric, they mostly ignore the ever rising cost burden that has brought health care to its knees. As longtime health care crusader Paul O’Neill pointed out in last weekend’s NY Times, the proposals pay relatively little attention to adjusting the health system’s structural flaws that encourage and tolerate tremendous waste and excess: fee-for-service reimbursement; a specialist-dominated medical paradigm; and a lack of enterprise-wide infrastructure that can facilitate transparency, transactional streamlining, and evidence-based decision-support. It appears we could be headed for Massachusetts-style health care reform, in which all the concessions will be made by the people paying the bills, and virtually none are borne by the health industry itself.

The health care waste that has been glossed-over in these proposals is monumental, the result of millions of premeditated decisions made by real people. Consider, for example, the MedPac report issued a couple weeks ago that found that physicians who own or lease imaging devices order images at twice the rate of physicians who do not have a financial stake in them. Or the fact that, even though the majority of claims are auto-adjudicated and we live in the age of electronic fund transfers, it takes health plans – which earn interest while they hold onto the funds – more than a month on average to pay a physician’s practice and nearly two months to pay a health system. Or that many health plan brokers represent that they are independent consultants to employers, but steer their clients to health plans with whom they have a financial relationship.

There are literally thousands of examples like this tucked inside every health care sector: the supply chain, the IT sector, the care delivery system and the finance system. No one knows for sure what these excesses actually cost, but estimates vary between 30 percent ($800 billion) and 60 percent ($1.5 trillion) of our annual total health care expenditures. These are breathtaking numbers. We fork over these immense sums every year for services that provide little or no value.

In the process, we have eroded our national economic stability. The President and his health team have repeatedly noted that health care cost represents the single largest threat to the nation’s long term financial viability. The savings that presumably would accrue from meaningful reform are key to the success of their larger economic plan.

The American people may not understand the technical issues, but they’re also aware that the system is not working in their interests. In a recent NY Times/CBS poll, 72 percent of respondents – nearly 3 in 4 – said they favored “the government’s offering everyone a government administered health insurance plan like Medicare that would compete with private health insurance plans.” While I doubt that the rank-and-file of respondants understands what a public option would really mean, the deeper message seems clear: the current system is dreadfully broken and we need a different approach.

But the Democratic proposals seem oblivious to how crucial the issue is to the President or the American people. And so their focus has been on two seemingly extraneous issues.

First is whether the proposals’ programmatic costs will come in at less than a trillion dollars over 10 years (rather than their long term impacts). Let’s leave aside the fact that a trillion dollars is less than 40 percent of our annual health care expenditure at the moment.

Internally, the Congressional Budget Office and then Congress scores each proposal – the most recent version of the Affordable Health Choices Act from the Senate Health, Education, Labor and Pensions Committee (HELP) came in at $611.4 billion over 10 years – even though the evaluations may not consider ancillary deals made to win the buy-in of powerful health care lobbies, or financing that offloads costs onto some part of the private sector.

Still, if 30-60 percent of all current health care cost is waste, it is not clear why we should spend another $60 billion a year to improve the system. Why can’t we recover and apply the wasted resources instead?

Second is whether the government offers a public option. This issue is worth a separate post, but suffice it to say that the cost growth of Medicare, a public option, has tracked closely with that of commercial health plans for 30 years. There is literally no evidence that the placing a program in the public domain – where it is highly susceptible to perverse influences like lobbying – is any guarantee of better performance.

In other words, one of the lessons of the last 50 years is that changing the financing model alone probably won’t fix health care. What’s needed – what is critical right now – are changes to the ways health care is supplied, tooled, delivered, managed and reimbursed, independent of any health plan’s sponsorship and legal structure.

So far, our current round of reform has conspicuously dodged those issues, presumably at the industry’s encouragement. The long term consequences of that avoidance, though, could prove disastrous.


One of the problems with taking on health care reform is that it is so complicated, with endless facets and special cases, and with stakes that are extraordinarily high. After all, we’re tinkering with an economic sector that represents one dollar in seven and one job in eleven. There is a tendency to suggest that the health care marketplace IS the problem, and that we can solve problems through policy alone.

