How quickly—and well—can the U.S. healthcare system re-envision and rework itself? That profound question was at the substratum of a dynamic keynote discussion on May 2 at the World Health Care Congress, being held at the Marriott Wardman Park in Washington, D.C. Tuesday morning’s first keynote panel discussion, entitled “Propel the Shift to Value-Based Care: The Forefront of Financial Sustainability, Cost Reduction, and Outcomes Improvement,” was moderated by Robert Pearl, M.D., executive director and CEO of The Permanente Medical Group, the physician organization component of the Oakland, Calif.-based Kaiser Permanente organization.
Pearl was joined by Michael Tarnoff, M.D., a practicing surgeon and the CMO of Medtronic Americas, and by Kurt J. Wrobel, CFO and chief actuary at the Danville, Pa.-based Geisinger Health Plan. The three plunged immediately into a dynamic discussion of some of the thorniest issues around the shift from a fee-for-service payment-based U.S. healthcare system to a value-based one.
“The idea of value-based care, to me, is both complex and simple,” Pearl said at the outset of the panel. “Want to know how complex it is? Spend a Saturday reading MIPS and MACRA. But I also think that we have to keep our eye on the fact that it’s simple. Preventing a stroke by managing hypertension is better than going in and retrieving a clot from the carotid artery. But that’s not the way we treat people in this country. Only 55 percent of people with hypertension have it under control. And only half of the people are screened for colon cancer, so that twice as many people die every year,” Pearl noted, among other statistics that he shared. Indeed, even with those sub-optimal outcomes, “Our care is still 50 percent more expensive than in other countries,” he said. “Prevention, medical errors, disparities based on race, account for 500,000 deaths every day. The government will spend over half of its tax revenues on healthcare, which can’t go on.”
Continuing, Pearl asked, “So how will this change happen? How can we accelerate the change, and what will be the impact upon physicians, upon hospitals, and upon the overall healthcare system?”
“A couple of years ago, I began to think about what we’re talking about this morning, which is the notion of variation in care,” said Tarnoff. “I was called in to see a young woman with abdominal pain. That generally equates to a CAT scan. She did have appendicitis. I came in in the middle of the night, performed a minimally invasive appendectomy, made a couple of very small incisions, took out her appendix, and six hours later, she was up and walking and on her way home. And our chief resident said, ‘It’s a good thing you were here tonight Mike; if we had had a regular trauma surgeon on call, they would have done an open appendectomy and she would have been here for at least a few days.’ And I thought, gee, that’s not fair. Why is the standard of care not in place? We shouldn’t allow for variation to dictate that that young woman gets different forms of treatment [based on variations in situation]. I can pull up on my phone evidence-based literature. But we don’t rely on that; instead, we end up with a high degree of variation in practice and decision-making, which leads to variation in outcome, and there you have a simplistic view of why things are so variable. So I began to look at Medtronic about how we could look at variation and change it. Variation as the enemy of quality, and the need for non-traditional partnerships to fix it.”
“I’ve spent my whole life as an actuary, and recently became chief actuary at Geisinger Health Plan,” Wrobel said, by way of introduction. “We’re not a traditional health insurer; our insurance is tightly connected to a clinical enterprise. The other piece of this, in looking at these questions as an actuary, is to think about the underlying risk we’re taking. And what we’re trying to do at Geisinger is to make the financial arrangements so that we can improve the quality of care and reduce variations. And where we ultimately want to take this program is less about the financing piece and more about the kinds of things Michael is taking about.
Even in 2017, Pearl said, “Half of the hysterectomies are open, whereas the most value-based organizations are doing it minimally invasively; gastric cancer is the same. What are the specific things you’d recommend to make it happen? I want to know the exact steps.”
“I do like to make things simple,” Tarnoff replied. “How about if we follow the data and the evidence? Where we have evidence and data and proof points that a particular standard or care path should be followed—category one is, what do the data and evidence suggest should be the standard of care? And how far are we from being where we should be? I’ve seen hysterectomy done as an outpatient procedure: you come in in the morning, have a minimally invasive hysterectomy, go home the same day. I wasn’t surprised it could be done, but was surprised it was happening. So I got on a plane, and went to see it being done. Then I got on a plane and saw minimally invasive bariatric surgery. So we know that those surgeries are happening,” he said.
