By MAGGIE MAHAR
The rumors that I wrote about Friday are, in fact, true. President Obama will name Dr. Donald Berwick, president of the Institute for Health Care Improvement (IHI), to run Medicare and Medicaid. Berwick, who is a professor of pediatrics and healthcare policy at the Harvard Medical School and a professor of health policy and management at the Harvard School of Public Health, will have to be confirmed by the Senate Finance Committee.
Just how tough will the confirmation hearing be? I’m not worried. Berwick can handle himself.
Granted, yesterday the New York Times called Berwick “iconoclastic,” i.e., someone who “smashes sacred religious images” or “attacks cherished beliefs.” But most who know him describe him a “visionary” and a “healer,” a man able to survey the fragments of a broken health care system and imagine how they could be made whole. He’s a revolutionary, but he doesn’t rattle cages. He’s not arrogant, and he’s not advocating a government takeover of U.S. healthcare.
Berwick stands at the center of a healthcare movement that would reform the system from within. In 2005, Modern Healthcare, a leading industry publication, named him the third most powerful person in American health care. In contrast to others on the list, Berwick is “not powerful because of the position he holds,” Boston surgeon Atul Gawande noted at the time. (Former Secretary of Health and Human Services ranked no. 1, while Thomas Scully, the head of Medicare and Medicaid services captured the second slot.) “Berwick is powerful,” Gawande explained, “because of how he thinks.”
Listen to some of the clips below, from the film Money-Driven Medicine, produced by Alex Gibney, and based on my book, and you’ll understand what Gawande means. Soft-spoken, and charismatic Berwick is as passionate as he is original. His style is colloquial, intimate, and ultimately absolutely riveting. He draws you into his vision, moving your mind from where it was to where it could be.
Berwick isn’t just another ivory-tower philosopher. He’s “an extraordinary leader when it comes to inspiring people and creating the will to move forward,” Dartmouth’s Dr. Elliot Fisher told me in a phone conversation Friday. “And he can teach people how to do it. He has demonstrated his ability to teach people how to implement change in a complex system.”
That is precisely what the Institute for Healthcare Improvement (IHI), the non-profit organization that Berwick co-founded in 1991 does, spearheading pilot projects aimed at “continuous quality improvement.” IHI targets problems like asthma care or safety in coronary surgery and then invites teams of medical workers from hundreds of hospitals to collaborate in what Berwick describes in his book Escape Fire, as “results-oriented, clock-ticking projects, which may last six months or a year.”
Berwick outlines the process: “A hundred teams working to improve cardiac surgery outcomes; 70 teams working to reduce Emergency Room waits . . .—guided by teams of faculty from around the country or around the world, meeting regularly in learning sessions . . . going home, sharing what’re learning, coming back together here, sharing again.”
IHI’s website (www.ihi.org) offers an abundance of resources. a team of health care professionals can sign up online courses that focuses on reducing Clostridium difficile infections, lowering the number of heart failure readmissions or managing advanced disease and palliative care. The interactive, two- to- four month web-based courses are called “expeditions” and include: check in calls every two weeks for faculty to provide advice and mid-course adjustments; ongoing opportunities to share with and learn from other participating organizations; opportunities for periodic check-ins with faculty.
Alternatively, readers who visit the website and scroll down to “How Did They Do That?” and discover that Models of Low-Cost, High-Quality Health Care Do Exist in the U.S.
So Berwick does that it can be done—and how to do it. Many of IHI’s initiatives have succeeded. But he also understands that reform not something that will happen in 2014 when the government flips a switch. It’s a process that already is happening –and that will continue in the years to come. Much depends on people on the ground.
The Will to Excellence
Berwick’s vision is generous. He is convinced that there are enough like-minded people within the health care professions to create a revolution: “The will to excellence is present everywhere in Health care,” Berwick told an audience at the National Forum on Quality Improvement in Health Care. “The will to do well, the quest for pride, the joy of achievement, the warmth of serving –these are natural capital, human traits. Not of all human nature, not all of the time, bu enough, plenty enough. We can waste them and deplete them,” he adds, referring to low morale in many parts of our health care system. “But the will to have pride in work is not scarce; it is everywhere abundant.”
Time and again, Berwick has seen IHI’s pilot projects work –without any financial incentives for the medical professionals involved. Hospital workers want change. Many are horribly frustrated to find themselves laboring in an system where the left hand and the right hand often fail to communicate, making much of their work seem redundant or even pointless. Berwick recognizes that these professionals would like nothing more than to turn their hospitals into efficient workplaces. And that such an opportunity might well be worth more than a 2 percent raise.
Indeed, a year ago at the American Medical Group Association meeting, Berwick compared physician performance bonuses to exhorting [doctors and nurses] “to do better,” and said both were “very poor cousins” to healthcare system redesign. As he told Kaiser HealthCare News in an interview today: “I think we need to create more consequences for good and bad performance. But we have to learn our way unto that. . .. The danger is that you create ‘games and gaming’—which we can ill afford.”
In a 2005 interview published in Health Affairs, Berwick expressed his concerns: “I would draw a very dark line between the incentives that apply to organization . . . where I do want incentives in place — and incentives for individuals. . . . I want it to be good for an organization to be safe, and I want it to be good for an organization to manage chronic illness carefully . . .” He applauds the pilot projects in the health reform legislation that encourage Medicare to “bundle payments to doctors and hospitals,” with a bonus added to the bundle when teamwork leads to good outcomes at a lower price.
But “at the individual level,” he insisted, I don’t trust incentives at all . . . I think it feels good to be a good doctor and better to be a better doctor. When we begin to attach dollar amounts to throughputs and individual pay, we are playing with fire. The first and most important effect may be to disassociate people from their work.”
Here, I think Berwick is putting his finger on a potential problem in the current reform movement. Recently, I have talked to both doctors and nurses who were troubled by the new emphasis on “productivity” in organizations where they work. How many patients have you seen today? As Berwick put it in 2005, “We’ve got to support the underlying culture and the underlying system that makes healing, not scoring, the objective.” Today, he added, “we need to stop paying for through-put.” (At the same time, he recognizes that primary care physicians must be paid more. Anyone concerned on that score should listen to the first clip from the film below)
When I was writing Money-Driven Medicine, I discussed the issue of “pay-for-performance” (which is quite different from paying an organization for good outcomes) with former Medicare director Bruce Vladeck: “Quality and improvement strategies need to focus on reinforcing the norms and values of professional responsibility rather than on undermining them through the exercise of economic muscle,” Vladeck said. “Unless we can continue to assume that most providers and administrators want to do the right thing for most patients most of the time,” he added, “we are all sunk and no amount of economic incentives can salvage the situation.”
Tapping into that underlying professionalism, Berwick has said, is “like drilling for oil. There is so much pent-up need in the health care work force that, even without financial incentives for individuals, health care workers are eager to make a change.”
To some, Berwick may sound out of touch. Over the past twenty years, the notion that pride in a job well done drives excellence has been dismissed as simply sentimental. People are motivated, we are told, by money. We’re all rats on a wheel, looking for the cheese. That’s what makes people “tick” Dr. Robert Galvin, director of Global Health at General Electric, told Berwick in that 2005 Health Affairsinterview. If we want a CEO to perform, a seven-figure salary is not enough. We must give him stock options. In this context, Berwick may sound naive. But when I was writing Money-Driven Medicine, I didn’t find anyone in the health care industry who wanted to call him that. The sheer authenticity of his presence commands tremendous respect.
“The Enemy is Disease”
Meanwhile, Berwick understands the role that money plays in our highly-competitive for-profit system all too well.
At one of IHI’s National Forums, Berwick recalled phoning a hospital in Houston to learn about its reportedly successful innovations in pneumonia care. He was told that “the gains are enormous but the methods cannot be reported to the public—excellent pneumonia care offered the hospital local competitive advantage.”
He was stunned. “The enemy is disease,” he told his audience. The competition that matters is against disease, not one another. The purpose is healing.” Yet “in the storm of the health care crisis,” Berwick acknowledged “it is so easy to forget why we trouble ourselves in the first place. It is so easy—frighteningly easy—to become trapped in the sterile thesis . . . that our true, deep purpose is to gain and preserve market share in a vacant terrain of others whose purpose is precisely the same.” In other words, it is so easy to forget the patients.
In part 2 of this profile, I’ll talk about what Berwick has to say about fragmentation–and variations in care in different parts of the country. Why can’t the Kaiser Permanente model work everywhere. What does he mean when he says that we haven’t even tried “transparency”? What will Medicare ask of U.S. hospitals? Just how much waste does the think there is in the system? How quickly can Medicare move to eliminate that waste?
Maggie Mahar is an award winning journalist and author. A frequent contributor to THCB, her work has appeared in the New York Times, Barron’s and Institutional Investor. She is the author of “Money-Driven Medicine: The Real Reason Why Healthcare Costs So Much,” an examination of the economic forces driving the health care system. A fellow at the Century Foundation, Maggie is also the author the increasingly influential HealthBeat blog, one of our favorite health care reads, where this piece first appeared.
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I am a mere layperson, a disabled American who is forced to rely on Medicare and to be honest, this man as head of CMS scares the you know what out of me.
He said the following in a speech in 2009:
“Any health care funding plan that is just equitable civilized and humane must, must redistribute wealth from the richer among us to the poorer and the less fortunate. Excellent healthcare is by definition redistributional.”
-and-
“NICE is extremely effective and a conscientious, valuable, and — importantly — knowledge-building system [which has] developed very good and very disciplined, scientifically grounded, policy-connected models for the evaluation of medical treatments from which we ought to learn.”
-and-
“I am romantic about the NHS; I love it. All I need to do to rediscover the romance is to look at health care in my own country.”
Source
I have read about enough of the horror stories of government run health care and the rationing that goes along with it to be very afraid of someone with this mentality to be in charge of my healthcare.
He may have improved the quality of health providers within our healthcare industry, but that doesn’t mean he is a good choice to run our healthcare industry.
He does not advocate a government takeover? Have you listened to his speech 2008 in the UK, he absolutely thinks we should have nationalized healthcare. And we should redistribute the wealth, a true marxist.
Don Berwick called pay for performance a “toxic daisy chain” and a blunt instrument.