But the truth is that the marketplace has not been allowed to work in health care, or at least not in the classical sense. Government has financed about half of health care over the last several decades, distorting market functions. And the most powerful organizational forces in the market – physicians, hospitals, health plans, drug companies, device companies – have consistently lobbied against transparency of cost and quality information, the one ingredient that markets need to work effectively. The hope is that good policy both empowers market innovation and constrains its propensity for excess.

What is really needed in situations like these, though it rarely appears, is a fresh approach from an unimpeachably non-partisan and credible source. That approach must cut through complexity to get at the root of the problem, preferably with a relatively simple, easy-to-understand idea. I believe Bob Laszewski has provided us with this kind of solution.

There are many excellent writers and thinkers in health care, but I doubt many would object if I suggest that Bob Laszewski is at the very pinnacle of this group. His articles, written plainly and clearly, are a model of lucid, informed thought. A former health insurance executive, he has deep expertise in health care finance. A longtime DC health policy advisor, he has extensive connections with and is highly regarded within that community.

Bob has written a summary piece and a detailed piece about the Health Care Affordability Model. These posts should be as high on the required reading list for everyone involved in the national health policy reform discussion as Gawande’s Cost Conundrum article was for the White House staff.

The Affordability Model posits a simple idea: Let’s use tax incentives to align everyone’s interest around driving out waste. If health plans and their health system partners hit targets, they keep their advantage. If they don’t, they lose them. He then provides sufficient underlying detail to convince us that it is a workable plan for attacking one specific, important piece of the health care crisis: unrelenting cost growth. He states it like this:

The Health Care Affordability Model creates unavoidable incentives for health plans and their provider network partners to maintain their tax qualification:

  • The health plan would be placed at a substantial competitive disadvantage without it.
  • Doctors, hospitals, and other providers who were not in a tax qualified health care network would lose patients to networks that did control costs.
  • Employers and consumers would almost certainly purchase their health benefits only from qualified plans.

And, unlike most health care reform proposals, the Affordability Model would simultaneously reduce both public and private health care costs.

The Health Care Affordability Model is not a standalone health care reform proposal. It could be attached to virtually any health care reform plan now on the table.

There is nothing new about using tax incentives to shape individual and corporate behaviors. We have used them to encourage employers to purchase coverage for their employees, but we have not applied them to drive behavior within the health industry itself.
In my experience, most seasoned health care professionals have very good ideas about what will work and won’t work, and what remedies can be applied to fix the current crisis. There isn’t a lot of mystery about this. Empowered primary care, data aggregation and mining for transparency and decision support, some new genomic assays, new imaging procedures, face-to-face disease management, and many other approaches are known to work but have been under-utilized. As Bob notes, there simply hasn’t been the reason to pursue these approaches.
We know, for example, that, when they’re appropriate, minimally invasive surgeries are a grand slam. They dramatically reduce the pain associated with an invasive procedure. They have lower episodic costs. They’re associated with fewer complications and nosocomial infections. And they produce quicker back-to-work times for workers. But we often pay surgeons less to do them, so we have created a perverse incentive to use the older, less positive approach. Under the Affordability Model, there would be a clear incentive for health plans, clinicians and everyone that supports them to change to the better, higher value approach.
To me, the real beauty of the Affordability Model is that it offers minimalist steerage. It implements a (relatively) simple, straightforward incentive, and then allows the market to innovate to achieve the desired results. It is as hands-off as possible, is likely to keep the best parts of our system intact and creates the impetus to drive out services that offer little value. It empowers the health care marketplace.
Who will be against Bob’s proposal? Nearly everyone in the industry, because over time it will organically reduce revenues throughout the industry. But they ought to be for it, because it would stabilize health care, and at long last provide the sustainability that has been missing for so long.
Read Bob’s piece closely, and you’ll hear the passion he has infused into it. This is not simply a post, a suggestion. It is the distilled, highly focused advice of a top professional, offered to his country in a time of need. It is the summary wisdom of a life’s work.
Congress has not adequately turned to the very pressing cost problem that Bob’s model addresses. If it does not do so, the result will health care reform that is empty, meaningless and, ultimately, shameful.
My fervent hope, for all of us, is that they are listening with open minds, and that they have the courage to follow his advice.

