A few weeks ago, I joined five of my peers in health care leadership throughout the country to help launch Health CEOs for Health Reform, a coalition dedicated to transforming health care and creating a more sustainable health system.
In mission, we committed to moving past policy concepts toward a detailed blueprint that would reconcile legislative goals with operational realities of the health care system. Our goals are lofty and the challenges immense. What struck me in recent months, with the current state of the economy, is the tremendous sense of urgency we all feel and the confidence we have that now is the time to truly transform health care.
First, it was clear to me last week that it is no longer “business as usual” for any of us. Health care reform can no longer be set aside or merely discussed. The New America Foundation has given us an opportunity to help make a difference and contribute to reforming our health system, but it is up to all of us to make the hard choices that will work – and every one of us will have to give up something for the better good.
As a medical doctor and a hospital administrator, I am proud to be a part of American medicine, but we can be much, much better. No other industry in the world tolerates the quality problems health care accepts as status quo.
The defect rate in health care approaches 3 percent. Consider the gap in quality if other industries accepted a similar defect rate -- about 2,000 airplanes would have unsafe landings a day, 12,000 checks would be withdrawn from the wrong account each day, and 20,000 pieces of mail would be erroneously delivered every hour. These levels of poor quality would be totally unacceptable.
As if quality standards were not enough to make the case, we’re also not getting what we pay for. According to a recent Washington Post article, U.S. health care represents about 16 percent of the gross domestic product (more per capita than any other nation in the world), yet we lag considerably in overall health. We’re 29th in infant mortality, 48th in life expectancy, and the worst of 19 industrialized nations in preventable deaths.
Our health care system is fraught with waste, which leads to poor quality and excessive cost. Nearly half of the $2.6 trillion in the U.S. health care system is waste that adds no value for patients and sometimes even causes harm.
At Virginia Mason Medical Center in Seattle, we’re using our Virginia Mason Production System management method (modeled after the Toyota Production System) to show how health care can reduce cost while improving quality and safety. By eliminating the waste, we have seen over and over again improvement in quality, safety and the patient experience – all while reducing cost.
We’re seeing results in every area of our health system: ambulatory care, inpatient care, facility design, chronic disease management, finance, supply and the list goes on. As a result, we’ve created an environment where dedicated care teams can actually do their best work and have more value-added time with patients.
I’m confident patients in our country can get higher quality and safer care at less cost. It first requires participation of employers, health plans, government and others to truly achieve what is possible.
At Virginia Mason, our work with employers, like Starbucks, Costco, Boeing and Microsoft, is yielding dramatic reductions in costs for those paying the bills; and better care, quicker return to work and more satisfaction for our patients. We, unfortunately, in the current payment system, reduce our profitability by doing the right thing. Despite my very supportive board of directors, they will not allow me to lead our organization into bankruptcy by doing the right thing. We need to change our payment system if we truly want to ensure universal coverage, improve quality and reduce cost.
We all need to change our mindset and commit to our shared agenda of cost, quality and coverage. It will require delivery system reform and payment system reform. We must stop giving incentives to hospitals and physicians to do the wrong thing to provide non-evidence-based, non-value-added diagnostic and therapeutic interventions.
We have seen what’s possible and we are anxious to share our experience improving care and reducing cost. It isn’t easy, but we are ready to roll up our sleeves and make it happen. The prize is worth it: quality, affordable health care for all Americans.
Comments
"Despite my very supportive board of directors, they will not allow me to lead our organization into bankruptcy by doing the right thing."
One of the best quotes I have seen about the reality of the challenges confronting our health care "system".
Great post.
Posted by: RW | Jan 27, 2009 8:08:02 AM
I realize many physicians obtained MBAs and many became CEOs over the past several decades. I admire them including Dr.Gary Caplan -the author of this blog piece.
But I believe that the era of viewing the "former profession" of medicine as a business and using business models and business lexicon is over.
This is also true of the "former professions" of law and journalism.
We have seen the excesses of the unbridled free market applied to professions causing them to fail and lose their moral footing.This deification of the free market, ironically, is even backfiring badly on business itself as we are currently witnessing in daily headlines.
It's all cyclical.
Welcome back to a renewed era of the noble profession on Medicine.
