PANEL: Reforms to rapidly reshape health care

October 1, 2011

Health care executives and employers have spent the past year absorbing and adapting to the new rules flowing out of the 2010 health reform law. Six local experts discussed those changes and what more lies ahead during IBJ’s Power Breakfast on Sept. 21 at the Downtown Marriott.pb-speakers

The panelists:

Sheri Alexander, manager of the employee benefits department at Gregory & Appel Insurance

Dr. Ben Park, CEO of American Health Network, an independent physician practice

Jack Phillips, North American CEO of Roche Diagnostics Corp.

Alex Slabosky, CEO of Indiana University Health Plans

Kevin Speer, chief strategy officer of St. Vincent Health

Seema Verma, president of SVC Inc. and an adviser to the Daniels administration on health care reform

IBJ reporter J.K. Wall moderated the discussion.

This is the unedited transcript of the IBJ Power Breakfast.

IBJ: How are accountable care organizations similar and how are they different than managed care and why should we expect a different outcome than what we saw with managed care in the ’80s and ’90s?

SLABOSKY: Well, accountable care organizations are organizations that theoretically are going to take responsibility or become accountable for the cost and quality of care provided to a defined population. But right now accountable care and accountable care organizations is still a concept. Medicare, which has been the big promoter of accountable care organizations, issued regulations in the early part of this year for accountable care organizations and the reception was completely negative and Medicare has had to go back and is rewriting the rules and regulations for accountable care and we’ve yet to see what the final rules and regulations will be, but I think one of the big differences between the accountable care concept and the managed care programs we’ve seen in the past is the theoretical requirement for quality measures. In the past managed care focused on controlling the cost of care while accountable care organizations and accountable care is going to try to deal with efficiency and effectiveness. In the proposed Medicare rules that have been pulled back but I assume in the new rules that will be finally issued there’s a requirement that accountable care organizations report under Medicare for 65 quality measures and these are quality measures covering things on outpatient care, the inpatient side and patient satisfaction. Well, that’s a component that really hadn’t been fully developed in traditional managed care, but a second big difference is most of the managed care programs, the PPOs and such, pay providers on a fee-for-service system, they pay providers to do more, and what accountable care is trying to do is set up a benchmark for an accountable care organization and reward organizations for controlling the total cost of the program and share some of the savings in a program with the accountable care organization, so it’s getting away from traditional fee-for-service reimbursement and trying to deal with the total cost of care for a population, so I think that’s going to be a big difference, but we’re going to have to wait and see. Medicare’s going to come out with its rules very soon and most of the big, large national insurance companies we’ve talked to are developing their own versions of accountable care, but we’ve yet to see them executed, so it’s a big question of how it’s going to work, but I think the big difference is the payment system, the shared savings concept and following quality.

PARK: Well, accountable care organizations in my mind in the way the original regs were written, and I don’t think they’re going to be a lot different, CMS was here in town and we had the chance to talk with them when they were visiting and the concept is that you will invest in infrastructure to improve quality so that your patients spend less time in the emergency rooms, in the hospitals, and that if you look at the accountable care model that’s where the savings come from, I mean that’s the operational way that it works is savings in hospital stays. So financially the way it’s set up is that the accountable care organization, whether it’s a hospital-based one or a physician-based one, goes to the hospital and says “Okay, give me that dollar of savings” and they take 50 cents of that dollar and they put it in their pocket and they take the other 50 cents and they give it back to Medicare, I mean that’s in a simple way the way that it works, I mean the easiest way, and I think employers are -- Bending the cost curve isn’t going to be enough, you know, they want it to be broken, I mean they want health care costs to go down and not to just slow the rate of increase.