What’s more, he noted, “Even with minimally invasive surgery, patients aren’t always leaving right away. The sin of variation is this: we’ve just tolerated everyone doing something other than that [the clinical standard]. The world at large is guilty of the change and the move away from evidence.” But, he said, mandating that clinicians and patient care organizations deliver care according to a certain standard, and be paid less or not at all for not meeting that standard, will become necessary. “In our work at Medtronic, we’ve shown health systems this variation,” he added. “And we’ve been told by large health systems, ‘You know, we’re just not ready to confront our doctors, they might take their business down the street.’ So I think that changing the payment model is the third piece.”
“That is the third piece,” Wrobel agreed. “The challenge is to line up the financial incentives to accomplish reduction in variation and compliance to a standard,” he said. “And because we own our own plan, the discussions are easier. Also, we’ve been at this at Geisinger for a number of years. My initial response is that provider-sponsored health plans can do this more easily. Then you have an ACO [accountable care organization] with total cost of care; the same is true with bundled payments as well. Those are two other components—now, each of those have their own advantages and disadvantages. But those are two other venues.”
Multiple incentives shifting at once?
“If we’re going to make change, does it come from the government making regulations, businesses refusing to pay otherwise, or disclosing to every patient the alternatives?” Pearl asked his fellow panelists.
“I would say, all of the above,” Tarnoff responded. “There isn’t a single guilty party here, there are many guilty parties. I think the payers, to be honest, have at large, the most power. Follow the money. Who butters your bread, so to speak? And as I’ve looked at bundled payments and what goes on with Medicare’s BPCI [Bundled Payments for Care Improvement] program, and how a change in the payment structure can change behaviors in providers and patients, I would say that I think the most powerful thing that could be done would be payment changes. For example,” he said, “if you said, here’s a fixed payment for appendectomy that forced you to look at the entire episode of care around that procedure, and if there were a way to fix that price or reimbursement, all of a sudden, I have to talk to the ED people, surgeons, nurses, case managers, home care, etc.”
What’s more, Tarnoff said, referencing a specific, though unnamed health system, “Even in advance of payment changes, an organization working with minimally invasive valve replacement, found that it forced them to work through developing an integrated network, and look at their own practices; this was in advance of payment changes, and they found that they just weren’t profitable. They moved their length of stay from 12 days to 2, moved their length of stay down to 2 days, which was best in class. And they were incentivized by their need to be profitable. So if their payer came to them, that would have accelerated it even more.” In other words, beginning to move down the path towards preparing to take on risk contracting, will inevitably help the leaders of a patient care organization to improve processes and efficiency.
In that regard, Wrobel said, “The potential for providers to take risk and start their own insurance company, that could roll out on a broad basis over time. And you have a partner organization that would have access to the entire premium dollar. It’s a difficult program to roll out on a broader basis; but bundled payments—that’s another mechanism. And it’s giving providers risk on something they can actually manage.” In fact, he said, “On an actuarial basis, I’m concerned about giving providers risk that they can’t manage, and that can be true with total-cost-of-care risk. With bundled payments, you’re giving them discrete risk, which is actually called technical risk. With risk for the entire population, that payer could have some bad situations and be hurt financially. The risk there is that now you don’t have a direct connection between your outcomes and your payment. So I would urge [the leaders of patient care organizations to take on] broader bundled payments, because it’s a more efficient way of managing risk.”
Turning to Wrobel, Pearl asked, “What is Geisinger doing, as you move to a value-based system?”
“We’re looking at everything holistically. It won’t be just the hospital system and health plan. It’s no longer we and them, we’re trying to make the best decisions as a total system. And it gets into how we want to manage dollars with providers. We actually have a social compact with our providers: instead of having all these financial components, we have a compact for providing high-quality care and access, research, providing a good process and system. And one of the dangers is making things so complex and financially oriented that we no longer have providers focus on what they do best, which is to provide good care.”
A granular conversation about patient volume
“How are we going to reassure the patient and make sure they don’t suffer a complication from pursuing potentially a dangerous approach?” Pearl asked.