A Dream of Reason


The dream of reason did not take power into account…Modern medicine is one of those extraordinary works of reason…But medicine is also a world of power.

-Paul Starr, The Social Transformation of American Medicine, 1984

Today’s unveiling of a Declaration of Health Data Rights is an important action, long overdue, that represents a collaborative effort by a group of health care professionals – activists, entrepreneurs, technologists and clinicians – all colleagues we hold in high esteem.

The Declaration’s several points arise from a single, simple premise: that patients own their own data, and that that ownership cannot be pre-empted by a professional or an institution. And there lies its power, especially in the context of early 21st Century health care. It is a transformative ideal that currently is not the norm. But we join our colleagues in declaring that it should be.

It is fair to note that this effort – making sure that all of us have immediate access to personal health information in easy-to-use (i.e., electronic or “computable”) format – is NOT the most important thing we need to achieve in health care right now. We all know that the system is wildly out of balance, with costs so excessive that even the insured mainstream of Americans risk financial ruin with a major health event, and quality that varies from superb to atrocious. Restoring a semblance of stability and sustainability to America’s health system will require many measures that may not include an individual’s right to control his/her own health information.

But it is an appropriate, critically necessary seed, nonetheless. Information withheld from patients, purchasers and professionals, wittingly or unwittingly, is the deepest root of America’s health care crisis. Too often it is an act of power, enabling – and we use this word in the clinical sense – actions without accountability, and trumping the checks and balances that laws and markets strive for in progressive societies. There are many other roots to our current dilemma, of course, but nothing is as pernicious or corrosive as the lack of information transparency. It has been the practice in American health care for decades, with ramifications so grave that, by itself, it has placed the nation’s future in peril.

And so the right place to begin is with a straightforward statement that health information belongs first and foremost to patients. We hope that this seed will take root, that doctors around the country will erect a small poster in their waiting rooms saying “We support the Declaration of Health Data Rights.”

And we also hope this event will spur a new sensibility about who owns information, about accountability, so that pricing and quality information on doctors, hospitals, health plans, drugs, devices, diagnostic procedures and treatments become freely available to health care patients and purchasers, so that absolute power is trumped and so Americans can have health care that is trustworthy, excellent and affordable, no matter where it is received.

Brian Klepper PhD is a health care market analyst and advisor to the industry. David C. Kibbe MD MBA is a Family Physician and Senior Advisor to the American Academy of Family Physicians who consults on health care professional and consumer technologies.

The Health Industry’s Achilles Heel

June 10, 2009

“You never want a serious crisis to go to waste.”

– Rahm Emanuel, White House Chief of Staff

Timing matters. The health industry has demonstrated steadfast resistance to reforms, but its recently diminished fortunes offer the Obama Administration an unprecedented opportunity to achieve meaningful change. The stakes are high, though. The Administration’s health team must not miscalculate the industry’s goals, or waver from goals that are in the nation’s interest. The two are very different.

Aligning the forces of reform will be the first challenge. The White House and Congressional Democrats appear to be collaborating to develop a unified reform design. Even so, the effort is hardly pure. Lawmakers have been receptive to industry influence. The non-partisan Center for Responsive Politics reports that, in 2009, health care interests have already spent $128 million on Congressional lobbying contributions, more than any other sector. The tide now turned, most of that largess has gone to Democrats.

All reform discussions acknowledge the twin goals of universal (or expanded) coverage and controlling cost. But as the state initiatives in Massachusettsand California have shown, expanded coverage is easier. Coverage pays for care, so the industry is delighted to oblige. Cost reductions, though, are harder. The mechanisms that undergird health care’s excesses are embedded in its operations, and waste is responsible for much of its profitability.

The Obama health team already has firsthand experience with the industry’s maneuvering. First it saw the health IT vendors’ association, HIMSS, hijack the well-intentioned $19 billion HITECH allocations for electronic health records by capturing control of the agency that specifies the certification criteria for product subsidies. Now those funds will probably favor outdated, non-interoperable, client-server technologies from a small number of legacy IT companies. Newer, more effective, less costly web-based tools from hundreds of innovative firms will likely have to base their success on market appeal, without the government’s help.

