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Experts look into the future of health care: Industry panelists disagree on whether current system needs radical changes

October 15, 2007

Five local industry leaders conducted a serious debate over problems and issues facing our health care system during the most recent installment in Indianapolis Business Journal's Power Breakfast series.

The event took place at the Downtown Marriott hotel on Sept. 21

The panelists:

Robert Brody, president and CEO of St. Francis Hospital & Health Centers, the Indianapolis-area's fourth-largest hospital system. Brody has been chief executive at St. Francis since 1996.

Dr. Robert Mouser, a primary care physician at Cornerstone Family Physicians PC. Mouser has been a family practitioner for more than 50 years.

Vicki Perry, CEO of Advantage Health Solutions, a health maintenance organization coowned by St. Vincent Health, St. Francis and two other Catholic hospitals. Advantage has more than 58,000 managed care members in Indiana.

Mitch Roob, secretary of the Family and Social Services Administration, the state agency that administers Medicaid in Indiana.

Steve Wantz, senior vice president of administration and human resources at Clarian Health, the largest hospital system in the Indianapolis area.

IBJ Reporter J.K. Wall moderated the discussion.

Following is an edited transcript of the conversation:

BRODY: We have plenty of money in health care. It's a $2 trillion-a-year industry. It's really a matter of how it's being spent and where. We have this issue of the uninsured, which exacerbates some of the problems that we would describe as the crisis in health care, care that is unequally and unevenly distributed. We have the haves-and-the-have-nots. In a country like the United States, that's inexcusable.

We have an insurance industry that typically generates 20- to 30-percent profit in administrative costs, and that's unnecessary. That's a lot of money that goes into private pockets and investors' pockets at the expense of the many. Rules behind the insurance industry-the experience-rated plans versus community-rated plans-are used to selectively eliminate coverage.

But I think the most fundamental reason that we're in this plight is that we are a victim of our own success. We've taken the health care economy from 6-1/2 percent of the GNP, gross national product, in the mid '60s to upwards of 16 percent. We know how the game's played. There's a lot of money in health care and a lot of different market niches are being exploited. What we need to do is reset the rules and start rewarding behaviors and activities that get us to the goal that we desire.

And we haven't really taken enough time and effort to have a serious, informed discussion about what we want the future to look like. Instead, I think we've been preoccupied with slapping Band-Aids on the existing problem. It's not going to work. We need to really get involved in a systematic design exercise that addresses the systemic issues that exist-fee-forservice medicine being perhaps part of that problem. ...

I think part of the problem to date has been we've relied on stakeholders, people with vested interests, to help guide the future and the discussion, and that's not going to get us to where we need to be. We need to have everybody participate, and there's enough intelligence, there's enough creativity, there's enough entrepreneurial spirit and common sense in society to address and correct this problem.

MOUSER: I think we need to pay attention to the fact that we're going to have a lot of baby boomers involved in the system within the next three years, according to Medicare. We're going to have more costs and we're going to have more inventions of more types of care.

One of the reasons we're in this problem is because we keep reinventing things all the time and that costs money. And somebody needs to pay for some of these new inventions in a private health care system.

We don't have enough doctors. Right now, we're going to need more MDs and [doctors of osteopathic medicine]. You have to understand that 31 percent of the new doctors in the United States as of 2006 are here on work permits or visas from foreign countries.

You have to understand, too, in the health care delivery system we have to decide whether we're going to have people assigned to doctors or are we going to have them just go to the emergency room or urgent care centers? How are we going to handle that?

The American population isn't going to stand for the same things that they do in Canada, for instance, as far as health care delivery is concerned. We've been used to more services and things along that line. So there's going to have to be control of distribution of services along that line. [In Indiana,] we're the second-highest smokers in the country and the seventh-highest in obesity, so we need to do preventive medicine and things along that line as well. about where to obtain care.

Now, the difficult piece here is to define how you deal with what is an overt government policy that exists of cost shifting, where those who are uninsured are financed by those who have insurance. It's not a mistake; it's a government policy. That's why Bob Brody's hospital doesn't pay taxes, because we want them to provide "charity care."

My approach, the approach [Indiana Gov. Mitch Daniels'] administration is taking, is to enfranchise individuals, help them purchase their own health care, and then begin to let the marketplace work. But that marketplace can't work when 15 percent or more of our state's population does not have some kind of health insurance product. ...

