The document discusses rising healthcare costs and declining quality in the US healthcare system. It argues that the current system rewards more treatment and increased capacity, rather than value and outcomes. It proposes moving towards accountable care organizations that are accountable for overall costs and outcomes, comprehensive performance measurement, and payment reform to reward high-value care rather than volume of services. Massachusetts could lead the way by fostering the development of accountable care organizations.

1. Rethinking Health Care: Costs of Care Models: Is there a solution? Massachusetts Medical Society State of the State October 23, 2008 Elliott Fisher, MD, MPH The Dartmouth Institute for Health Policy and Clinical Practice

2. Houston, we’ve got a problem… The usual suspects: Uneven quality Rising costs Declining access to care Some looming challenges: Collapse of primary care Credibility of academic medicine Loss of professional authority of physicians A window of opportunity Health care reform debate set to begin What role will physicians play? Can Massachusetts lead the way?

3. Candidate proposals Coverage reform – radically different proposals McCain Obama Coverage Reform Aim for Universal coverage No Yes Requirements to have coverage No Children only Employer contribution No Yes Changes to employer benefit tax exemption Yes No Regulation of insurance markets No Yes Delivery System Reform Health IT Yes Yes Transparency Yes Yes Malpractice reform Yes Yes Prevention Yes Yes Pay-for-performance Yes Yes Comparative effectiveness/ quality measurement Yes Yes

4. Candidate proposals Delivery system reform – similar, traditional approaches McCain Obama Coverage Reform Aim for Universal coverage No Yes Requirements to have coverage No Children only Employer contribution No Yes Changes to employer benefit tax exemption Yes No Regulation of insurance markets No Yes Delivery System Reform Health IT Yes Yes Transparency Yes Yes Malpractice reform Yes Yes Prevention Yes Yes Pay-for-performance Yes Yes Comparative effectiveness/ quality measurement Yes Yes

5. Candidate proposals Delivery system reform – similar, traditional approaches Underlying assumptions Individual provider performance is the problem Better evidence and more guidelines are needed Transparency on price and quality will drive improvement

6. Rethinking health care Every system is perfectly designed to get the results that it achieves. Paul Batalden Insanity: doing the same thing day after day and expecting different results. Albert Einstein

7. Per-capita Medicare spending 1990 Boston, San Francisco and East-Long Island -- $4000 $8,363 1990 1995 2000 2005 East Long Island San Francisco Boston $10,827 $9,544

8. Per-capita Medicare spending 2006 Boston, San Francisco and East-Long Island -- $2500 spread $8,363 1990 1995 2000 2005 East Long Island San Francisco Boston $10,827 $9,544

9. What do high spending regions get? Use Rates in High vs Low 1.00 1.5 2.0 0.5 2.5 Reperfusion in 12 hours (Heart attack) Effective Care: technical quality Ratio of rate in high spending to low spending regions Aspirin at admission (Heart attack) Mammogram, Women 65-69 Pap Smear, Women 65+ Pneumococcal Immunization (ever) Total Hip Replacement Total Knee Replacement Back Surgery Preference Sensitive Care: elective surgery CABG following heart attack Evaluation and Management (visits) Imaging Diagnostic Tests Supply sensitive services: often avoidable care Inpatient Days in ICU or CCU Total Inpatient Days

10. What do high spending regions get? The paradox of plenty (1) Fisher et al. Ann Intern Med: 2003; 138: 273-298 (2) Baicker et al. Health Affairs web exclusives, October 7, 2004 (3) Fisher et al. Health Affairs, web exclusives, Nov 16, 2005 (4) Skinner et al. Health Affairs web exclusives, Feb 7, 2006 (5) Sirovich et al Ann Intern Med: 2006; 144: 641-649 (6) Fowler et al. JAMA: 299: 2406-2412 If all U.S. regions could adopt practice patterns of most conservative fifth of US, Medicare spending would decline by 30%

11. What’s going on? Research on causes of regional variations (1) Pritchard et al. J Am Geriatric Society; 46:1242-1250, 199 (2) Anthony et al, under review (3) Kessler et al. Quarterly Journal of Medicine 1996;111(2):353-90 (4) Baicker, Chandra, NBER Working Paper W10709 (5) Fisher et al. Ann Intern Med: 2003; 138: 273-298 (6) Sirovich et al. Archives of Internal Medicine. 165(19):2252-6. (7) Sirovich et al, J Gen Intern Med. 2006;21(Suppl4):164.