Dr. Rick Lippin
Southampton,Pa
Posted by: Dr. Rick Lippin | Jan 27, 2009 10:12:51 AM
Dr. Kaplan,
I admire your effort and your intention to improve the healthcare system. I’m especially interested in how you would describe what hospitals and doctors should be prepared to give up vs. the status quo for the greater good. Also, some more color on payment reform would be useful. Are we talking about episode pricing (one bundled payment) for expensive surgical procedures? Robust price and quality transparency tools that would be accessible to both patients and referring doctors? Pay for performance? Evidence based medicine? Comparative effectiveness and cost-effectiveness based payment criteria?
As you well know, doctors drive virtually all medical spending through their decisions to admit patients to the hospital, order tests, prescribe drugs, refer to specialists, consult with patients and perform procedures themselves. It’s hard to envision reform that significantly improves value for money without doctors’ leadership, commitment and cooperation? With their decades long history of trying to stifle competition at every turn, why should they respond differently now?
Posted by: Barry Carol | Jan 27, 2009 11:17:33 AM
"We, unfortunately, in the current payment system, reduce our profitability by doing the right thing."
That is reducing utilization where the results go to insurers or the bottom lines of corporate plans. This is why reforming healthcare with a free enterprise insurance model will not work - the innovators don't benefit. With a single-pay system and universal budgets savings go to the tax payer and if structered right could reward hospitals and their staff for cutting costs.
Posted by: Peter | Jan 27, 2009 5:01:49 PM
Bravo! I commend your commitment, and lead. Health reform is inevitable if only for the perfect storm of a MBS/derivatives driven global economic meltdown, and the swelling ranks of the uninsured, and growing pools of under-insured Americans.
The employer sponsored model has outlived it's utility. We have more health plans and insurance entities including their TPA breatheren all with hands in the till, than we need.
A handful of regulated public trust type, non profit insurers (a la Swiss model), will do. No more cherry picking, risk shifting, slicing and dicing of benefit plans, and the torrent of under-disclosed marketing efforts to sell these "affordable" products to a poorly informed public.
The "diminishing returns" value of comprehensive plans, due to higher deductibles, increased coinsurance, expanded non covered services, capped benefits, retroactive underwriting, "mother may I" obstacles to care, etc... is nothing compared to the projected carnage we can expect from so called "limited benefit plans", or their poorly understood discount medical plan alternatives, who target the uninsured.
Hospitals must evolve beyond the clusters of operational silos that compete and rarely coordinate their down lines. Horizontal communication is too often the exception rather than the rule.
Hospital medical staffs (aka a club of independent contractors) typically defend their turfs from a para-military (but w2 employed)organized nursing staffs, too often completed by temporary laborers via per diem pools.
The non profits must give back more than merely counting their Medicare, Medicaid, Bad debt write offs, in exchange for their "community benefit" tax exemption.
Roll it all up, and it's not a very pretty picture. Inefficient, yes. In need of reform, absolutely.
One can't separate the financing component from the delivery piece. They go hand in hand.
http://www.twitter.com/2healthguru
Posted by: Gregg Masters | Jan 27, 2009 6:20:23 PM
You said, "We, unfortunately, in the current payment system, reduce our profitability by doing the right thing. Despite my very supportive board of directors, they will not allow me to lead our organization into bankruptcy by doing the right thing."
You are surely right that the current system for paying hospitals (and physicians) is irrational, and need to be changed. You are right that often we are paid less to do the right thing.
However, profitability should NOT, repeat NOT be your main concern. You run, as far as I can tell (see this link: https://www.virginiamason.org/home/body.cfm?id=93), a not-for-profit organization. Thus, your goal should be to fulfill your mission, and to try to raise enough funds to do so well.
Your organization's stated mission is:
"Our vision is to be the Quality Leader - Our aspiration is not to be the biggest, but to be the best. We will differentiate ourselves on the basis of quality.
Our mission is to improve the health and well being of the patients we serve - Healing illness is our first priority and is what gives our people the energy for our vision. We are also committed to providing a broad range of services that improve one's sense of well-being and which prevent illness."
(See link here: https://www.virginiamason.org/home/body.cfm?id=121 )
That all sounds good. I'm sure you are trying to fulfill it. But if your board is more worried about your "profitability" than fulfilling that mission, they are violating a fundamental duty of the board of a not-for-profit organization, the duty of obedience, the duty that requires "board members to be faithful to the organization's mission. They are not permitted to act in a way that is inconsistent with the central goals of the organization. A basis for this rule lies in the public's trust that the organization will manage donated funds to fulfill the organization's mission."