We say the American health care system is in crisis. Every health care system across the world is in crisis. We have our problems, but if you go to a centralized planned accounting, you adopt somebody else's problems, which are anathema to where America has been from a philosophical standpoint.

BRODY: I don't know that anyone would suggest that we wholesale adopt another nation's health care system. I think the issue is that we need to better align incentives and rewards in our own system and think about how we spend that $2 trillion. We effectively spend 50 percent more than any other industrial nation in the world and we would rank 38th among industrialized nations in our health care [outcomes].

We're not rewarding the appropriate results. We reward procedures. We do a great job in a fee-for-service mechanism-we reward things that people do. The reimbursement system in this country is designed around 7,000 to 9,000 procedures and fixes. What we should be rewarding instead are keeping people healthy, reinforcing healthy behaviors, investing in our societal advantages that help to keep people healthy. We need to focus on chronic disease and preventive medicine. We're not doing it. There are no rewards in the system.

Because of the system that's in place that Mitch described, there's a huge cost shift. The burden of the poor and uninsured and Medicaid shortfalls fall on everyone else that can afford to pay. They're paying for services delivered to folks that can't afford those services. And hospitals are being pressured-because of the declining reimbursement, because now we have 47 million Americans uninsured-to cut back on the very services we should be delivering. And that's community education around chronic diseases, geriatric medicine, behavioral health services. Those are the things that get cut out and compound the problem.

ROOB: We ask hospitals in America to act as wealth-redistribution agents, and

ROOB: Well, Bob Brody and I would generally agree on the problem. I think we have pretty different approaches to what the solution is. The marketplace is the worst possible way to allocate resources-except for all the rest. That's why almost every good and service in America is distributed through the marketplace, because everything else has failed. So we fall back to the marketplace.

Now, we don't really have a medical marketplace in the same sense that we have a marketplace for the purchasing of other goods and services, like financial services or cars or houses, right? And part of that is because of this cost shifting that occurs, and part of it is because of defining what quality is.

So if you think about the price-qualityvalue equation, it's quality over price equals value. So we have to figure out how to get transparency in pricing and we have to figure out how to get transparency in quality, particularly in the area of procedures. We've had a fair amount of success in the last decade in America in defining what quality was in a procedure, and we're beginning to see what transparency is in pricing. So you can make those choices they are ill-prepared for that task. Government isn't very good at many things, but government is good at redistributing your wealth. Hospitals aren't.

Hospitals are designed to provide highquality care at low cost and cost shift, right? And that cost shift is wealth redistribution. It is their primary focus. Their primary focus tends, unluckily, not to always be high-quality care at low cost, but it is playing that cost-shift game.

If we figure out a way to enfranchise individuals-95 [percent] to 96 percent of Americans-with some kind of affordable health care package, we will allow a marketplace-based economy to work in the health care environment. But we can't get there until we solve the uninsured problem.

PERRY: I think that there are two barriers to a true retail market. One of them, the whole transparency issue, I think it's absolutely necessary.

The biggest problem is, there is a danger in putting a price out there that can't be relevant or may not be relevant to the individual seeking services.

My outcome for a hip repair might be very different than somebody that's 50 pounds overweight, has hypertension and isn't well-controlled on medication or compliant. So just putting procedure costs out there and not doing a good job of educating the consumer on the variability to that cost based on their condition is, I think, dangerous. But we need to figure it out.

The second thing, the health system is more reactive today. If you enter a hospital, you're entering because there's a procedure or something that needs to be done. We need to shift as much of the health care dollar as we can to figure out how we [motivate] kids [and] adults to get the right care at the right time and to take care of their health. We're not putting enough money upfront in healthy outcomes.

IBJ: There are other industries that do have some complexity upfront. When we take our cars to get repaired, we're not quite sure what's wrong with that complex engine, but we sort of have a negotiation with the mechanic beforehand. It's the same perhaps with home repairs. Is health care too complicated to do something like that, or do you think we could get to that point?

PERRY: I think there are tremendous complexities to health care, but there are also tremendous variabilities between health systems.

We can identify them, we can talk about them, but to get them into an easily managed, easily understood transparency platform that is usable, I think, is where the difficulty is. It's not a data-configuration or data-culling issue as much as, how do you put parameters around that, that don't misguide or mislead an individual seeking care?

Buying a vehicle, you know, they all get you from Point A to Point B, they've got four wheels, they've got a steering wheel. You can make your own decision as to what kind of luxury you want in getting from Point A to Point B. It's very different in accessing health care.