Listen to the horse’s mouth:
http://www.ihi.org/IHI/Programs/IHIOpenSchool/On+Call+Does+Pay+for+Performance+Work.htm?player=wmp
Mass AG Martha Coakley gave Caritas Christi health system a hard time before the Catholics cut a deal with hell hound Cerberus Capital Management. For the backstory:
http://stateofthedivision.blogspot.com/2010/04/curious-case-of-caritas-christis.html
Berwick’s #2 has an interesting history as head of Virginia’s Health & Human Services.
http://peureport.blogspot.com/2010/04/marilyn-tavenner-2-at-center-for.html
PEU Cerberus agreed on March 25 to buy Caritas Christi Health Care, a hospital operator affiliated with the Archdiocese of Boston, in a private-equity deal valued at $830 million.
Caritas hospitals are nonprofit community hospitals according to Guidestar. They will convert to for-profit facilities under Cerberus ownership. Besides adding debt to finance the deal, these hospitals will now be taxable. If they’re like Triad or HCA, expect interest expense to put a hurt on profits for a year or two.
Just as Cerberus ran Chrysler into the ground, they can do likewise for health care.
While Maggie makes inane comments about the for-profit model, a Catholic system sold out, changing stripes.
KKR plans to double its money on HCA. That’s after milking the company via dividend distributions in the interim.
http://www.reuters.com/article/idUSN0925156020100409
Someone has a profitable business model, which will increase costs.
Taking HCA private added over $1 billion in annual interest expense. How much will new shareholders expect in dividends? Wait for the prospectus.
Carlyle hired an ex-Wyeth CEO as Senior Adviser:
“We see a range of opportunities in the U.S. and globally for private capital to help strengthen and improve the efficiency and effectiveness of the healthcare sector,” Essner said in a statement.
Essner’s hire comes in the backdrop of private equity firms looking to recruit industry veterans to manage their portfolios.
On Wednesday, former Procter & Gamble Co (PG.N) Chief Executive A.G. Lafley joined private equity firm Clayton, Dubilier & Rice as a special partner.
http://www.reuters.com/article/idUSSGE6370FV20100408
The Carlyle Group’s David Rubenstein expects health reform to produce 30% annual returns for his private equity underwriter (PEU):
http://peureport.blogspot.com/2010/04/30-annual-returns-still-target-for-peu.html
More on those plan making shadow bankers. From FT:
So, apart from secondary buy-outs, where will the private equity deals of the future come from? Bain’s report identified four promising areas for new investments: energy, healthcare, the Asia-Pacific region and distressed investing.
http://www.ft.com/cms/s/0/687e7496-308e-11df-a24b-00144feabdc0.html
Senator Grassley got his wish granted by an Illinois court:
http://stateofthedivision.blogspot.com/2010/03/illionois-supreme-court-rules-nonprofit.html
“Liberals see equality as a top priority”
Do you actually believe this crap when you type it Maggie? Or more importatnly does anyone actually fall for this?
Why does a liberal living in NY, MA, NJ, or any other liberal state with high taxes pay less in federal income tax then me even if we make the same amount?
Why did liberal counties get twice as many ear marks as conservative counties?
Why does 40% of the population pay no federal tax?
Why did union debt holders get their claims placed ahead of those before them under existing law?
Why did healthcare reform just grant 10 billion to unions to sure up their health plans they underfunded so they could contribute to political campaigns instead?
Why is it illegal to discriminate against any race but whites?
Why do young people subsidize older people for healthinsurance but when the risk is flipped like on auto insurance they are on their own?
No single piece of liberal ideology is about equality, your entire belief structure is about placing the needs of a few above the effort of the rest.
When I posted THA CEO Dr. Dan Stultz’s comment I didn’t imply any stench. I once worked for him and found his assessment spot on. Our estate backed health system was going for-profit in 2006. With its resources, it should have been one of the last to change stripes. (The merger with Triad later failed).
SEIU President Andy Stern called employer sponsored health insurance dead and not coming back in 2007. Who knew a health care worker union would be one of the first to cave?
There are many unspoken themes embedded in health reform and they have nothing to do with Red or Blue talking points. A seismic shift is underway from employers to individuals and a tapped out Uncle Sam. While many cheer this move, few are creating graphs.
More people had employer coverage in 1998 (168.5 million) than CBO projects in 2019 (162 million). That’s with over 50 million in additional population.
Jeff, Bev MD,Alan Private Citizen
Jeff– Liberals see equality as a top priority– they value individual liberties, but tend to put equality first.
Conservatives, on the other hand, emphasize the right of the individual,including an individual’s right to amass as much wealth as possible, and keep it, to hand down to his heirs, without being forced to share it with others in the society.
I don’t think I’m “casting aspersions” on anyone’s character by saying this. Obviously I think the liberal point of view is fairer, but many people would disagree with me.
I’m just saying that we should all own up to the fact that our values and politics shape our views about the economy and public policy. And just as I am willing to acknowledge my priorities, conservatives should acknowledge their priorities.
And none of us should pretend that our analysis of policy or economics is value free (or not influenced by our politics and values.)
Finally, “Ideologue” and “ideological” are words people use to characterize politics that they disagree with. In truth, the word “ideology” simply refers to a set of beliefs.
But “ideology” began to mean “a set of Untrue and Rigid beliefs” during the McCarthy era, in the 1950s, when McCArthy attacked liberals who he viewed as communists..
Liberals were portrayed as “ideologues” who believed in socialism or Communism–which were “ideologies.” Capitalism, on the other hand, was presented as a set of beliefs that are simply True. (Rather like the teachings of the Catholic Church.) Therefore, capitalism couldn’t be an “ideology” and those who believed in American-style capitalism could not be considered “ideologues.”
To this day, some people continue to use “ideologue” and “ideology” as McCarthy did– as a smear, while denying that their own arguments are influenced by their values and politics.
Bev– Yes, Berwick is taking a pay cut to go to Medicare. And, as you suggest, the brouhaha about what he earns is beside the point.
Alan- Didn’t call you a troll. Merely said that you are repeating very peculiar allegations that a troll has been circulating in the blogoshpere
Private Citizen– Yes, people are beginning to focus more on patient safety (washing hands, etc.) Reform is happening on the ground. This is important.
Thank you for focusing the discussion on what matters: patients.
T
Well guess what; doctors have the worst record on washing hands and putting on gowns; in fact they have the worst record on all hospital policies because they don’t believe rules apply to them. So yeah – they do need somebody with an M.D. to tell them, sad to say.
Just the facts, nothing but the facts. The IOM report garnered headlines but used flawed methodology, was roundly criticized, and if it was not the IOM’s work, would have been ignored.
Sure there are mistakes and deaths but the number was exaggerated by the IOM study enabling the invasion of medical care by industries and do gooder charlatans and pretenders who proclaim having the solution. Should a hospital pay thousands to companies like IHI to tell health care professionals to wash their hands and put on gowns to prevent the spread of infection??
Or would a better deployment of funds involve hiring extra janitors to keep the c diff poop cleaned from the floors?
Some of you guys sound Cheap and Jealous. The very same people who cry that CEO should be able to rake in huge bonuses will turn around and complain that Dr.Berwick is cutting a paycut because he made money previously. Even my 5 yr old acts more reasonably. What is the problem? That he made money or that he is taking a pay cut for this job? I know our local hospitals are addressing more patient concerns than before and my nurse friends tell me that they get more training of fall prevention, hand washing etc. HEALTH CARE WORKERS WASH HANDS LESS THAN 50% of the time, does that kind of stuff need to be addressed, they do need pressure for these things to happen. Unfortunately you can make a kidergartner to wash hands after restroom use but much harder to get healthcare workers wash hands after each patient.
The 990 I found has only 35 pages with Dr. Berwick’s compensation on page 21. I could not find your number anywhere on the filed report. The 990 was filed with the IRS on 3-13-09.
Pardon me. Page 36 of the Form 990 for 2008 states that compensation for Donald Berwick, MD MPP FRCP President/CEO a 40 hour per week schedule is $2,326,386.00
Omitted earlier is additional compensation: $30,066.00
I do not believe that the 2009 Form 990 is available. If it is, please post it.
Believe you me, he does not need worry about a pay cut.
Certainly, he is honorable and gave out worthy certificates to the hospitals that paid to join the safety club. Exactly what has been accomplished other than a feel good state that the call of his IOM has been addressed.
Dr. Stevens;
I don’t really see your point about Dr. Berwick’s pay, since he will be taking a substantial pay cut to take this job, no matter whose current $$ ## you pick. So who cares? And who cares exactly what number precedes the comma in the xxx,000 patients harmed by medical errors, either. One doesn’t need external numbers for this one,only their own eyes and ears when encountering the medical system. I worked in it for 30 years and have been a patient/patient’s relative in it for an additional 5 and believe me, the errors are rampant. I know you know that, unless you practice in remote Alaska, never make a mistake, and never go near a hospital in your practice.
In other words, cut the nitpicking. What is your real problem with Dr Berwick?
As for Dr. Goldsmith and the insults, hahaha!! One has to have a thick skin to interact with this blog. The rewarding thing is to watch some people like Nate gradually come around, and to ignore the real loonies.
I checked IHI’s 990 filed in March 2009 and Berwick’s salary and deferred compensation, while handsome, was nowhere close to the number you posted, Dr. Stevens. When was the 990 you cited submitted to the IRS?
While I might get into spitting contests with other bloggers, I draw the line at posting employment salaries.
Maggy Mahar is flat out wrong about Rerwick’s compensation. Can you read?
On page 34 of IHI’s Form 990, it reports Berwick’s compensation on the W2 as….dom de dom!!!! guess___
$2,326,286.00 for 40 hours per week
Not bad for a guy who wrote the report that his profitable non profit has used to further its business.
“containment of healthcare costs has become the nation’s imperative”
http://www.modernhealthcare.com/article/20100318/NEWS/303189989/1153#
Rest assured shadow bankers are making plans.
Margalit, your question “how are ACO’s different than HMO’s” is a good one. That remains to be seen.
Strategic planning sessions will buzz focusing on that very issue. What do we need to look like as an ACO? Who do we partner with? Who do we buy? What competencies do we contract?
The 90’s drove massive vertical integration, only some of which came apart the last few years. ACO’s will drive the next round.
Should physicians not get their act together, others will design ACO’s with doctors in a subsidiary role. That includes shadow bankers, seeking large returns on their corporate health care investments. The Carlyle Group owns MultiPlan, a huge PPO. I wonder what’s going on in their strategic situation room? What role will they give physicians in any new models?
Well, well, well…. if we’re back in college, let me impersonate the nerdy kid in the front row who keeps asking “why” and having taught in college, I know exactly how the lecturer feels about him…
First, I’m not too certain about capitation working so well… Salaried physicians are what we keep comparing to, but unless we plan on turning our delivery system inside out, that’s not going to happen.