And then there was the May 14 cost backpedaling by six major health industry associations. After apparently agreeing to voluntary cost reductions with President Obama, they reversed, insisting they had offered to only “ramp up savings” over an unspecified time frame. At least one health plan is already preparing an anti-reform campaign, similar to the Harry and Louise ads that helped turn public sentiment against the Clinton health reform effort.

These developments confirm the industry’s focus on the status quo, backed by cash and lobbying strength. The question is whether it can again stave off reform, sealing another win at the American people’s expense.

But the industry has an Achilles heel. Its fundamentals have eroded, potentially easing the way for operational restructuring. Consider the evidence that commercial health plan enrollment is in freefall, as mainstream purchasers – employers and individuals – are priced out of the coverage market.

  • AIS and Kaiser Family Foundation data show that, after reaching 180 million enrollees in 2005, commercial health plan enrollment has plummeted by more than 20 million lives (11.3%).
  • In recent discussions, health plan executives have acknowledged that the multiplier to estimate total covered lives from employee lives has fallen from 2.2 to 1.8. This 18 percent change mostly reflects kids whose parents’ employers have stopped subsidizing dependent coverage. It could represent twelve million new uninsureds, previously unaccounted for, and another nine million new Medicaid lives.
  • Last month the Wall Street Journal cited Wellpoint’s loss of 500,000 lives since December 2008, and United’s loss of 900,000 in the last year. Similar enrollment declines have been reported at health plans throughout the country, the result of a decade of premium growth at four times general inflation, exacerbated by a severely downturned economy.
  • The Congressional Budget Office estimates that, in 2009, seven million Americans currently enrolled in commercial health plans will avail themselves of the COBRA subsidy that was part of the American Recovery and Reinvestment Act. Unless the economy rebounds or Congress extends the program, many of those enrollees will lose coverage as well.

Premium pays for nearly all health care products and services – from office visits to stents – so decreasing enrollments have stressed the industry more than at any time in memory. Ancillary issues, like drops in investment income and anticipated payment reductions to Medicare Advantage health plans, are also reverberating throughout the industry, compounding its financial troubles.

But even in the face of hemorrhaging enrollments, the health plan sector has not visibly changed its medical management approaches. Instead, most organizations seem to be waiting, presumably for the new revenues associated with universal coverage. It seems likely that the health industry will campaign for Massachusetts-type reform that forces concessions from purchasers rather than in the ways health care is financed, delivered and supplied.

To be meaningful, though, reform must fix the three deep structural flaws that enable the excesses that have benefited the health industry and created the cost crisis. A specialty- rather than primary care-dominated system promotes more expensive downstream care at the expense of less costly upstream care. The lack of an interoperable information technology infrastructure has created barriers to quality/cost transparency, transactional streamlining, and science-driven decision support. And a fee-for-service reimbursement system has encouraged more care, independent of appropriateness, rather than the right care. Industry groups fight hard to preserve these approaches and the excesses they produce, and to block the most obvious remedies to overspending.

Health care could be far more affordable. Experts agree that at least one-third of all health care cost is inappropriate care or administrative waste. As a recent White House meeting showcased, many health care managers have attained consistent, significant savings through innovations ranging from primary care clinics, data analytics, and Web-based management tools to health literacy and incentive programs.

As health care financing pressures intensify, the Administration must leverage the industry’s discomfort by making the achievement of expanded coverage contingent on key operational reforms: re-empowered primary care, a national technology framework for outcomes management and payment tied to results. These are pragmatic goals that, when implemented elsewhere, have been shown to improve quality and drive down cost. Carefully explained, they will make sense to most Americans.

Finally, being effective with this immensely important issue will demand that the Obama team reach out and recruit the active leadership and support of the nation’s non-health care business leaders, the one group csollectively more powerful than the health care lobby.

If the Administration can get the backing of influential leaders outside health care, and if it is willing to hold out on expanded coverage until the industry accepts changes that can rightsize cost, then we’ll have a chance to establish affordability and sustainability in American health care.

Brian Klepper is a health care analyst, consulting with the industry. David C. Kibbe is a Family Physician, Senior Advisor to the American Academy of Family Physicians and a technology consultant.