WANTZ: I woke up one morning and thought I'd really like to appear in a "Dilbert" cartoon as kind of the "Evil HR Director." (Laughter)

We didn't wake up one day and decide to do this. We've had a fairly aggressive health-promotion program for employees for over five years. We offered health-risk appraisals on a voluntary basis. We offered coaching on a voluntary basis without incentives for a few years. And we saw results. And what we learned is, if you can engage, or to use Mr. Roob's comment, enfranchise, the individual, you can get health behavior changes and you can change outcomes. And that's a good thing.

So we said, "What else can we do about that?" We were seeing the same increases year to year in our health insurance costs that other employers are seeing-15 to 17 to 20 percent-and that's not sustainable. So we asked ourselves, "What else can we do?" So we wanted to have some incentives, we wanted to get some people's attention. And we did get people's attention-a lot of attention. And that's a good thing.

We engaged our employees, we had open screenings, we had 300 to 500 people show up to learn about their health status. I guess they were surprised sometimes by that. And that's a good thing.

We introduced a program that said, if you're at risk and if you do not address that risk, or if you're not attending to that risk, then there would be an extra charge on your health premium. And that got translated into penalties-where you're fining fat people and some other comments like that.

What we found is packaging the product created so much noise that the product wasn't getting through. So we went back to our employees, and we talked to them, and we listened to that. And we said, "What can we do to make this work better?"

So we revised it, and now we're offering rebates. The net impact is exactly the same. It's more tenable to our staff, so we think it can be more effective. We announced changes for 2009. We knew they were big changes. We wanted to get feedback, we got feedback, and we used that feedback to learn and advance the program.

BRODY: In our hospital, we've offered discounts over the years to employees that ascribe to following healthy behaviors. Our organization is much smaller than Clarian's, yet we spend $20 million a year on the health insurance costs of our own employees-and that's buying services at cost, effectively. The system is dangerously out of control, and I hope that registers. I know that's why we're here, and that's why we're talking about it.

I can't suggest hard enough that we all get involved and read and understand what the issues are. There's an excellent book recently published, called "Health Care Reform Now!" by George Halvorson, one of the best thinkers in this nation about health care. I would suggest that you get a copy of that. I've got a copy with me. I'd be happy to give it to the first person that approaches me after the meeting.

But he does talk about how our system is malaligned, how there's plenty of money in the system but we are, again, rewarding the wrong behaviors. And we really need to get back and understand where it is we want to go in the future. It may take us 10 to 15 years to get there, but we have to start now and design a better system.

MOUSER: In our practice, we would like to practice preventive medicine. That's the key to success in the future for our patients, and not enough health insurers go to that part. Now Vicki Perry's company is one of the best in that-and she didn't pay me anything to say that. But some of the plans are not doing anything in preventive medicine at all because they want the benefit to come off of somebody else's dollar instead of theirs. But preventive medicine is the secret to getting the United States back in the upper few percent of the nations in the world that are having good health care.

WANTZ: I would agree with what Dr. Mouser just said. The focus has to be on health. We're spending a lot of time talking about health care. The focus really needs to shift to health. People need to take accountability. Our plan designs are designed to [provide] that personal accountability for your health and do something about it. If we can get people's attention, give them the right information, the right tools, then they'll make different choices. They'll see different possibilities.

PERRY: We encourage individuals to do the right thing at the right time, we sit with our employers, we try to put [in] a longterm strategy, identify where the risk factors are, and then come up with strategies that work at an individual- and employerbased level. And it does work. We've seen from 22 percent up to 40 percent or higher in employers that stay engaged and get their employees engaged in health.

BRODY: We've got a very forwardthinking governor with his INShape Indiana program. We have here the mayor with the FitCity Indianapolis program, all encouraging healthy behaviors.

We've seen the smoking bans proliferate across the state, and that's a good thing. We need to be working on bike trails. We need to be working on eliminating trans fats from restaurants. There's a lot more work that can be done. But it's not all gloom-and-doom.

BRODY: I think, unless you're in the construction industry, it's not a good thing. I think it raises costs. I will defend that [statement] until the cows come home.