Yes, fee for service is not working very well, so I am asking about fee for time. Change the CPT system. There is a big difference. And fee for time is not the same as salary.
Second, I am not sure why we insist on putting hospitals in charge of what physicians are paid. By all accounts here, hospitals are as bad as private insurers when it comes to profiteering from our health care resources.
If there is one group in the system that I would be inclined to trust to look after the patient’s best interests it is the Primary Care Physician. Yes, there are exceptions, but by and large, PCP’s are the least motivated by money. And I thought that studies also show that powerful primary care can and does reduce costs. Where is the alignment here?
I may be mistaken again, but the #1 issue we have is cutting costs, not improving quality. As our Republican friends point out frequently, we know how to provide excellent care. The #2 issue is to provide this excellent care to everybody, which of course ties back with #1.
So if those ACOs are there to cut costs and if they are managed largely by hospitals and if most physicians remain independent, how are ACOs different than HMOs?
First Maggie called me misinformed, then she called me a troll. The points I made on the distortions of incentive compensation were long ago stated by the world’s foremost quality guru.
I’ll chalk up our differences to foundational management theory and experiences. Having worked on both the nonprofit and for-profit hospital side, I’m aware of the problems with both. However, I found for-profits more obsessed with money. HCA will go public for the fourth time in several decades. This will be a joyous, champagne toasting affair.
I am looking forward to Dr. Berwick’s Senate hearing, especially in front of Chuck Grassley. He’s pushed the FAH line for years, nonprofit community hospitals have an unfair advantage as they don’t pay taxes.
Chuck got his way in PPACA. Nonprofit community hospitals are now “private tax exempt facilities.” Enough to chill your heart.
Let’s see how few words I can use to say this (without triggering another rhetorical avalanche):
1) just because you can run a $27 million foundation and are a world thought leader in healthcare quality does not mean you can run an $800 billion federal agency whose mandate has just been, what, tripled by health reform. it’s not the highest and best use of a really valuable person.
2) it’s time for everyone who uses this space (and Maggie is by no means the worst offender) to stop casting aspersions on peoples’ character or values because they disagree with their politics. enough.
Wow! I feel like I’m back at the UCLA School of Public Health with two titans in the industry (both of whom I admire and respect) have their day in health wonk ‘moot court’! This is beyond educational! Diggin’ the energies!!
Jeff, Bev M.D. ,Gregg, Margalit,Everyone–on the various shapes that ACO’s can take, fee-for-service, Medicare payments and for-profit hospitals.
Jeff–
Political views shape our views of the economy. In recent years, honest economists have been acknowledging this fact. (Krugman, et. al.)
Moreover, this is not a bad thing. Our politics are all tied up with our values. Conservatives tend to put a high priority on invdividual freedom and growth of capital. Liberals tend to make equality a top priority.. In recent years, progressives also have become increasingly skeptical about “growth for the sake of growth.” (It leads to overbuilding and concentration of capital among the wealthy, which encourages speculation and bubbles)
Jeff– recently, on this blog, you argued against the Medicaid expansion, saying that we can’t afford it. I disagreed. The people who will now be included in Medicaid need that care–even if it means raising state income taxes on the wealthy (individual earning over $200,00; couples earning over $250,000)–or perhaps taxing unearned income over $200,000 and $250,000. The alternative is more federal help to the states (which is, in fact, part of the legislation.) But these people need health care. From a liberal perspective, this is a moral imperative. (And I’m sorry if it makes you uncomfortable, but I think it’s perfectly okay to talk about right and wrong.)
Our different positions on expanding Medicaid reflect political differences.
On Berwick: as Bev M.D. points out “Dr. Goldsmith’s comment [on Berwick] morphs from “doesn’t have the patience, discipline or experience to do the job” to “it’s not the highest and best use of this remarkable person.”
Then you tell us you really don’t know him that well: “Don isn’t a a friend, merely someone I admire.”
But you still feel free to suggest that he lacks “administrative skills” and you hope he’ll be able to learn them on the job. “The job does require a fair amount of ruthlessness, and foremost, administrative skills. Some people come to them naturally, or are quick learners. I hope that will prove the case with Don.” A tad condescending.
Berwick has demonstrated his administrative skills while running IHI and overseeing IHI’s very large projects–not unlike the Medicare pilot projects that will be so important to Medicare reform.
You say that you have “paid your dues.” That seems to me an odd phrase. It suggests that early in life, one tries to do good, and then “grows up” and tries to do well financially.
When I began my career as an English professor, I didn’t feel I was “paying dues.” I loved my work then, as I do now. All of my life, I’ve either been a teacher or a writer–neither are particualrly lucrative careers, but money has never been what motivated me to work.
Someone questioned my credibility , asking about my credentials to write about health care: Yes, I earned a Ph.D.in English lit and taught English at Yale. Then I became a financial journalist (20 years.) During that time I was an editor at the NYT, but spent most of my career as senior editor at Barron’s, writing about markets and social policy –Wall Street and Washington–mostly long cover stories.
I covered many subjects, including healthcare, HMOs, managed care,(Ellwood, et. al.) for-profit hospitals (interviewed Rick Scott), nonprofit hospitals and their tax exemptions, Medicare, the FDA,Kessler, Genentech, TPA, AIDS, venture capital and medicine, Medicaid and state budgets, the Clinton administration (STiglitz, Laura Tyson,Robert Rubin) device-makers and Pharma.
Once wrote a story about Pfizer: it was selling a heart device that was defective. Sometimes it broke, and when it did, the patient died. Pfizer knew this,but kept on selling it. I published the story Saturday; Sunday Pfizer’s stock stopped trading in London and Monday, it never opened in New York.
By the time I left Barron’s in the late 1990s, I knew a lot about the ecnoomics of U.S. healthcare, the politics, the science (read a lot of medical journal articles) and the corruption.
I then wrote a column about international markets and finance for Bloomberg for a couple of years. (I had covered int’l at Barron’s: Japan, Russia, China, Hong Kong, Iraq and Iran. Oil and the Gulf War.
I then wrote two books.
The first: “Bull! A History of the Boom & Bust– 1982-2003” traced the boom, put it in the context of earlier booms, explained how an economy “hooked on growth” got into trouble, and why markets are only as rational and efficient as we are (not very.) Market solutions are rarely the best solutions. They are “too psychological” as Robert Rubin once told me.
Warren Buffet recommended my book in Berkshire Hathaway’s annual report. (Jeff– If I’m an ideologue, I guess Warren is too.)
Then I wrote: “Money-Driven Medicine: The Real REason Health Care Costs So Much.” Got a great review from Ezra Klein (another ideologue) and also well-reviewed in Health Affiars.
Then Alex Gibey decided to make a movie based on the book. (I suppose Gibney is yet another ideologue who lectures people on “right and wrong”– See “Taxi to the Dark Side” and “Enron: The Smartest Guys in the Room.”
Sorry to bore everyone with my resume, but I’m a bit tired of people on this blog saying “You have a PH.D. in English Lit” don’t you?-suggesting that this means I have no credibility as a health care writer.
On ACO’s– Gregg has it exactly right– they will be configured in various ways– as physician groups, physicians and hospital, etc. What they will have in commmon is: an emphasis on collaboration rather than competition, payment is not likely to be fee-for-service.
Margait– at this point we have quite a bit of evidence that outcomes are better and the cost is lower-when doctors are either on salary or paid a lump sum to keep patients well (capitated care). Fee-for-service drives unncessary treatment. It’s not conscious; doctors don’t set out ot overtreat. It’s simply what happens. We have than two decades of research on this.
Everyone– Last summer IHI co-sponosred a conference with DArtmouth and a couple of other groups titled “How Do They Do That?” Berwick, Atul Gawande, Mark McClellan and Eliot Fisher were the main speakers.
The conference focused on 10 communities around the country, that have managed to significantly reduce health care costs while either lifting or maintaining quality. (They had actually identified more than 10 communities that had done this–about 50 if I recall correctly–but chose 10 that were scattered in different parts of the country and illustrated different ways of achieving these goals)
As the IHI website explains “the conference brought together teams from ten high-performing regions to explore openly the local, regional, and national factors ― including culture, financing, infrastructures, and more ― that underlie the mechanisms for delivering health care in their communities.
“The goal for this meeting and subsequent efforts is to build awareness among the public and policy makers that successful models for achieving high-quality care at significantly reduced cost already exist in many regions and in many forms throughout America.” (see http://www.ihi.org– scroll down to Initiatives and you’ll find “How Do They”
AT the conference, the people involved stressed the fact that physicaians, hospital administrators and leaders from within the community did this on their own–they didn’t hire and bring in health care consultants. Nor were they paid for the work. Berwick stresses how health care reform must be about entire communities–people within the community collaborating.
The physicians and other involved were volunteering their time. As a result, they said, they felt that they “owned” the process, and this is why they co-operated so well in adapating to the changes– they had helped design the changes.
What the communities had in common is that 1) almost all of them moved away from fee-for-service –in one city, they kept fee for services, but physicians agreed to “pool” their fees so that no one person could ratchet up his income by “doing more.” Secondly, they replaced competition with collaboration– hospitals volunarily sharing with each other, doctors and hospitals working together with one target in mind: what would be best for the patient?
Hospital CEOs stopped thinking of themselves as revenue centers (how can I grow revenue) and began thinking of themselves as cost centers (how can I help bring down the total cost of care in this community?)
Yes, this means that hospital revenues shrink.
But in these communities, hospitals found that by being less wasteful, they could keep their doors open.
The notion that Medicare underpays is a myth. A recent MedPac study of hospital payment shows that when brand-name hospitals don’t have to be efficient –because they have enough market clout to charge private insurers whatever they wish– they are not efficient.
Private insurers wind up paying 115% to 125% of what it should cost to care for each patient. (And yes, Barry, this includes capital costs.)
However, when hospitals don’t have a “marquee name” and are in a market where large insurers have quite a bit of clout, they are paid significantly less by private insurers–and manage to stay in the black. If they have to become efficient in order to survive, they do it. Fewer preventable readmissions. Fewer errors that lead to more treatments. Better communication and hand off’s among doctors. ETc. ETc.
As for Medicare payments, the American Hospital Assocaition has said that Medicare pays about 97% of what it costs a hospital to take care of a patient, and that, in fact, most hospitals either break even or make a profit on their Medicare patients. It’s a relatively small number of “outlier” Medicare patieints who cost hospials money. Sometimes this is the hosptial’s fault– the patient becomes the victim of hospital error and windds up spending more time in the hospital. Sometimes it’s just that the case turns sour, the patient becomes sicker– often no one is sure why.