A Self-Fulfilling Prophecy: The Continuity of Care Record Gains Ground As A Standard

We live in a time of such great progress in so many arenas that, too often and without a second thought, we take significant advances for granted. But, now and then, we should catalog the steps forward, and then look backward to appreciate how these steps were made possible. They sprung from grand conceptions of possibilities and, then, the persistent focused toil that is required to bring ideas to useful fruition.

We could see this in a relatively quiet announcement this week at HIMSS 09. Microsoft unveiled its

Amalga Unified Intelligence System (UIS) 2009, the next generation release of the enterprise data aggregation platform that enables hospitals to unlock patient data stored in a wide range of systems and make it easily accessible to every authorized member of the team inside and beyond the hospital – including the patient – to help them drive real-time improvements in the quality, safety and efficiency of care delivery.”

The announcement was amplified by a New York Times article, earlier this week by Steve Lohr about New York Presbyterian’s collaboration with Microsoft, now beyond the pilot stage, to transfer patient data into consumer-controlled personal health records (PHRs). The article acknowledges that Google, as well as Microsoft, are now actively engaged as well with major health care institutions – Mayo Clinic, Cleveland Clinic, Kaiser Permanente – to automatically move patient data into PHRs.

The facilitating technology in all these efforts is the Continuity of Care Record (CCR) Standard. Here is the Wikipedia entry, cited in the Microsoft announcement, describing the CCR. It is

“a patient health summary standard. It is a way to create flexible documents that contain the most relevant and timely core health information about a patient, and to send these electronically from one care giver to another.

Because it is expressed in the standard data interchange language known as XML, a CCR can potentially be created, read and interpreted by any EHR or EMR software application. A CCR can also be exported in other formats, such as PDF and Office Open XML (Microsoft Word 2007 format).”

The creation of a new industry standard is an immense undertaking of breathtaking audacity, vision, skill and hope. It starts from scratch to craft a highly useful, flexible tool that can be easily adopted by developers, who are focused on wide-ranging aspects of common problems.

The CCR Standard was developed by a collaborative – the Massachusetts Medical Society[1] (MMS), the HIMSS (HIMSS), the American Academy of Family PhysiciansAmerican Academy of Pediatrics (AAP), and other health informatics vendors – under the auspices of ASTM International, a not-for-profit organization that develops standards for many industries, including avionics, petroleum, and air and water quality. David Kibbe MD, my friend, colleague and often co-author on the Health Care Blog, was a co-developer of the CCR, and serves as the 2008-2010 chair of the E31 Technical Committee on Healthcare Informatics, the leadership group within ASTM that works with individuals and organizations on the implementation and use of the CCR standard in the US and abroad, (AAFP), the

The CCR’s increasing adoption by major players is testament to the soundness of its vision and its utility. It’s advance will allow patient health data to be easily transported from one platform to another, intact and with integrity, so that better decisions can positively impact care, health, and the costs of achieving them.

This is something we can all acknowledge and admire, because it fulfills the common mission – better, more affordable care for better health – that brings us together on this site.

Is the Health Care Economy Rightsizing?


More than at any time in recent memory, powerful forces are buffeting the health care sector. We are in the midst of profound upheaval, driven by market and policy responses to the industry’s long-term excesses. We can already see evidence that the dysfunction of our traditional health system is accelerating. It also seems clear that the center cannot hold indefinitely.

Dog Eat Dog
It is useful to remember that the health care industry’s different stakeholders are adversaries. While they clearly share a common understanding that a wholesale meltdown is possible, there is little real motivation for collaboration and no unity. Independent of role, the industry as a whole has been focused on, and extremely effective at, securing dollars from purchasers: government, employers and individuals.

But each silo within the industry has been separately focused on growing its own slice of the health care pie. In every niche, there are courteous conceits – access, appropriateness, efficiency and value – reserved for the good manners of public relations. But these are meaningful in practice only if they do not conflict with the professional’s or the firm’s economic performance.

Back in December when the bloom of the Obama election was still on the rose, the rhetoric of health industry representatives reflected widespread, earnest agreement that we must finally move toward meaningful reforms. But as the details of reform have taken shape, their impending realities have started to chill the industry’s public stance on change. And so the gloves are coming off to protect self-interest as the system seeks solutions.