The issue is, again, what are we rewarding? Well, in this case we're rewarding physician-investment hospitals. The five newest hospitals in the Indianapolis marketplace have physician investors. Is that a good thing? I don't think so. I think it creates a lot of extra capacity that has to be paid for. I think it creates an even greater competitive environment for labor, which is the biggest cost component of any hospital. Sixty or so percent of what we spend is in labor. I think it potentially diminishes the quality of care as we diffuse services over a broader number of provider organizations, and I think it's irresponsible to the communities that we serve.

We have a problem in this nation in that providers can't collaborate effectively in planning health care. The Justice Department doesn't look kindly on market carving and those kinds of things. But where it can happen-and it's gained approval out in Lafayette-it was a wonderful thing. Two hospitals in Lafayette 10 years ago decided to come together, went to the Justice Department, got a stamp of approval with the proviso that they eliminate $50 million in costs in that community. They did so.

Over the course of time, the 50-50 ownership of that organization didn't prove to be as satisfying. One organization, ours, effectively bought out the other partner, created a big health care foundation in Lafayette, and no sooner was that done than another hospital pops up, just because it can. And what's it going to do? You're going to have two new hospitals. Both have to be paid for. You're going to have that competition with employees and you're going to see diminished health care quality. It's crazy. It's insane. And it's rampant across the state.

We're one of 11 states in the nation without any rigorous review of our barriers to entry, either through provisos that prevent private investment in hospitals or through certificate of need, which assigns that rationing responsibility to a civic organization or to the state. I think we're terribly irresponsible.

The last time I was here I talked about a gold rush. Well, it's a gold rush because of the ineffective reimbursement mechanisms that we have, where the few are paying for more and more and more of the uninsured and the underinsured. We really have to sit down, understand what the issues are, and dissect the existing system and begin designing a better system. I don't know how many times I have to say that.

ROOB: I guess this is where Bob and I diverge pretty radically or pretty substantially. ... I don't disagree with the problems he's identifying. The answer-more government regulation-and, you know, I'm the government. I'm who's going to do the regulating. And I don't think we're well-prepared for that. I don't think we ought to be in that business. Markets work. Reimbursement mechanisms work. People ought to be taking risks. And if doctors and hospitals create products and services that don't work, the market will penalize them.

BRODY: I beg to differ. I think we're not doing a good job, as good a job as we're capable of doing as Hoosiers and people with good common sense here in the Midwest. I think we probably have the secondhighest ratios of companies dropping their insurance and employers finding themselves without insurance around the country. We lead the nation in per-capita bankruptcy due to medical costs.

You're doing a laudable job. The governor's doing a laudable job trying to increase coverage for the uninsured. But it's not enough. It's a Band-Aid. And it doesn't minimize your contributions or your effort, your commitment to making the situation better. But it's just not enough. We've got to get into a radical discussion.

ROOB: And I don't think there's any possible way you can radically change a $2 trillion dollar industry. It just doesn't work.

BRODY: It may take 10 or 15 years.

ROOB: Well, then that's not a radical change. That's an evolutionary change. And I think the only prospect that you can get is to be determined and incrementally move to a place where 90 to 95 to 98 percent of Americans, particularly Hoosiers, which is really all I care about, have affordable health care.

PERRY: My thought is that there is a model out there that may actually benefit from bricks-and-mortar investment. Wishard Hospital operates a number of community-based clinics that serve some of the poorest communities. But without those bricks-and-mortar clinics, those individuals would not have access to any health care outside of the emergency room.

The clinic model, community-based clinic model, is probably the best model in my mind to promote early prevention and education within those communities to overcome some of the barriers that exist to access, which is transportation, timing, the cost of child care if somebody is ill. Those are all things that can be better met with a good, strong, community-based health care system that integrates into our more acute health care systems.

MOUSER: I think that all of the candidates are avoiding the issue. If you watched "60 Minutes" about two months ago, the Office of the Inspector General said Medicare Part D and the baby boomers on regular Medicare are going to bankrupt the United States. I don't think anybody is going to really do anything about this thing until it reaches crisis proportions, and I think that's what's going to happen. I think it's unfortunate that that's the way it's going to happen.

BRODY: I think one of the candidates is not talked about enough-and I'm not necessarily advocating this, but I think it bears some review-and that's Dennis Kucinich's position. He's effectively suggesting that for-profit motive in medicine, certain aspects of medicine, is not productive. And it kind of reinforces, I think, some of the points I was making earlier. We are reinforcing bad behaviors. There's another excellent book called "Money-Driven Medicine" by Maggie Mahar. It really does talk about the abuses that have occurred over the years by the way we approach this health care market.