MedPac (the Medicare Payment Advisory Commission) has done several years of long, detailed reports on these problems. The Bush administration ignored them. But White House budget advisor Peter Orszag and his medical adviser, Zeke Emanuel have read them — thousands of pages (as I have, and I imagine Jeff has too.) They are excellent and lay out a blueprint for the pilot projects that Medicare will be starting and expanding.
Medicare doesn’t need to pay hospitals more. But it does need to change the way it pays hospitals–creating incentives for patient safety, and efficiency.
Don Berwick has suggested that rather than rewarding hospitals for overtreatment, we should pay them for empty beds–rather like paying utility companies more for nano-watts in communities where energy use goes down (thanks to education by the utility.) See my most recent post on Gawande and Berwick on this idea (www.healthbeatblog.org)
MedPac and Medicare are also very concerned about doctors and hospitals collaborating. The new legislation talks specifically about “bundling” payments to doctors and hospitals for an episode of care. (This is what Geisinger does) This would be voluntary, but if a hospital and doctors who work for the hospital or send patients to the hosopital choose to accept bundled payment, the bundle would come with a bonus–if outcomes are good and costs relatively low when compared to benchmarks (very efficient hospitals that provide high quality care.)
On for-profit hospitals– thanks to my experience at Barron’s I know quite a bit about stocks.
For-profit hospitals have taken investors on a roller-coaster ride– boom and bust cycles. And, unfortuately, too often, they cook their books. I’m told that HCA is getting into trouble again. . .
As always, sorry this is so long, but this thread did raise a number of important topics.
Thanks for commenting
P.S. Regarding John Podesta, Matt Yglesias and The Century Fund. A troll has been following me around the blogosphere making these accusations. I’ve never met Mat. I’ve barely met Podesta. And TCF does not tell me what to write or think.
Alan:
Appropos to Jeff’s point:
‘It’s a brave new world. If you live long enough, all the old ideas you saw fail earlier in your career end up cycling back fresh and new again. Can hardly wait for hospital rate review!’
and per the ‘stench’ of the Dan Stultz comment…
‘there’s no guarantee that the nonprofit model will survive.’
which are distinct echoes of the past, i.e., Sanford Bernstein guidance circa 1989 that… ‘the future of the hospital industry IS the for-profit’ business model… (paraphrased).
Yes, we do indeed live in interesting times! If you haven’t seen, check out my most recent post: http://2healthguru.wordpress.com/2010/03/29/from-health-reform-to-delivery-system-transformation/
Finally, I get Jeff’s contextually justified skepticism, and gut check agree with him, yet also believe in the power of granular transformation via an open and crowd-sourced digital revolution (call me naive). If we can manage processes which engage docs in a level of cultural discourse that values and extends ‘group culture’ and ‘patient empowerment’ into the conversation, perhaps these new and improved PHOs, IDSs, or provider sponsored integrated delivery systems can work. The e-patient and participatory medicine cross currents are real, deep and not to be discounted.
The migration away from group and staff model HMOs began in earnest in Southern California when Fred and Pam Wasserman launched the Maxicare ‘window project’. This introduced mainstream medicine to HMOs via IPAs, as a bold play to grow the model outside of an essentially closed staff or group culture, the then prevailing models of ‘managed care’. Unfortunately the full court press to develop IPAs over an essentially FFS physician (and hospital) culture was doomed to failure, the best efforts of their management companies’ (MSOs) or consultants notwithstanding. Ergo the litany of withholds, losses, declining conversion factor bases for payment and ultimately the unwinding of these flawed risk bearing physician models.
We’ll see, if this time can be different. Jeff’s skepticism is however well founded, imj.
Thanks Alan:
Am really diggin’ and now a new fan of your blog series!
Again, the insights offered here, exceed the level of discourse found in many pricey executive briefings, and for that matter graduate programs in health policy or health services administration; just sayin’
This is from Fitch Ratings. It’s on our local safety net hospital’s bonds:
“For the fourth consecutive year, ___ Health System recorded a loss from operations, approximately $5.6 million (a negative 1.9% margin) through the September 2009 period.”
As I said in a prior post, funds from an estate support the hospital. Otherwise Fitch would rate the bonds much lower.
Bonuses, incentive awards, performance pay have a long record of suboptimization. America saw CEO’s backdating stock options (supposedly the most pure incentive reward) on a widespread basis, stealing millions from shareholders. Uncle Sam has a bad track record with their P4P efforts. Dr. Berwick will join an extrinsic motivation regime in the Obama administration, whose reliance on P4P is matched by its belief in PPP’s (public private partnerships).
http://stateofthedivision.blogspot.com/2010/03/dr-berwick-to-enter-p4p-heaven-or-is-it.html
As for payment for volume, there are a variety of methods of hospital payment, discounted fee for service, per diems, capitation and no payment at all. For safety net hospitals providing care to a patient could mean nothing.
The graph below shows employer plans, obviously the uninsured aren’t represented. It does show a variety of plans, implying payment arrangements based and not based on volume.
http://2.bp.blogspot.com/_VoTMOdI9adk/SxAOKcF-7kI/AAAAAAAAG_4/bWOveNJaVT8/s1600/health+insurance+types+2008.gif
Jeff, thanks for the link. I remember reading that last summer. No idea why I forgot.
I may be oversimplifying everything, but it seems that payment for volume is the identified culprit, and the reason for providers ability to increase volume at will is that there is no constraint on unit time.
At least when it comes to private practice, time it takes to provide a unit of service is irrelevant. I am not suggesting that physicians should be salaried, but if payments were based on a mixture of time spent and complexity, instead of the current CPT scheme, there will very little ability to jack up volumes and provide substandard care.
In addition to that, time based payments will allow primary care docs to get paid for care coordination and for actually taking care of patients. If Medicare wants to throw in bonuses for outcomes, even better.
Purely for profit over-utilization of tests and procedures, by those who own equipment and facilities, is a different story and will require a different solution. Probably along the lines of reducing fraud. It’s a bit silly to base an entire payment system on the need to discourage stealing and racketeering. Those are better dealt with by law enforcement.
As for Maggie Mahar, she recently teamed up with Center for American Progress’ Matt Yglesias. Together, they’ve produced some vacuous statements. Maggie’s position on employer sponsored insurance seems in opposition to the foundation sponsoring her:
http://stateofthedivision.blogspot.com/2010/03/whos-not-watching-your-back.html
John Podesta is behind CAP and on the board of the Century Foundation.
Gregg, I concede the decades long dance of imitation between nonprofits and for-profits, something Maggie sees as a new development. However, there’s tremendous variation within the nonprofit sector.
All healthcare is local and my community’s nonprofit gets 4 uninsureds for every 1 the for-profit gets.
Even with the support of a large estate, the nonprofit agreed to sell out to Legacy Hospital Partners in 2006. That’s Nancy-Ann DeParle’s old firm, owned by CCMP Capital Partners and she sat on the Legacy Board. I wrote a critical piece in the local paper. Dr. Dan Stultz, System CEO leaving for the head job at the Texas Hospital Association, said “there’s no guarantee that the nonprofit model will survive.” Fortunately, the Board called off the deal.
Fast forward to Nancy-Ann’s current job and that statement rings true, at least for safety net nonprofits. They have a rough four years for help, during which the For-Profits will be looking to pick up carcasses:
http://stateofthedivision.blogspot.com/2010/03/will-nonprofit-community-hospitals-make.html
When Chip Kahn of the FAH is Obama’s biggest supporter, I get a little nervous.
http://stateofthedivision.blogspot.com/2010/03/president-clinton-lobbied-congress-for.html
“If you live long enough, all the old ideas you saw fail earlier in your career end up cycling back fresh and new again.”-Dr. Jeff Goldsmith
Funny, I wrote about this step back in time.
http://stateofthedivision.blogspot.com/2009/11/deparles-health-reform-twelve-years.html
Soon we may have “Too Big to Care”:
http://stateofthedivision.blogspot.com/2009/05/sfc-bungling-i-mean-bundling-health.html
As an aside, I drove Paul Ellwood around Roanoke, Virginia. He spoke to what is now Carilion Health System’s physicians. Paul might as well have spoken a foreign language. Things have changed mightily since then with the Carilion Clinic shadowing the Mayo’s. I also managed the system’s first purchased physician practice.
Margalit, I’ve already said my piece on ACO’s. See http://healthaffairs.org/blog/2009/08/17/the-accountable-care-organization-not-ready-for-prime-time/
If Maggie had actually read the article, not just the title, what I said was that the idea of hospitals and physicians working together to manage costs is not new, and it has, in fact, worked in some places. It failed in ten times as many places, however, and the reasons for those failures have not changed materially since the new regime arrived in Washington with a lot of “fresh ideas”. As a replacement for fee for service Medicare, ACO’s are not going to scale up to the whole country, and are not, as the title said, ready for prime time.
Those places that succeeded incidentally created their OWN health plans, usually based on IPA or group models. Geisinger and Intermountain went through the brain damage and cost of setting up their own health plans. Now that health plans are evil, regardless of who sponsored them, the policy community is going to pretend that they never existed, and develop incentive systems which bypass formal, and public, and regulated, risk sharing and go directly to providers. Which seems really stupid to me.
Many of the places that created those health plans are now viewed as exemplars of community wide cost management (Grand Junction, Colorado and Akron, Ohio are two I know something about). Apropos of the concerns in this post, the ACO will necessarily shift power from physician communities to hospitals, even if they end up modest redistributing some income that used to be hospital revenues back to the docs. Hospitals will most likely be the core risk bearing entity, and end up losing the most if the experiments fail.
It’s a brave new world. If you live long enough, all the old ideas you saw fail earlier in your career end up cycling back fresh and new again. Can hardly wait for hospital rate review!
Margalit, link above included comma after PDF; here is one that works: http://www.ebglaw.com/files/38833_BNA%20Article%20-%20The%20Timeline%20for%20Accountable%20Care%20(3-25-10).pdf
Alan, interesting attitude brother. Clearly if proprietary hospital systems learned anything, they’ve certainly perfected the art of EBITDA management. Returning ‘benefit’ to the communities they serve is an entirely different question.
Asset churns, selective (profitable only) service offerings, routine shuttering of non or below par performing operating units, and knee jerk entry and exits from markets, joint ventures or ill advised vertically integrated business strategies (i.e., buying or building their own insurance companies, i.e., Equicor, Amicare, Partners, etc.) were apparently just a cost of doing business.
While their ‘tax exempt’ brethren, who’ve spawn mega hospital systems via asset concentrations, look like, smell, like and ‘quack’ like their for profit competitors, the primary distinction is their tax status vs. ‘profitability’, or excess of revenues over expenses, per se.