Steven Pearlstein of the Washington Post detailed the campaign by conservative commentators led by Rush Limbaugh to discredit the stimulus bill’s allocation for comparative effectiveness research. The mantra was that this effort was really cost-benefit analysis intended to deny people care. But the funding for the disinformation effort came from the drug and device industries. The funders worried that credible data showing which drugs and devices actually worked best would wreck their sales, margins and, most importantly, their business paradigm of the last twenty years.

Short of an enterprise-wide catastrophe that sinks all ships, fundamental differences in goals will also make any real collaboration and compromise among the power players difficult. A New York Times story last week focused on two important unions, the Service Employees International Union (SEIU) and the American Federation of State, County and Municipal Employees (AFSCM), that suddenly and without comment, quit the multi-constituency Healthcare Reform Dialogue (HRD). HRD, a health care reform coalition, has tried to bring together employers, unions, and health industry players to find consensus on reform approaches. It is hard to not interpret this seemingly insignificant event, the shattering of unity by apparent intense disagreement, as a foreshadowing of the ferociousness yet to come on health care reform.

Then there’s the simmering rage that lower- and middle-class Americans harbor for the industry. Most lawmakers are finally realizing that this is a sleeping dragon. True, nurses, pharmacists and doctors, in that order, continue to engender the greatest consumer trust of professionals. But many health care corporate segments – certainly the health plans and the drug companies – are widely seen as taking advantage whenever they can. Remember audiences’ overwhelmingly supportive reactions to Helen Hunt’s frustration with her HMO in the 1997 movie, As Good As It Gets?

So we have the industry’s fragmentation and fear of reduced margin, and the consumers’ seething. Now add an unexpected national economic downturn, and the industry is finding that tolerance of its exorbitant costs is evaporating and that its very structure is in question. Health care has out-priced the mainstream of its purchasers, a sin that is finally being revisited on every sector of the industry.

A Deteriorating Marketplace

We see circumstantial evidence that the health care industry is under unprecedented siege in the marketplace, the fruit of longstanding business practices that, as John Sinibaldi so eloquently pointed out last week, have consistently favored health care vendors over patients and purchasers.

Health plan enrollment is now like a sieve. At a recent conference of senior health plan executives, all admitted that enrollment had recently dropped precipitously. Some members are switching to other plans. But many more are dropping out because their premiums became unaffordable, or because they’ve lost their jobs. The execs also agreed that the multiplier used by industry professionals to estimate the number of total lives from employee lives, stable at 2.2 for many years, has plummeted over the last few years to 1.8. If true, that would signal that increased costs have driven fewer businesses to subsidize dependent coverage, resulting in a 20% drop in total enrollment – the casualties would be mostly children here – that is NOT being reflected in the uninsurance surveys. In a related vein, HHS data from before the economic downturn show that only 39% of Florida’s small businesses – they comprise 95% of all Florida businesses – still offer health coverage to their employees. This is significantly below the coverage values reported by the Kaiser Family Foundation, which makes it difficult to believe that these dynamics are accurately reflected in the surveys of those populations.

As coverage erodes, we are most concerned about the hospitals and health systems that are the anchor health care resources in most communities. With the economy and stocks tanking, the investment income that was keeping many health systems afloat has disappeared. The ranks of the uninsured and underinsured have exploded, so uncompensated care costs and bad debt are skyrocketing. Few health systems have gotten serious about huge supply chain margins, often north of 50 percent, so there’s nowhere to turn in the short term. While safety net short term acute care facilities have been under duress for many years, now these trends are conspiring to also threaten the community facilities that cater to those with more resources. One recent survey of 4,500 health systems, published before the economy really began to plummet, found that more than half were “technically insolvent or at risk of insolvency.”

As the economy has worsened, and jobs and money evaporate, many patients are breaking physician appointments or are unable to pay for services received. Bad debt has become much more of a problem for physician practices, so many have become more aggressive in collections. We have received anecdotal reports that some physician practices are demanding payment in full prior to procedures, and are balance-billing their health plan patients in direct violation of their contractual agreements. The health plans aren’t positioned to police every practice’s policies. But if this trend is widespread in the system, it suggests that the niceties of business practice are going by the wayside as practices struggle to maintain.