“I came out of med school 17 years ago as one of the first to be able to train in minimally invasive surgery; I was given a year fellowship at Cleveland Clinic to do this,” Tarnoff said. “And I was approached by some members of my department in varying ways,” in terms of their reactions to the introduction of minimally invasive surgery there at that time. “Some were completely resistant and angry, and others were very interested and wanted me to help them. And now, 17 years later, I will say that the answer is, we all took a Hippocratic oath, all agreed to give patients the highest standard of care. And if you’re falling behind the times, you have to make decisions about how you want to operate, literally, in this case. And there’s no excuse for not learning new techniques. Companies like Medtronic will offer support for learning new techniques. I think it’s that simple. I think these skills can be transferred, and things can be learned; and I don’t think you can argue with that.”
“With volume, surgeons simply get better,” Pearl said, adding that “Heart hospitals in the U.S. are often doing fewer than 300 surgeries a year, which is fewer than one a day. You can’t have high quality at that rate.” Inevitably, he said, some hospitals that perform smaller numbers of key procedures, will need to cease doing those procedures, or even to close altogether, over time. “How will our nation move forward on the difficult issue of consolidation, of closing hospitals to improve care quality?”
“You’re getting at a really important point, which is that volume is critical,” Wrobel said. “I approach it for what kind of funding mechanisms would help with that approach, where certain facilities would specialize in certain procedures. And under bundled payments, certain facilities would be able to drop their price based on volume. And particularly on heart surgery and other expensive procedures, you could have bundled payments, and different facilities competing based on volume. You could see certain facilities competing on price, and build that into an insurance product.”
Adding nuance to the discussion of volume as a proxy for outcomes quality, Tarnoff noted that “The state of Massachusetts was moving towards consolidation” in reimbursing certain patient care organizations as recognized providers, “because CMS [the federal centers for Medicare and Medicaid Services] said if you don’t do bariatric surgery at a certain rate, you won’t be able to do it. Because certain surgical centers were actually getting better outcomes than some of the big-volume centers. As a surgeon,” he said, “I inherently believe that volume is important; the more you do, the better you get at. But we did encounter this issue, that these bariatric surgery centers were able to offer high-quality outcomes with lower volume. And the literature has found that it’s the high-volume facility with the high quality rather than the high-volume procedure list. And that make sense, because if you practice in a high-volume facility, the whole culture is different: the nurses know a case should take an hour, and the nurses know on the floor what a perfect outcome should look like, and everyone knows what good outcomes look like. So the high-volume facility may correct the low-volume procedure list. The poor outcome is picked up faster.”
Looking at that set of results in that area of clinical services, Tarnoff said, “I don’t know that there’s a simple answer to this. I agree that we should consolidate care in general. Geisinger has contracts now with organizations like Wal-Mart, that are contracting with high-volume providers. So the only thing in the way of this, frankly, is patients. I’ve seen way too many patients just demand what they want when they want it. I operated on a woman with an adrenal tumor, I did a minimally invasive surgery, and she was ready to go home that day, but her daughter said she was uncomfortable with her mother leaving that day, so she stayed another day. And some patients are choosing lower-volume facilities. So we’ll say, why don’t you just go to the high-volume center? But that misses the patient dynamic, where they just want to go to facilities where they’re comfortable.”
In fact, Wrobel said, “There is the potential for a smaller organization to compete in the marketplace based on newer techniques or approaches. So I’m not pre-judging the opportunity for smaller organizations to compete; it just has to be on a market-based competition.”
“Having practiced in both environments, I can see that,” Tarnoff responded. “But it’s hard for me to imagine, as the cost containment [phenomenon] continues—everyone’s either going to get smarter and better, or we’ll see this kind of mass consolidation” of patient care organizations.”
“From my Kaiser Permanente experience, when you raise the volume, people start to ask the right questions,” Pearl emphasized. “A great example is around total joints”—total hip replacement and total knee replacement surgeries. “Five years ago, [the standard of care] was two or three days’ stay in the hospital; then it went down to one to two days by two to three years ago. And now, 70 percent [of total hip and total knee replacements] are done outpatient. We’ve just gotten better at it.”