12. What’s going on? The key role of local context – and capacity – in the “gray areas” Consequence: reasonable individual clinical and local decisions lead, in aggregate, to higher utilization rates, greater costs -- and inadvertently -- worse outcomes The more complicated care becomes, the more likely mistakes are to occur. Hospitals are dangerous places if you don’t need to be there. Physician - Patient Encounter Clinical Evidence Professionalism Clinical evidence is an important -- but limited -- influence on clinical decision-making. Physicians practice within a local organizational context that profoundly influences their decision-making. Payment system ensures that existing capacity is fully utilized. Physicians adapt to available resources: more referrals, more admissions, more ICU stays Policy Environment (e.g. payment system) Local Organizational Context (e.g. capacity - culture)

13. Just the gray areas?

14. Just the gray areas? “ These marketing ploys are wildly successful across the entire country. Patients are viewed as the ball in a pinball machine, popped back and forth, ringing up profits, until finally they escape past the paddles and can no longer render income. I believe that the fingers controlling those paddles often use those "gray areas of judgment" as an excuse to shoot the patient back to the triple-score bumpers. Speaking just as some guy out in the boondocks, I can tell you that life's more like the Star Wars trilogy than one would guess. There's a"dark side". Difficult to resist and only a very few are able to throw themselves over the precipice to escape its clutches once they are embroiled within.” Geoffrey G. Smith, MD, Casper Medical Imaging, PC May 24, 2007 (email)

15. Candidate proposals Delivery system reform – similar, traditional approaches Underlying assumptions Individual provider performance is the problem Better evidence and more guidelines are needed Transparency on price and quality will drive improvement Alternative assumptions Local system – capacity, norms -- is the critical determinant of costs and a powerful influence on quality Most decisions require judgment (guidelines insufficient) Current payment system is the fundamental problem For some – drives unprofessional, entrepreneurial behavior For most – creates conflict between values and daily work

16. Thoughts on moving forward Address the underlying causes of rising costs, poor quality Failure to recognize key role of local system (capacity, local social norms) as a driver of cost and quality Assumption that more is better Equating less care with rationing Payment system that rewards more care, increased capacity, high margin treatments, entrepreneurial behavior Foster development of local organizations (delivery systems) accountable for overall cost and quality of care Comparative effectiveness research Balanced information on risks / benefits Comprehensive performance measures Reform of payment system (long term) Shared savings as interim approach Underlying cause General Approach

17. Moving forward Some recent recommendations IOM Pathways Series Performance measurement: foster shared accountability through comprehensive, longitudinal, system level measures Payment reform: Medicare should align incentives to promote better health and better value. Commonwealth Fund Framework for a High Performance Health Care system “… central to implementing these changes is the need to establish more organized systems of care.”

18. Moving forward Some recent recommendations Rethinking Medical Professionalism, David Mechanic Information technology (EHR, decision support), care management, payment reform, integrated systems “… but American physicians do not particularly like these types of organized medical groups, so much thought is needed about building virtual systems that can successfully incorporate these technologies and support services.” Milbank Memorial Quarterly, 2008

19. Organizational Accountability Foster Accountable Care Organizations (Systems) Essential attributes of an Accountable Care Organization Provides (or can effectively manage) continuum of care as a real or virtually integrated local delivery system Sufficient size to support comprehensive performance measurement, shared EHRs, decision-support Capable of prospectively planning budgets and resource needs Potential Accountable Care Organizations Integrated delivery systems (Partners, Kaiser-Permanente) Physician-Hospital Organizations / Independent Practice Networks (Middlesex Health System) Regional Collaboratives (Indianapolis IN, Vermont)