Finally, the combination of health coverage erosion and high care costs is fueling an arms race that, until fixes are in place, patients will lose. The two fastest growing segments of the health care financial sector are individual credit scoring and collections, specifically aimed at capturing available dollars for the system. In this economy, aggressive collections practices will drive many more patients into bankruptcy, intensifying consumer dissatisfaction and further fueling the engines of change.

Is Health Care A Bursting Bubble?

One of us recently had a 3.5 hour diagnostic procedure at a local hospital outpatient surgery center. The EOB (Explanation of Benefits) from the health plan showed the hospital had submitted a facility charge of just over $13,000 – more than four months of total income for one-third of American households – and the health plan paid approximately $1,300, which means that willing vendors and purchasers agreed that the procedure’s market value was 10% of the charge.

But without insurance, we would have been legally responsible for that bill, with the willingness to negotiate utterly at the discretion of the health system. Setting aside the fact that charges are crazily tied to the evolution of Medicare cost reports and grow out of stuffing every bit of possible cost into each charge, the EOB begs three questions.

  1. Is it appropriate to add a 1,000% surcharge for the sin of uninsurance. For not-for-profit health systems especially, is it appropriate to do so while receiving a tax break for providing community service?
  2. When a provider chooses to pursue a receivable figure that is more than the established market value (as determined through the contractual figure with the health plan), can that effort properly be understood as inflating the market?
  3. Can a system maintain stability when it inflates value beyond the means of most of its purchasers ?

The definition of a market bubble is a high variance between the intrinsic value of a product and its market valuation. Bubbles always burst eventually, as inflated market values tumble back towards intrinsic value. We’re seeing this with homes and banking stocks. Are we there yet with health care services? Could America’s health system collapse?

The Threat
It’s hard to imagine the health care system in free fall. The federal government pays for approximately half of health care already, through allocations for Medicare, Medicaid, SCHIP, the VA, and the Federal Employees’ Benefit Program. The stimulus bill allocates a “down payment” of $634 billion for health care reform over the next ten years, assuming that somehow this money will go to save health care dollars. But it could just as easily become a bail out for the failing health care sector, massively larger than the bailouts for the banks or the autos, and “too large to fail.” Keep in mind that health care is now 16 percent of the US economy, one dollar in seven and one job in eleven, so large that any significant disruption in the sector would inevitably cascade to all other parts of the economy.

And the threat goes both ways. Health care could push the larger economy over the cliff, or the reduced resources associated with the downturned economy could precipitate the collapse of a health care sector that has become accustomed to inflated reimbursements. Either way, American society is vulnerable and in very big trouble.
It goes without saying that, as the funding dries up, the safety net provider organizations that deliver the lion’s share of care to the medically indigent will fail first, as did Martin Luther King in Los Angeles, and as Grady in Atlanta almost did. A year ago, the safety nets’ distress at the edges of the system were already the most tangible signs of the unfolding crisis. Now, the problems we’ve described above are with mainstream providers who cater to the middle class. What we have not seen yet is the impact on the health care supply chain, which accounts for 40 percent of health care dollars and which are also tremendously over-valued.

The Opportunity
Instability in systems that are directly connected with important societal benefit is never good, because powerless people suffer disproportionately according to caprices of fortune and the system’s rules. American health care certainly fits that bill at the moment. A majority of the American people are very unhappy with the system, and nearly every sector of the health care industry is under increasing and unsustainable stress. American health care’s storm clouds are gathering. It’s very ugly right now, and getting worse.

The good news is that, as the system becomes becomes increasingly unstable, the opportunity also increases for a full scale overhaul of health care that rightsizes the longstanding waste and pricing of American health care to more sensible proportions, and develops both policy- and market-based solutions that build on experience and that can have lasting utility. If our leaders are unwise and susceptible to special interest influence, it could also go the other way. But times like this are our best shot, because the problems are so glaring and the solutions that are in the common interest so straightforward.

Whatever path we go down, health care is certainly poised for significant change. Part of our national effort for that change must include a transition plan that consciously seeks to reduce to a minimum the turmoil involved.