Thanks, Gregg. I will read those articles ASAP.
I have a feeling that ACO are one of those things that could work well when done well, but could turn into veritable disasters rather easily.
It’s clear Maggie knows something, but she doesn’t know what she doesn’t know. For-profit hospitals are quite profitable.
You don’t issue $1.4 billion in notes in today’s climate without serious financial muscle. HCA did that weeks ago.
http://www.sec.gov/Archives/edgar/data/860730/000095012310024146/y83261e8vk.htm
Their 2009 uninsured burden was the lowest in three years, at 8% in 2009.
HCA’s 2009 bottom line was over $1 billion.
http://www.sec.gov/Archives/edgar/data/860730/000095012310019197/g22062e10vk.htm
Take Maggie Mahar’s musings with a grain of salt. Not a whole shaker, but definitely a few grains.
ACO’s and bundled payments will drive another round of vertical integration, i.e. deal making. Private equity has their sights on health care. While KKR flips HCA after paying itself a $1.75 billion dividend (using borrowed money), Obama’s “Chrysler speculators” will be buying companies.
http://peureport.blogspot.com/2009/11/bad-sign-health-reform-entices-peus.html
If you liked what incentive pay did for Wall Street, you’ll be a fan of PPACA.
Funny, on another site Maggie Mahar suggested outcomes based pay wouldn’t impact the Mayo’s or Cleveland Clinic’s of the world sharing their methods for achieving high quality, yet this piece shows a hospital system doing that for simple “competitive advantage.” Under reform they’ll have a financial incentive not to collaborate with other, lower quality providers.
As for Dr. Berwick, I was once an admirer. Distance came from a change in career emphasis, but I’ll tune in for the hearings to find his current thinking:
http://stateofthedivision.blogspot.com/2010/03/dr-berwick-to-enter-p4p-heaven-or-is-it.html
I’ve heard Dr. Goldsmith speak several times and always enjoy his perspective. He was right that health care reform would happen. The groups I thought would hold it up, employers and stakeholders, crafted the plan to their advantage.
I am no Jeff Goldsmith, but do have some insights relative to the ACO request posed. You might check this link: http://www.ebglaw.com/files/38833_BNA%20Article%20-%20The%20Timeline%20for%20Accountable%20Care%20(3-25-10).pdf, for a timeline.
To the extent ACOs are ‘new and improved’ clinically and financially integrated delivery systems, i.e., PHOs assuming global risk (with perhaps even a sufficiently capitalized ‘PO’ without the ‘H’, i.e., no hospital partner), it seems to me there will be more than one business model template as to how ACOs can be legally structured and operationally organized.
To assume ACOs can only be hospitals who then employ physicians in order to accept downloaded risk, and administer a portfolio of risk contracts terms may be a tad premature, and an inaccurate interpretation of the Act.
As noted by: Bruce A. Johnson, and Gerald A. Niederman
[ACO] Participant Configurations Will Vary
Consistent with the objective of promoting delivery system innovation, the federal legislative proposals do not prescribe particular organizing principles for ACOs beyond those functional requirements referenced above. Thus, such organizations may be driven by physician organizations such as the established clinics (Mayo, Cleveland, etc.) listed above.
Alternatively, some ACOs will be driven by health system–sponsored integrated delivery systems (IDSs) that use their cadre of employed and contracted physicians as the ACO’s nucleus. They may involve the IDS hospitals and physicians while including other providers “virtually” (at a minimum) through service contracts—but not necessarily involving them in active organizational governance, capitalization or otherwise.
In between these two extremes will likely be clinically integrated networks of providers consisting of physicians only, or, more probably, joint venture organizations involving physicians and hospitals.
In a rapidly evolving marketplace—and irrespective of legislative impetus or the lack thereof—the range of participatory options itself may involve any number of configurations of health care providers in different communities.
For complete piece, see ‘Accountable Care Organizations: Executive Briefing for Health Care Decision-Makers’ http://www.faegre.com/showarticle.aspx?Show=10896
Margalit – When providers claim that Medicare and Medicaid don’t pay enough to cover their costs, they are talking about fully allocated costs including the cost of capital. Capital costs for a non-profit means its cost of borrowing. In the case of for profits, it’s a blend of borrowing costs plus a reasonable return on equity capital commensurate with the risks inherent in the business.
There are lots of different types of costs which can be applied at the level of the hospital overall, an individual department or even a specific type of procedure. Here is a list of broad categories of costs to consider when thinking about this general subject: operating costs, general and administrative costs, capital costs, direct costs, indirect costs, joint costs, fixed costs, variable costs, average costs, standard costs, marginal costs, escapable costs, historical costs, replacement costs, and fully allocated costs. For retiree pension and healthcare benefits, there is the projected benefit obligation (PBO) and accumulated benefit obligation (ABO). It’s a subject that finance and accounting types can really get into the weeds on.
For hospitals, by the way, labor costs are the largest expense by far. Most of this money goes to pay for staff doctors, nurses, medical technicians, therapists, orderlies and transporters, laundry and food service workers and the like. Only a comparatively small portion is attributable to executives, administrative people including insurance billing clerks, etc. Materials and supplies account for 15%-20% of revenue while uncompensated care can run in the high single digits assuming it’s accounted for at contract reimbursement rates and not chargemaster (list) prices. Uncompensated care includes uncollectible deductibles and co-pays owed by insured patients as well as receivables from the uninsured, most of whom can’t pay.
Jeff, this is an unusual request, but could you maybe write an article here about ACO?
I understand the drive and the potential, but I fail to understand how putting hospitals in charge of payments to individual physicians is a good thing.
I understand that Geisinger and Intermountain are great, but I don’t understand how you replicate that greatness with the current crop of hospitals and independent medical practices.
Since I don’t think that we all died and went to heaven right after the HCR bill was signed, money is going to remain the driving factor for hospitals and the existing tension between private docs and large hospitals is not just going to disappear overnight.
I assume that those that take the financial risk will be the ones making decisions and coordinating care. Where does that leave the primary care docs? And where does it leave the patients?
Gregg–
Thanks for the kind words . . .
On for-profit hospitals, I’m afraid it’s a business model that doesn’t work very well. It’s hard to make moneyl The hospital business is labor intensive; if you “downsize” nurses patients die.
It’s also unpredictable– both private insurers and Medicare always changing what they pay. And it’s hard to guage the right capacity. (One hospital administrator said to me: we’re all set up for the airplane to hit a bus, right in front of the hospital doors.)
Meanwhile, many of your customers can’t pay.
Unfortunately, in 1980s, Wall Street hyped for-profit hospitals as a “high-growth business”. (I was at Barron’s at the time and remember this.)
Investors expected double-digit profits. This led to much corruption as for-profit hospitals lied to Medicare, to insurers, to patients and ultimately to investors as they tried to create the appearance of being hugely profitable.
They also, as you say, got into the business of churning properties.
Benefits? Research published in Health Affairs shows that for-profit hospitals tend to be somewhat more expensive than non-profits, no better outcomes (sometimes worse), and less likely to provided needed services (burn units, trauma units, caring for the uninsured and Medicaid patients.)
For-profit coporations rarely build a hospital in a ghetto or very poor rural area (which makes sense–if they did, shareholders could probably sue them) so they don’t see as many poor patients as non-profits.
They do pay taxes (unlike non-profits) and that’s about the only “benefit” that I can see. (I also think that some non-profit hospitals should lose their tax exemption–they’re just not doing enough for the community while sitting on hugely valuable property and paying no property taxes.)
I’m sure there must be some good well-run for-profit hospitals out there–though I doubt that they are hugely profitable (double-digits)
Meanwhile virtually all of the big for-profit chains have wound up in deep trouble–FBI raids patients dead or maimed,, etc.
I just read your post on ACOs (thanks for the link)
You ask: What’s the difference between the “managed care” of the 1990s and what reform is going to do now?
For-profit insurers took over managed care, and most didn’t understand the concept. They thought it was all about enriching their bottom line.
As you probably know, before 1980, very very few health insurers were for-profit. The vast majority were non-profits and some were very good. .
(Peugot Sound Co-operative, in the state of Washington survived from an era when most insurers were non-profits, as did Kaiser)
Then, after Ronald Reagan was elected in 1980, he changed the laws that gave non-profits some govt’ financial support (laws that Richard Nixon, who believed in Dr. Paul Ellwood’s early vision of managed care, had supported.)
Meanwhile, more and more money was pouring into healthcare. With so much money on the table–and non-profit insurers no longer getting that govt’ support–for-profit insurers decided that maybe they should go into the business.
And they did. With deep pockets and methods designed to appeal to employers who bought the plans(who wanted to reduce costs) for-profit insuers began to drive the non-profits out of business. Unfortunately, for-profits were much more concerned about their customers (employers) than patients.
By the early 1990s, the vast majority of health insurers in the U.S. were for-profits.
I was working at Barron’s in the late 1980s and much of the 1990s and watched all of this happen. I began doing in-depth research on the difference between the for-profits and non-profits, got to know Ellwood . . ,
Ellwood envisioned HMOs managing care and competing on quality of care. The for-profit HMOs competed on price. Period. Employers (understandably) were looking of lower premiums– many couldnt’ afford spiralling health care prices.]
And employers were less interested in whether a diabetic patient would be getting the care he needed to keep him out of the hospital 10 years down the road.
In the 1980s, employers were learning how to lift profits by “down-sizing”–reducing their work-force whenever they didn’t ‘ need so many employees. .
The long-term contract between employer and employee was broken. Employers were no longer trying to keep looyal employees for 30 years. They viewed them as dispensable. This also meant that employers were less concerned about what today’s health insurance would mean for that employee’s health in five or ten years. Chances are, in five or ten years, that employee would be someone else’s problem.
So, in the 1990s, for-profit insurance was all about saving money– not about lifting the quality of care (as Ellwood had envisioned.)
Under health reform legislation–and under Medicare reform as envisioned by Berwick and White House Budget Director Peter Orszag– improving the quality of care comes first. In fact, that also will save money by reducing medical errors, unnecessary hospitalizations, over- medication, unneeded potentially dangerous surgeries and tests etc. etc.
Under the reform legislation, it’s all about changing what we pay for , how we pay for it, and how health care is delivered by looking at what would be best for patients, based on medical evidence.
The savings follow automatically.
As I used to tell my kids when they were in school: just focus on the work — learning, really understanding it. The grades will follow.
This is Berwick’s vision of what medical professionals should be doing–and what professionals truly want to do.