20. Performance Measurement Meaningful measures; strategically deployed Current performance measures seriously flawed Focus on individual providers reinforces fragmentation, antiquated professional models, current silos of practice How to measure: Accountable Care Organizations Fosters shared accountability among providers for full continuum of care Organizational support for managing and improving care essential Only level of measurement that can account for capacity and costs What to measure Effectiveness: health outcomes over time Care coordination: did care meet patients and families needs? Total per-capita costs

21. Payment reform Value, not volume Long-term: reward improved care, lower costs Must decouple payment from volume; encompass entire population served Provider: Capitation – or other population-based cost accountability Regional: prospective budgets for care of population served Short term -- Shared savings models Establish target growth rate or prospective budget Reward ACOs that achieve spending growth below target (if quality benchmarks met) Advantages Preserves fee-for-service payment (good for patients and MDs) Can be voluntary on part of enrollees (no lock in; less fear) Provides incentive to avoid increases in capacity Can be done with existing administrative data

22. Moving forward Could Massachusetts lead the way? Feasibility: how coherent are local physician-networks? Payment reform through shared savings: How much money is on the table? What happens under a shared savings model? Practical steps forward

23. Shared savings How much money is on the table? Lots $8,363 $10,827 $9,544 1990 1995 2000 2005 East Long Island San Francisco Boston

24. Shared-savings What is current evidence? Physician Group Practice demonstration Shared savings payments if groups achieve target savings and meet quality goals Within 2 years, quality benchmarks achieved by all groups; almost all achieved some savings; 4 of 10 received shared savings payments Dartmouth experience – a new conversation Growing internal support for primary care & “medical home” System beginning to focus on improving “population health” Interest in all-payer model – essential to fully reorient system (Current incentives to increase volume in < 65)

25. Moving forward Where do we go from here? Federal support for shared savings pilots essential Congressional interest in ACO / shared savings growing: goal to expand state and local pilots rapidly States with all-payer datasets best positioned to design and implement all-payer models – critical for success!! Barrier: rapid – and conflicting – proliferation of P4P, quality measurement, medical home initiatives Establish clear long term goals; align interim steps with long term goals Bring payers and providers together to design shared savings programs Short term savings: focus on acute care hospital

26. Moving forward Creating virtual integrated systems Implementation Year Support coordination & integration among physician groups Performance measurement pathway to support quality improvement, shared savings and HIT Shared savings payments for qualifying ACOs Shared savings payments to ACOs that meet quality benchmarks (progressively increasing performance standards, based on above) 1 2 4 3 5 Provide list of MDs within network Report on network quality using admin data (eg AQA), replacing PQRI Report on care coordination, access using survey data (eg CAHPS) Registries for expanding list of conditions Health outcome measures for conditions included in the registry (e.g. functional status) Cost-measures for specific conditions included in the registry

27. A riddle for would-be health care reformers: Q: How is a kilowatt-hour of electricity like a day in the hospital? A: Nobody wants either

28. Insights from the energy industry Utility industry rewarded for producing energy. Result: only interested in building power plants. Reforms require new structure to reward “end-use efficiency”: light, heat, cold beer – at lowest cost. Key principles of energy reforms Population-based accountability for end-use goals. Payment reform: (1) Decouple profits from volume (2) Shared savings Performance measurement California per-capita electricity use FLAT, while Gross State Product rose by 82%

29. Insights from the energy industry – how applicable to health care? Providers now rewarded for producing services. Result: focus on high margin services; volume growth. Reforms require new structure to reward “end-use efficiency”: health promotion, restoring health / function; quality of life – at lowest cost. Key principles of health care delivery system reform Population-based accountability for end-use goals (health) . Payment reform: (1) Decouple profits from volume (2) Shared savings Performance measurement Imagine if health care costs were flat for the next 10 years