ROOB: I'm not going to take the bait on the profit motive on that one, but I will comment that I think a national approach to solving our health care problems is, frankly, hopelessly naive. We are not going to reform health care on a national basis. The people have been talking about it since the Truman administration, and it has never gotten a vote in Congress.

BRODY: Let's understand, though, why we are where we are versus the rest of the industrialized world. The only other developed nation that doesn't have a government-based universal system is South Africa. It doesn't put us in great company. The reason we're where we are is, it's an accident of history; it's because we looked to the employer sector to provide insurance through World War II. That's the only reason. We happen to be where we are by accident, by whim, and it needs to be reexamined. We can restructure things and deliver far more value for the dollar.

ROOB: Well, as a practitioner of politics, I will tell you about getting substantial health care reform done in Indiana, which is what we did this legislative session. We had-it was a fortuitous time, frankly-we had a Democrat-controlled House and a Republican-controlled Senate, we had experienced leadership in both the House and the Senate that the administration was able to work with, and we had developed long personal relationships. It was a relatively small group of people. We all trust each other. We worked together for over a decade on issues and we were able to get a, as you put it, Bob, a Band-Aid. We call it a bit more of a Band-Aid. We call it a first step in the right direction.

But by no means is it a systemic alteration of the health care marketplace in Indiana. It begins to point us in a direction. That is not what you see coming out of Washington. You see the parties talking about grandiose plans, which will not be passed. We are going to go down the incrementalist path. And I think we ought to accept that and work toward working that direction.

BRODY: I can't accept it. I think that's business as usual. And I think we have global gridlock because of the lobbyists and special interests that have undue influence. What we need to do is get the discussion back at the community level and have the population as a whole weigh in on the issue instead of the stakeholders.

ROOB: A great example is the Clarian example of personal responsibility versus the collective payment for services. I think the actual line is that rugged individualism collides with the Judeo-Christian ethic every day in health care. And I've said that for 15 years.

We are one of the most compassionate, giving societies in the Western world. Our percentage that we give vastly exceeds [that of] Western Europe, as an example. However, we're also built on rugged individualism, where anybody can start a business. And you guys cover that routinely and praise it appropriately. So those collide in health care. It's why we believe at the same time that people ought to be responsible for their own behavior and no one ought to go without health care.

How do you ameliorate those two things? You do it by, I think, the kind of steps that Clarian has taken, where they're saying to individuals who don't take personal responsibility for their behavior, for their condition, that it'll cost them more. Because it's not, frankly, it's not fair to burden society with the totality of that cost based on your behavior.

We're trying to tease out genetic predisposition versus personal behavior choices that affect your health care. And I think that's a difficult line to walk. One example is maybe Type I versus Type II diabetes, you know, what's the causality of that diabetes and have you been appropriate in your use of insulin and medical infrastructure or not? It's not easy.

PERRY: We keep talking, appropriately so, about costs. But I also think as responsible corporate leadership, there also is an obligation to help individuals access appropriate services and to educate them for their own productivity.

So there's that improvement in the quality of life and the health outcome status for the individuals that we can't separate from cost. But we also can't mention that as secondary to cost.

PERRY: I think the market trend of health care insurance costs increasing has slowed down. And most managed care plans are somewhere around an 8- or 9-percent annual increase on the whole. But they are going up faster than wages are going up.

The expectations, the cost of technology, the cost of all of the drugs that are in the market that are very expensive, those have to be paid for.

But I think, again, if we focus on keeping [employees engaged in their health], over a period of three, five, 10 years, we can impact that trend.

ROOB: I view the movement of more and more responsibility to the employee as a positive thing. And the reason I do is because that would put more pressure on companies to do what Clarian has begun to do, to make people inside that plan somewhat personally responsible for their own care.

I think that is an important piece of this equation that people have to be personally, financially responsible for at least a portion of their own expense.

WANTZ: It's a huge challenge, though, because it's a very complex system we're asking people to work through. And most of us don't access it very often. There's a huge education task here, a learning task that we have to attend to, to make this thing work.

MOUSER: I think that the employers are in a tough spot right now. Because if you're an employer and you have to buy a health care plan, the amount of dollars that you spend depends upon how much profit or loss that you have in your business.

In the future, the employer needs to also pay attention to his or her employees because of the preventive medicine, keeping them on the job, keeping them healthy and working. You need to consider that, too, besides the bottom-line or the dollar cost.
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