SPEER: Yeah, I mean I think that both Greg and Alex in their opening comments used the word accountable care versus accountable care organization and as we look at where the market is headed and what’s happening in Washington, DC and the amount of flux that there is, I think as a health care provider in this state we recognize that the way care is going to be delivered and how it’s going to be delivered is going to change and the cost has to go down. Quality, if it’s there, has to be transparent for the consumer to see and that there’s got to be coordination across the continuum for the patient and if you can achieve the coordination across the continuum and you can begin to take out some of the excess or the fixed costs in it, you’ll get to that cost savings that I think is ultimately behind all of this, but the reality is I think everybody at this table and if you’re involved in health care in this room you probably started down this path two years ago, and the concept of an ACO, whether it becomes reality or not, isn’t going to have that much impact on where health care’s headed from a cost perspective, from a quality perspective, and how it’s delivered, it’s got to change and it is changing and it’s going to change with or without an ACO model.

SLABOSKY: I think we may be at a tipping point. You probably heard me say that many years in the past, but if you look at the national economy, if you look at the federal budget, the state budget and you even look at local budgets, we’re simply in a situation where we’ve got to bend the cost curve for health care, and the President, Congress are going to take action whether the health care system likes it or not, so we’ve got to try to develop a system, a mechanism, to bend the cost curve ourselves or we’re going to have a lot of additional rules and regulations imposed on the system, it’s inevitable, so I think one of the big pluses for the accountable care organization or for the concept it’s saying to the health care system, hospitals, doctors, what have you, “Here’s your opportunity to operate within a budget and to manage the system yourself as opposed to having outsiders come in and imposing minute rules and regulations on everything you can do,” so I think this is an opportunity for the various health care systems to respond and reorganize themselves, operating within a budget rather than having somebody tell them everything they have to do.

ALEXANDER: The magic word is “transparency,” that’s what I think we’re all hoping for, and I think all our clients and employers that are in this room are very anxious for anything that will help in [bending] the [cost] trend, so that’s what we’re looking for.

IBJ:  It seems that there’s been a lot of consolidation amongst hospitals and physicians sometimes in the name of accountable care or as preparation for that. Given that that’s been going on, some studies, including one recently by the Center for Studying Health System Change, said that may offset any savings that the accountable care concept achieves. Kevin, can you talk about that? Do you think that there’s a chance that accountable care won’t save money but actually contribute to the ever-rising costs?

SPEER: One I believe, whether it’s accountable care or it’s simply market forces, that the cost of health care has to change, it has to go down, so I believe that’s inevitable, this process. I think what the concern around the expansion by systems in Indiana and the acquisition of physician practices, outpatient centers, et cetera, they kind of blur over the top of this ACO concept. That process has been underway for probably 36 months and it’s been driven by access to capital, it’s been driven by IT costs, it’s been driven by uncertainty in Washington, DC, the ACO model and whether it will take hold, and so those acquisitions, those mergers, those expansions have occurred I think first and foremost for those reasons and as that occurred this ACO concept got laid on top of it, and so, yeah, today there probably was an uptick in the costs as a result of that but that’s not sustainable, and the model, which I think we’re all striving for, is that continuum of care where you have the right patient in the right place at the right time and if you can achieve that you can reduce costs, you can reduce repetitive procedures, duplication of care, you can get to one common pricing system in one system and so I think the cost savings will be realized. I doubt they’re being realized today but in 24 months if we’re sitting up here and we haven’t realized them something’s wrong.

SLABOSKY: But one of the advantages of the consolidation is more coordination of care. We have a health care system that was composed of a multitude of individual silos, physicians in individual practices, separate hospitals, separate clinics, outpatient surgery facilities and integration is one method, not the only one, of trying to provide better coordination of care through a single electronic medical record, through analysis of practice patterns to try to reduce variations in care, but one of the things we need to do to better bend the cost curve is to increase the coordination of care and it’s amazing how much waste there is in the system simply because of the lack of coordination, where a patient may go to one provider, one physician, have an imaging procedure done, be referred to a specialist and that image is repeated simply because of the image cannot be communicated or moved from one place to another, so there’s a lot of opportunity in better coordination of care.