Further, aren’t you the one screaming the doctors make too much money, but is is okay for Berwick to pull in 377,000/yr. Does he even treat kids or is he too busy with his lucrative institute job. Wonder why he is not just be a pediatrician–in the trenchs.
I worked at CMS as Mark McClellan’s chief spokesman from 2004-2006. That meant working with the career and the political staff, which, of course, the CMS Administrator has to do in spades. From my personal view, what it takes to succeed in that job is either having the respect from multiple constituencies or the ability to earn it. That requires some degree of political (and I don’t mean in the partisan sense) skill and awareness.
I don’t know Dr. Berwick at all, so I’ll let others comment on whether he has that ability or not.
Goldsmith may be a sociologist, but Maggie you are a journalist. Not an MD, nurse, or public health care expert either. In fact, isn’t your degree in english?
The main clients: Sisters of Providence Health System (Portland), Presbyterian St. Lukes Health System, now part of HealthOne (Denver), Adventist Health System (Los Angeles), Lutheran General Hospital (now part of Advocate), Chicago, Sutter Health System (Sacramento). Please note the large number of religious sponsors. The people who ran Geisinger and Intermountain are long time (e.g. twenty year friends), and I love what they are doing. Even these advanced health systems will find difficulties being “accountable” for the Medicare spending trends in their markets.
Don isn’t a a friend, merely someone I admire. He doesn’t need my advice. The job does require a fair amount of ruthlessness, and foremost, administrative skills. Some people come to them naturally, or are quick learners. I hope that will prove the case with Don. There’s so much to do.
What Maggie doesn’t know about my background would fill a very large room, I spent my first ten years working in state government and in a large inner city academic health center, where I was responsible for planning and government affairs. I actually created the job at the University of Chicago Medical Center last held by Michelle Obama (who did a way better job at it than I did). I’ve paid my dues.
I’ve also taught public policy and healthcare for twenty five years in two great universities for no pay. I’ve not only followed Medicare and Medicaid policy continuously for thirty five years, but have been an active published advocate of reforming these programs. I just don’t agree with Maggie’s ideologically driven formulae for that reform. You can get an idea of what I think should happen to Medicare by downloading my recent book: The Long Baby Boom from my website (www. healthfutures.net) and reading the chapter on same.
The gratuitous comments about my consulting activities and the political and social views of my colleagues are insulting, and evidence of a profound and unhelpful ideological intolerance. I’m actually what’s called in Chicago an independent Democrat (exactly like the President) and I hate being lectured about what’s “right” by anyone.
I have to beg to differ. 250,000 is not very, very wealthy. At least not in the circles i travel in.
Racemic
Skeptic, Jeff G., Matthew, Joseph Stevens, Lisa, Margalit, Jeff (second comment) Dan Smith, twa,
Skeptic– I guess you’re assuming that no one is going to go to Wachter’s post and actually read it.
Wachter calls Berwick a “superb” choice and expresses some mild disagreements on policy issues over the years.
He finishes by applauding the appointment and saying that Berwick will be able to stand up to beltway politicians and beaurocrats.
Also, I disagree with Bob Wachter’s interpreation of what Berwick means when he says that things should be done the patient’s way. He isn’t saying that patients should have whatever they want, no matter the cost– in the sense of futile treatment. Berwick is saying that the doctor shoudl be asking the patient to express his desires and fears, listen, and try to meet those emotinonal and spiritual needs. Berwick doesn’t think that more high-tech very pricey medicine is the answer. See Berwick’s brilliant piece on caring for the very sick/dying patient here: “Twenty Improvements in End of Life Care”
http://abcd-caring.org/tools/intern.htm
Jeff-
I’m glad you have great respect for Don Berwick too, and I believe that you do. (Almost everyone who meets him does.)
But your sense that the job is “beneath him” does, I
think, reflect your politics– your belief that “govt’ bureaucracies” are never as good as private-sector for-profit consultancies where profits motivate people to be “innovative.”
Thus, you believe that by going into govt’ Berwick will be saddled with supervising thousands of over-worked and demoralized civil servants in a job that is, first and foremost, “political”
This suggest a very cynical understanding of government and what government can do.
Consider what goverments have done in Europe: France, Sweden, Switzerland, Germany all have first-rate health care systems that cost far less than ours– and are largely designed and run by government working with Non-profit insurers. (There is a huge difference between the best non-profits and for-profit insurers. I wrote about this at Barron’s in the late 80s and early 90s when for-profit insurers began to take over the hc industry–and ruined managed care (which was originally a very good idea).
I wonder if the accoutanble care organizations that you tried to start were non-profits?
So much of making something like Inermoutnain or Geisinger work is the culture and visionary leadership that inspires collaboration rather than competition. The stuff they teach at Harvard Business School isn’t very helpful in these organizations.
In terms of what govt’ leaders can do: As Matthew says, Ken Kizer single-handledly turned around the VA–without extra money. Ultimately, Congress pushed him out. But Berwick will have more protection from Congress than Kizer had. And while I don’t know Kizer very well (have spoken to him only a couple of times), I think that Berwick is probably a stronger figure, and in the end will handle Congress very, very well. . As Bob Wachter says in his post on Berwick “I can’t see Don Berwick being intimidated or beaten down, even by the Washington bureaucracts.”
I’m not sure if you’re old enough to remember Robert Kennedy in the Justice Department, or Sam Rayburn in Congress, or LBJ . . .civil rights, Medicare . . Jacob Javits . . .(a Republican), the department of Health, Education adn Welfare. Even what Nelson Rockefeller did with the higher education system in New York State- -fabulous scholarships for poorer kids, excellent univeristies–many still very very good. If you remember what Reagan did to higher education in California, well Rockefeller did the opposite for New York. (And he was dyslexic!)
The problem is that private sector consultancies tend to believe that peole are motivated by money, and payign them more than they make other places, or payign them bonsues, will make them work harder and better.
Berwick believes that people are motivated by something other than money, that measuring performance and giving out bonuses can kill the soul of an enterprise,by undermining morale.
Meanwhile, Kizner is not the only person to turn around a govt bureacracy in the past 20 years. I watched David Kessler do it when he took over the FDA.
I had and still have quite a few sources within the FDA-Morale there was very low when Kessler cam in. He sinpried people . . Unfortunately, during 8 years of the Bush administration, the FDA lost all sense of purpose of mission and morale hit bottom.
I think Berwick will get along very well with the White House. Peter ORszag has the president’s ear, and understands the problems that Berwick understands–as does Zeke Emanuel, Orszag’s medical director.
I expect that Berwick will be given quite a free hand. (I very much doubt that Rahm will be second-guessing him. ) We know that Berwick was offered the job some time ago, but refused to accept it until after health reform legislation was passed (This came out when the story broke last week.) The administration received quite a bit of criticsm (the NYT etc) for not making the appointment sooner.
I thought (and wrote for much of the past year) that the adminsitarion wanted to pick somone very strong for CMS (which would mean controversial) and that the confirmation would become a battle. They didn’t want to fight that battle while fighting the war for reform.
No doubt there were people in the administration who thought that they should just move on and pick someone other than Berwick. But they didn’t. It seems that they Berwick him call the shots on the timing (Though I also imagine that wise voices within the White House agreed: it was better to wait.)
Finally, I’ve often noticed that many of those most cynical about what government can or cannot do were not actively involved in politics (as adults) until the 1970s–or, often the 1980s. They seem to assume that the way things have been since they were alive define how things always have been and always will be. There’s a certain solipsism that started in the 1970s, with the Me Generation . . . If it’s not about me and my generation, I’m not interested.
The same people insisted that the health care legislation was “dead”–that it couldn’t happen without Republican support (i.e. letting the Republicans totally gut it)
Granted, the last 30 years have been discouraging– though with some very hopeful blips. (David Kessler coming into the FDA and taking over the tobacco industry. The industry never recovered. I was at Barron’s and followed it closely. Some people at Barron’s said “he can’t do this . .” But he did. The FDA didn’t wind up regulating tobacco, but after those cig execuitves sat under the hot television lights tyring to claim that cigarettes don’t hurt people . . . It was all over except for the lawsuits and state settlements.
Finally, the history of U.S. politics is a history of pendulum swings. It’s not entirely cyclical — we do make progress. (Slavery is not coming back). But it’s a dialectic– a spiral, as we swing from left to right.
We’re at a point, much like 1930, where we are ready for a major swing to the right. Thirty years ago Ronald Reagan set the country on a path that allowed corporate America to take over government, putting profits ahead of people while Reagan taught us to disdain the poor.
Obama is paying attention to the poor– expanding Medicaid, for instance. (I recall that on this blog you argued that was a bad idea.)
Obama is also looking out for the middle class. No tax increaes except for very, very wealthy people earning over $200,00 ($250,000 couple) That’s the top 3% in terms of income.
As David Leonhardt wrote in the Times recently, the health care legislation is part of a larger undercurrent in the Obama administration– they are going to redistribute money–and services– downward.
For 30 years, income and wealth have been redistributed upward, with cataclysmic results. Too much money consolidated in too few hands at the top has led to rampant speculation–stock market bubbles and real estate bubbles that have hurt many. (Usually less affluent people. The wealthy get out early. See my book, Bull!)
Meanwhile the middle class has watched wages stagnate while opportunities evaporate. Good education and good healthcare become increasingly unaffodable, even for hte upper-middle class.
Good government is interested in the public good–not corporate welfare. We’re ready for good government, and people like Don Berwick have the vision, the idealism, the charisma, and the balls to lead us in that direction.
Matthew–
Thanks– Kizer is a very good example.
And you’re right, I’m wary of mixing blood and money. (Rather like mixing money and sex–a bad match.)
But I wouldnt’ want to suggest Jeff was selling his blood, just that, perhaps he was giving it to the wrong people. . . Rather than competing with Kaiser, maybe he should have joined them, collaborated wtih them–or Geisinger or some of the others.
Joseph Stevens
Joseph– An M.D. who calls “To Err is Human’s” report on medical errors “hogwash” sounds just a tad defensive.
Everyone from the Institute of Medicine to Consumers’ Union has documented the high rate of medical errors.
As for Berwick’s salary: “IHI, has about 100 full-time employees, another 400 adjunct faculty members, and an annual budget of $27 million, with revenue coming from contracts with health care systems and foundation grants. Berwick is paid an annual salary of $377,000.”
I can’t think of many people in teh private sector–for-profit or non-profit, running an international organization that size who make less than $400,000.
Lisa– Yes.
Margalit–
I have never met anyone who didn’t like and respect Berwick. And I know a number of people in the health policy field who might have reason to be envious of his
success–but they’re not.