PHILLIPS: From a diagnostic perspective, too, I completely agree and I think the electronic medical record and things like that will absolutely drive coordination of care. The only thing I would add to that is I believe there’s a huge opportunity in the system for education, education of patients, education of clinicians, education of pathologists, et cetera, on what are the best courses of treatment, what is the best standard of care, what are the best diagnostic tools to be used at certain given times, and I think that’s another, from our view at Roche, that’s another contributor to this inefficient system and I think if we can get our head around that from an education perspective, I think we can make huge progress in the area of improving health but also really driving costs down.

SLABOSKY: Well, and having data that simply wasn’t available a few years ago that allows us to look across the whole spectrum of care and analyze that data to see what treatments, what technologies, what therapies are the most effective and identify often where there are low cost therapies that are not being used.

PHILLIPS: Exactly.

SLABOSKY: And identify the gaps in our system and the technology, the data analysis, is going to allow us to do a lot of things if we make use of it.

SPEER: And I think that’s linked to this concept of wellness, despite the sticky buns for breakfast. We have to be proactive around our health care. Physicians and hospitals in the future are going to be presumably compensated for keeping someone out of the system as opposed to in the system and what you’re talking about, Jack, is dead-on with being proactive around certain disease categories and taking that wellness program out to the 49th heaviest state in the country, so we have ample opportunity, it’s a target- rich environment.

PARK: It is, and there’s no reason that we aren’t doing better today. I mean Indiana has very high utilization across the board for services. 2200 bed days are used in the hospital per thousand Medicare patients. If you look at best practices and HealthCare Partners, one of the groups we’ve worked with, they’re at 800 bed days per thousand, that’s a huge decrease and an enormous savings, you know, and I mean there’s three things you have to do well, I think you have to manage the chronic illnesses, that means investing in infrastructure and computer systems and being able to take care of those chronic illnesses that account for 75 percent of health care costs, so you have to do that. You have to get the cost of your services down, and this is an area where we’re particularly vulnerable as a physician group because hospitals get paid a lot more for doing things than what we do and we know because we just lost a group of eight doctors who went to work for Riverview Hospital up in Noblesville and the impact to the community there is about six million dollars in increased cost, and to show you how that happens, one of the patients there called us and said “What happened to my lab tests?” and we said “Well, we don’t know, what do you mean? You don’t see us anymore.” “Oh!” Well, she three months ago had a blood panel that was $80. She came back in to have it rechecked and it was $800. Nothing had changed except for who was billing for it, so we have to get the cost of the services down, too, I mean that’s a problem. And then I think that the coordination needs to occur with the patient. We like to think of it as playing like fantasy football. Does anybody, you know, play fantasy football? Probably everybody. But imagine if you could do it for real and you could go out and pick the best player in every position from any NFL team and so for a quarterback right now you’d probably have to go with Tom Brady. I know, that hurts, but Peyton’s injured, and you would have similar choices for a wide receiver and safety and all of those positions and then you put all of these guys together and you go play the other NFL teams. How well do you think that would work out for the other teams? Not terribly well. Well, we play fantasy medicine but what we do is we look at the very high-cost complicated cases, be it brain surgery or open heart surgery or those kinds of things, and then we direct patients to the best place and the best place always for everything isn’t in the same institution, it varies, and so we think it’s important to use evidence to drive your referrals as well. And last is we try to engage with the employers and with our patients and get them in as part of this conversation so they understand what we’re trying to do and we’re improving their health and when we can everybody wins.

SLABOSKY: Under accountable care when we’re trying to live within a budget to control costs it’s going to encourage us, the health care system, to change our delivery models and the way we provide care. One example we have within our own organization is we looked at claims data for our employees and 5 percent of the eligible members, employees and dependents, consumed 48 percent of our costs, and so we’ve tried to look at that 5 percent and find many of these people are patients with multiple chronic diseases and unfortunately also with psychosocial problems, so we tried to identify these people and direct them into a special program that has physicians, nurses, social workers, who can really work with them directly, maybe even visit them in their home, go with them to their doctor, and help them better use the system, help them better understand their condition and help them better do what they need to do to manage their own care. Under the traditional fee-for-service system that’s not going to be reimbursed, but under a budgetary system where you want to try to control costs there’s a big incentive to try new programs like that.

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