Of course, you’re right, there must be someone out there who dislike them, and chances are they will turn up on this often conentious thread. . .
Jeff– your second comment–
Berwick is a grown-up. I really think he is in the best postion to judge how to use his talents. I can’t help but feel that you just don’t want to see Berwick turn Medicare around–setting the stage for reform nationwide. You don’t want to believe that government is the answer. But we are the only developed country that has turned healthcare into a for-profit largely unregulated enterprise–and have failed miserably. Unaffordable care; too many errors; outcomes not as good in many areas. .
Barry– The difference is that, under reform, these decision about what care is necessary will be made by health care experts, based on medical evidence–not based on how much the care costs. This was Paul Ellwood’s original vision for managed care,, and this is the vision Berwick shares.
Dan Smith–
Clearly, you don’t know much about IHI. Bureaucracy is the last word that applies.
twa–
Thanks. And yes, people like Berwick, Elliot Fisher, Wacther, Atul Gawande do have legitimate differences on specific points. But in terms of the overall vision–to redesign the system, to make it people-center, to share decisoin-making with patients, to focus, above all, on patient safety they’re all on the same page.
As I say in my post recent post about Gawande and Berwick, when it comes down to the specifics of reform, Medicare and local communities will be experimenting, all over the nation, in pilot projects to see what works where.
But now, under the new legislation, if a pilot is succeful, Medicare will be able to expand it and roll it out– without needing permission from Congress. This is Huge.
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So Dr. Goldsmith’s comment morphs from “doesn’t have the patience, discipline or experience to do the job” to “it’s not the highest and best use of this remarkable person.” I guess my feeling is, Dr. Goldsmith – if you know Dr. Berwick, why don’t you tell him that yourself? Why post it in public to his embarrassment? And are you really saying, as the space between the lines indicates, that he’s not mean enough for the job? It is true in our profession that pediatricians tend to be a bit more easygoing; they have to or they couldn’t deal with the kids, much less the parents. But don’t you think he’s thought of that already?
My second observation is that you seem to think this job is impossible for anyone. That may be true, but it must be filled by someone nonetheless. There is a small chance that someone so dedicated to quality and to the improvement of the delivery process as Dr. Berwick could be a transformative choice – or do you want to settle for a mere caretaker at such a crucial point.
I think it is up to Dr. Berwick, having presumably received your well-intentioned advice personally from you, to make his own decision. I would hope you would support the nomination if it occurs, being his “friend.”
“Overall, most doctors and hospitals say it pays too little and forces them to cost shift to private payers.”
Too little means what? Less than cost, or too little to make a nice profit, considering the current overhead?
If everybody in the system is expecting to “bend the curve” solely by imposing restrictions on patients, they will be greatly disappointed, in many ways.
This is a very powerful stream of highly useful posts. Maggie I hear Jeff Goldsmith’s message on ACOs, and as one who has also given IPA/PHO/MSO blood on the strategy implementation side both in Texas and California, I believe he raises legitimate issues well worth discourse elsewhere. FWIW, I recently posted a comment ‘From Health Reform to Delivery System Transformation’ on my blog at http://2healthguru.wordpress.com/2010/03/29/from-health-reform-to-delivery-system-transformation/, for context.
Meanwhile, on the Berwick nomination, I agree with your assessment; while also agreeing with Barry Carol’s tiered incentives insights. Barry seems to be another one who’s been in the trenches, IMJ.
Thanks again for the piece, excellent as usual; I tweeted it today under @2healthguru.
P.S. Am a big fan of ‘Money Driven Medicine’. One of my former clients was HealthTrust (I was the CEO of the Houston Network), then Columbia, now HCA (again). The ‘Nashville Family Tree’ morphs continuously or so it seems. Lots of profit extracted via hospital asset ownership churn, the question remains, where are the benefits – I suppose there are some?
What is this – Sermo? Just what I want to see, more physicians lashing out in their anger over this mess (a mess they have largely presided over). And now at one of the more respected physician leaders in this country. That physicians would refer to Dr. Berwick in this way is embarrasing, since his work and accomplishments are well known to anyone truly concerned about improving the quality and safety of health care. You may not agree with him, as well covered by Dr. Wachter, but he is a respected physician leader. Whether or not he is the right person for the job based on the factors Jeff is talking about is a legitimate discussion, but some of these other aspersions are not. But then again none of this suprises me.
It makes perfect sense to hire as director of Medicare and Medicaid a guy who has been a bureaucrat since 1983.
“Peter – We already have single pay for seniors – Medicare.”
Not even close to the concept of single-pay. It’s just government paying private profit healthcare who live/breath/function revenue/profit/ROI/share price. It’s a fallacy, at least in the U.S., to believe that costs can be controlled with just Medicare/Medicaid paying less. Five years after HCR we’ll still be trying to figure out why costs haven’t come down and insurance premiums are still rising.
Peter – We already have single pay for seniors – Medicare. While it can control (dictate) the price it pays per procedure or per DRG code, it can’t control utilization because it can’t control how doctors practice medicine. Practice patterns are driven by the medical culture which varies geographically in the U.S. That culture, in turn, is driven partly by the litigation environment, partly by perceived patient expectations and partly by misaligned and sometimes perverse financial incentives. Medicare overpays for some procedures giving us surpluses of those while it underpays for others creating shortages. Overall, most doctors and hospitals say it pays too little and forces them to cost shift to private payers. Medicaid, which also uses dictated prices in insuring the poor, is an even worse payer. Extending Medicare to everyone just wouldn’t work, primarily because there would no longer be private payers to shift costs to. Let’s try getting the incentives right for a change, which means tiering coupled with price and quality transparency tools to allow referring doctors to make cost-effective choices for their patients. Alternatively, employers could show more interest in narrow network products which exclude providers who command high reimbursement rates because of their market power even though their quality is no better and sometimes worse than their less powerful competitors. At least in some markets, employers are starting to do just that.
One insurance executive recently told a small group that some of the old concepts are coming back. HMO’s were hated in the 1990’s because they sometimes denied necessary care along with unnecessary care. Now there is independent third party review. The new name for HMO’s: Accountable Care Organizations (ACO’s). In the 1990’s, people hated having to go through a primary care gatekeeper to get a referral to a specialist. Now the experts are talking up the medical home which would perform the same function.
Any one who would craft (Berwick did) the To Err is Human Report, extrapolating two small studies to the entire nation and claim 98,000 patients die from medical mistakes per year and have the nation believe that hogwash ..”
The only hogwash about it is 98,000 is too low a number. It just figures an MD would make this statement, you doctors don’t have any idea what the patient experience is like. It’s not a criticism, it’s just a fact, you’re out to lunch.
Except Berwick, he’s our man. Jeff, if you had any vision at all you’d realize Berwick is the perfect candidate to head CMS. I just hope Berwick accepts the nomination, it’s the best thing that could happen to this country.
Ken Kizer ran the California Health Department before going to VHA. It was crucial experience. (Ken would have actually have been a great “sleeper” choice for this job). Nancy Ann DeParle ran Tennessee Medicaid and worked in OMB before going to CMS. Management experience isn’t essential to be a success at CMS (Scully, McClellan and Wilensky didn’t have it and did well) , but it’s really useful in getting a quick start and sustaining momentum. David Blumenthal had no real management experience prior to ONCHIT and he seems to have flourished.
I do think Don will inspire a lot of those frustrated CMS staffers because I think they share his values. How he will get along with his boss, the Secretary, and the White House is another matter. He’s been his own boss for more than twenty years and that will be a big challenge.
The next CMS Adminstrator will have a nightmare implementation challenge, particularly given how much public skepticism there is about health reform. Degrees of difficulty, this job is about as hard as it gets. I hope I’m wrong, but I think Don could be miserable doing this. It’s not the highest and best use of this remarkable person.
(Lots of gratuitous personal comments about people posting in this thread).
YES
” .. Any one who would craft (Berwick did) the To Err is Human Report, extrapolating two small studies to the entire nation and claim 98,000 patients die from medical mistakes per year and have the nation believe that hogwash ..”
YES!
And after the financial failures of Tenn-care, Oregon One, Mass-care and the recent federal Pack of Lies (TM) — voters will “settle accounts” with the Party of Incompetents. On Nov. 2 and Nov. 6, 2012.
Yeah, Bev, I’m a know-nothing. Well, so are you. At least I’m not a PhD in English, claiming to have health care experience and expertise.
Jeff. Maybe you’re right, but the right leader at a government agency can make the difference. Kizer at VA in the 90s? That cop who ran the Boston and NY Police in the 90s too?
And of course Maggie would say you didn’t donate your blood, she thinks you sold it!
For a more balanced perspective on Dr. Berwick, I urge readers of this blog to check out Dr. Robert Wachter’s blog:
http://community.the-hospitalist.org/blogs/wachters_world/archive/2010/03/26/is-don-berwick-the-one.aspx
“A truly successful quality program might look something like the following over the long term: We’ve significantly reduced infection rates and surgical complication rates as well as readmission and mortality rates. Doctors are no longer referring patients for imaging and surgery who don’t need them. We’re providing far less futile care at the end of life while our palliative care program is among the best in the business. Since tort reform was implemented, defensive medicine is way down. Bottom line: our revenues declined 20% and we need to lay off 20% of our staff and close some of our facilities.”
Sounds like single-pay Barry. Can’t wait until I see this happening in hospitals across this country, then we’ll know true reform has come.
Don Berwick is a personal hero, and one of the people I most admire in the health system. He’s done more than anyone I know to push the quality improvement agenda in health care. I met Don when he was at Harvard Community Health Plan, which was a client. But more importantly, I know the job he’s been selected to fill, and there are legitimate questions about whether it’s a good fit. This isn’t about politics or about my “personal experience”.
Running CMS is perhaps the hardest subcabinet job in government (IRS Commissioner may be almost as hard).
I’ve personally known all but two of the people who have run CMS since the agency was created, and I’ve got a really good idea of what it entails. You spend about half your time away from the office giving speeches and testifying before Congress. You spend a lot of time in the office fending off 535 Congresspeople who have constituent or interest group issues, and many of whom behave like owners. Those two activities sap your energy and divert you from the real challenge of trying to change the two programs you administer.
The rest of the time you get to “manage” over 4000 overworked and demoralized employees who will be there long after you’ve left. The agency’s mandate has been massively increased by the new legislation, and it remains to be seen if they will have the staff to execute. The agency hasn’t had a permanent, confirmed Administrator since Mark McClellan resigned in September 2006. This is, first and foremost, a political job requiring skills in exercising political judgment and relationship management. Secondly, it is a huge management challenge mastering the arcana of the world’s most complicated price control system.
With respect, it’s not clear that Don is qualified to do either of these jobs. Frankly, both the political and bureaucratic challenges are beneath him. It’s a waste of a really valuable person, who could do a lot more good pressing IHI’s agenda than wading into the fetid swamp of Washington DC.
Don was the White House’s first choice for this job, and told them no repeatedly. Glenn Steele of Geisinger, their second choice, told them no about four times. For both men, “no” was the right answer.
Maggie and I can talk about ACO’s some other time. About ten years of my management consulting career was spent trying to do them, to compete with Kaiser all across the west. I’ve donated blood on this issue. It’s not that you cannot pull it off. It’s just not a viable replacement for fee for service payment. Believe me, I’ve donated blood on this one. . .
Margalit – Even Partners Healthcare in Boston, which is probably the poster child for healthcare providers with huge local market power, has roundly 20% or so of the relevant market in the Boston area, I believe. Presumably, regulators could impose some limits on market share. On the insurer side, I note that Pennsylvania regulators nixed the proposed merger of Highmark Blue Cross with Independence Blue Cross which would have created the nation’s 8th largest health insurer. Both are non-profits, by the say.
I think that transparency enabled by disclosure of provider contract reimbursement rates would be especially useful in areas like diagnostic imaging, the charge for a day in the hospital for situations that are reimbursed on a per diem as opposed to a case rate basis, and common surgical procedures like gall bladder removal, routine childbirth, etc.
For more sophisticated procedures like heart bypass surgery, hip replacement, brain surgery, organ transplants, cutting edge cancer treatment, etc., we should encourage the development of regional centers of excellence and discourage proliferation of capability. In these instances, utility like rate regulation would be appropriate so that in exchange for monopoly or near monopoly status, providers would only be allowed to recover their prudently incurred fully allocated costs including a reasonable return on their capital. At the very least, I would at least like to try robust price and quality transparency before any regulatory move toward full all payer rate setting.
I also want to make two comments on cost shifting. An insurer CEO recently told a small group of investors that of his company’s recent 10% medical trend for hospital charges, fully four percentage points was attributable to cost shifting from Medicare and Medicaid while six percentage points was due to legitimate provider cost increases plus higher utilization. Second, a financial executive for BIDMC in Boston recently noted on Paul Levy’s Running A Hospital blog that Medicare is a reasonable payer for inpatient care at his hospital but a horrible payer for outpatient care. The revenue mix for Medicare patients at BIDMC is 56% inpatient and 44% outpatient. For commercially insured patients, by contrast, the mix is 37% inpatient and 63% outpatient. My interpretation of the numbers is that Medicare is paying costs plus maybe a few percentage points for inpatient care but as much as 30% below costs for outpatient care. Costs are defined as fully allocated costs including the cost of capital (borrowing costs for a non-profit).
Any one who would craft (Berwick did) the To Err is Human Report, extrapolating two small studies to the entire nation and claim 98,000 patients die from medical mistakes per year and have the nation believe that hogwash; and then, position his nonprofit for profit (check what ISI charges hospitals)
business to “solve” the problem is an operator, not a leader. What was his compensation at this not for profit and did he pull down a Harvard sized salary as well? Always a good idea to have a pediatrician manage the medical insurance for the elderly!
It is true, bev. See Maggie’s blog http://www.healthbeatblog.com/2010/03/congress-agrees-to-lash-itself-to-the-mast-making-it-possible-for-medicare-to-move-forward-with-reformupdate.html
There’s a nice conversation going on there….
Fair enough reply on Goldsmith, Maggie; thanks. Now here’s another question, regarding your congress lashes itself to the mast post –
I read this morning in Samuelson’s column in the WaPo that “the (new Medicare independent) Board is prohibited from submitting proposals that would ration care, increase revenues or change benefits, eligibility or Medicare beneficiary cost sharing”; quoting the Henry J. Kaiser Family Foundation. Is this true? It sounds more like the old MEDPAC restrictions. If it’s in the new bill, that’s not good.
Orac knows nothing.
It will be a very cold day in hell when any given public person has no critics. Even saints had critics. Not that Dr. Berwick is a saint, but I’m sure he has strengths and weaknesses. As long as he can lead the way, we should be good.
Barry, I totally agree with your description of the hospital situation. I believe somebody needs to step in and break those huge monopolies apart, and I believe that the current trend of purchasing private practices needs to be halted. I don’t know if states or federal government have the power to do that, but somebody should look into it.
While price transparency and tiers may help, if in a given metropolitan area all you have is one mega health organization (hospitals and ambulatory clinics), there is very little to be accomplished by transparency.
Barry–
I’m very glad–but not surprised–to hear that you are pleased about Berwick being the president’s pick.
You and I come from somewhat different ends of the political spectrum, and disagree about some issues, but your response confirms my belief that any truly intelligent, very knowledgable and thoughtful person person–whether liberal, conservative, moderate or libertarian– would applaud the idea of Berwick directing Medicare.
This is why I think that, while the confirmation process may be very unpleasant, he will be approved.
On the issues you raise regarding hospitals and revenues: This is what I wrote about on HealthBeat today while commenting on Atul Gawande’s upcoming piece in the New Yorker.
As you say, “the underlying problem is that hospitals are built to generate revenues.” Gawande and Berwick understand the problem, and Berwick actually has the beginning of a solution.
We don’t want to reward hospitals (and other healthcare businesses) for Growth. We want to reward them for delivering Value. (The government needs to think like Warren Buffet.)
See this post on HealthBeathttp://www.healthbeatblog.com/2010/03/atul-gawande-in-the-april-5-new-yorker-now-what—maybe-we-should-pay-hospitals-for-empty-beds.htm
Bev M.D.–
Good to hear from you.
Berwick actually has plenty of management experience. He ran quality improvement for Harvard’s Health Care System (now Harvard Pilgrim) for about 7 years.
That gave much experience in dealing with a bureaccracy,etc.
In addition, IHI itself is a huge international organizationAnd Berwick has demonstrated his skills in helping enormous heatlhcare organizations improve care.
I suspect Goldsmith got this idea from Robert Pear’s Sat. article in the NYT. Pear described Berwick as a “scholar” –not at all who Berwick is. He’s at Harvard, but he’s a systems person (someone who has studied improving systems) with a degree in public health as well as an M.D. And he runs an enormous international organization that helps launch pilot projects all over the world.
He is not someone who sits in his study and writes.
Pear is a longtime NYT journalist, but not an expert in healthcare and so I’m afraid he often gets facts wrong in healthcare stories. (I’ve written about a couple of his pieces on HealthBeat.) Also, he probably had to report and write this piece very quickly— the rumor that Berwick might be appointed came out Thurs.) These days, because money is so tight in the newspaper business, newspaer reporters just don’t get the support they need, even veterans like Pear working at places like the Times.
As for “patience and discipline”– I’ve been observing and reporting on Berwick for seven years. . . . Patience and discipline are two of the words that come to mind when I think of him.
The problem with Facebook (which can be useful) is that it allows anyone to say anything about anyone.
One also should consider “Who is Jeff Goldsmith, and why would he be saying these things about Berwick?”
Goldsmith is not a doctor, a nurse or a public health expert. He has a Ph.D. in Sociology.
Goldsmith’s Speaker’s Bureau bills him as “America’s premiere health care futurist” and explains that he owns Health Futures, Inc., “a firm specializing in corporate strategic planning and forecasting future health care trends.”
He charges $15,000 to $20,000 per speech.
Goldsmith also wrote disparagingly about Accountable Care Organizations like
Intermountain, in Health Affairs in Aug of 2009. (“Accountable Care Organizations: Not Ready for Prime Time”)
Autl Gwaande, DArtmouth’s Elliot Fish and Jon Skinner and Mark McClellan are all major fans of accountable care organizations. And, in fact, ACOs are working.
But they’re not a major source of profits for health care entrepreneurs like Goldsmith..
I don’t know Goldsmith. Probably he’s a perfectly respectable hard-working entrepreneur. But I don’t take his criticism of Berwick seriously.
For traditional hospitals, improving quality and processes in ways that save money usually benefits payers and patients but not the hospital itself. Indeed, hospitals generally lose revenue as Virginia Mason in Seattle can tell you from experience. A truly successful quality program might look something like the following over the long term: We’ve significantly reduced infection rates and surgical complication rates as well as readmission and mortality rates. Doctors are no longer referring patients for imaging and surgery who don’t need them. We’re providing far less futile care at the end of life while our palliative care program is among the best in the business. Since tort reform was implemented, defensive medicine is way down. Bottom line: our revenues declined 20% and we need to lay off 20% of our staff and close some of our facilities. How do you think the Board will react to that presentation? While an individual hospital might be able to offset the revenue loss with greater patient throughput, the hospital sector overall will need to shrink materially if we are eventually successful in improving quality while reducing costs. While that would be a great thing for the society and the economy, I don’t expect hospital executives or Boards to embrace the objective.
The underlying problem at its core is that hospitals are built to generate revenue. They are extremely capital intensive businesses like hotels, cruise ships, airlines with enormous fixed costs. As hospitals lead in the building of accountable care organizations by buying up medical practices, even if the doctors are salaried, their “productivity” will be closely monitored and there will be plenty of pressure to generate revenue for the mother ship. Those that don’t, especially primary care doctors, will be viewed as “not earning their keep.”
While there are plenty of knowledgeable people who disagree with me, I would prefer to see insurers’ contract reimbursement rates for doctors, hospitals, imaging centers and labs publicly disclosed and, to the extent that we can appropriately measure quality, especially for hospitals, those metrics, including infection rates, mortality rates, complication rates and 30 day readmission rates should be disclosed as well so referring doctors will have the information they need to steer patients to the most cost-effective provider instead of their golfing buddy or the hospital he has always used because he and his predecessors always used it. If patients still want to use a more expensive or less cost-effective provider or even a more expensive accountable care organization, they should pay a higher co-payment or coinsurance percentage for the privilege. This tiering approach has worked well in the prescription drug space. I think it can work in the rest of healthcare as well but we need to try it to find out.
That all said, I’m pleased to see Dr. Berwick appointed as CMS Administrator.
Wow, it’s back! Now, Maggie – Jeff Goldsmith put on Facebook that Berwick has neither the patience, nor discipline, nor experience for this job. I don’t know the man except by reputation – your thoughts? Would a manager deputy be the solution? It seems it would be easier to find a manager than a visionary such as Dr. Berwick.
Test comment: are you there, THCB?