See http://www.boardsource.org/Knowledge.asp?ID=3.364
If your board does not understand that duty, they need to. I believe that ethically at least the CEO and other officers of the not-for-profit organization also have a duty of obedience.
The notion that not-for-profit hospitals ought to put profits ahead of mission is the kind of bad thinking that was all too prevalent in the last 20-30 years in health care, and was probably a major reason why we are in the current crisis.
Posted by: Roy M. Poses MD | Jan 27, 2009 7:04:56 PM
Roy:
And Virgina Mason is a trophy property in the class of "coordinated" and/or "integrated medicine" elite....what does that say about all the others who are relentlessly fighting each for more of the depreciating health care dollar, amidst a declining share of a better paying patient mix?
Where is the patient care mission in that cross current?
Thanks for the boardsource reference and reminder of the non-profit board legal responsibilities.
Posted by: Gregg Masters | Jan 27, 2009 7:32:37 PM
Gary,
I started a group on one of the professional networking site for the same purpose. Granted it does not have all the CEOs as member but it has over 100 member. We also created a site to discuss the Healthcare transformation in whole. If you want to check and drive the discussion, you are welocomed to read the mission at http://blogs.biproinc.com/healthcare
Now here is the question however. Starting a group is relatively easy. The question is what have you done to reduce the cost and improve the access. I have been in the business of operation and quality improvement and strategy development. Have you looked into the ratio of manager to employees, ratio of clinicians to admin, the salary relative to other industries with same background, a good metric on quality control, accountability, the working hours of clinicians and non-clinicians.....
The list goes on.
I once had a VP (non-healthcare) complain all the time how things are broken and he is surrounded by incompetent. finally, I could not take it and asked him..with his power what has he done over the half decade. Goes without saying, he had made a career about creating projects to fix problems but never did and upon time he was the bottleneck to the solution.
I will be honest I get worried when we create the groups, action committees...Why do we not build the momentum thruough action rather than through groups, committees, etc.
Pls note that I am not picking on you or any other leader, I am just trying to say that it is time for leadership and action. CEOS have the power and the resources to bring about the fundamental changes with relatively little effort. If anyone is really willing to create best operations: quality, access, speed, etc, I would be more than willing to work with them in achieving the objective
rgds
ravi
www.biproinc.com
Posted by: Dr. Pandey | Jan 27, 2009 10:00:57 PM
"We, unfortunately, in the current payment system, reduce our profitability by doing the right thing. Despite my very supportive board of directors, they will not allow me to lead our organization into bankruptcy by doing the right thing."
Unfortunately, hospitals need to be able to sustain themselves financially. No margin, no mission. The incentives in the system, however, need to be changed. We need to move away from the fee for service payment model which rewards providers for doing more whether it’s effective and necessary or not. Bundled pricing for expensive surgical procedures would be helpful. For drugs, devices, tests and procedures that are not cost-effective, we should just not cover or pay for them. Anyone who wants those should self-pay. We also need tort reform that protects doctors from lawsuits based on a failure to diagnose a disease or condition as long as national (not local community) evidence based standards were followed. Interoperable electronic records could help to reduce duplicate testing and adverse drug interactions. Finally, much more widespread use of living wills and advance medical directives could drive down futile and often unwanted care at the end of life.
At the very least, it’s good to see more focus on and recognition of the need to control medical costs rather than just throw billions more dollars at the same failed system to cover the currently uninsured and underinsured.
Posted by: Barry Carol | Jan 28, 2009 3:53:06 AM
Barry, until we look at healthcare as an expense not revenue or profit not much will change. That's the advantage of a government run system, it's all considered an expense from a system point of view as the payer is the taxpayer.
Posted by: Peter | Jan 28, 2009 2:45:28 PM
"it's all considered an expense from a system point of view as the payer is the taxpayer"
I'm starting to think you don't pay taxes, Peter. Any taxpayer should find that statement chilling. It's almost as if our paychecks offer a never-ending supply of funds to create all of these wonderful programs. Doesn't sound much like freedom to me.
Posted by: Deron S. | Jan 28, 2009 4:48:48 PM
Deron, yes I do pay taxes, in fact at tax time I send a check, not get a refund. If you look at the total mix of incoming money into the healthcare system (private & public) you see that both sides are paying way too much. My point above was that if we continue to allow the private sector to control healthcare because their income/profits depend on the creation of new profit centers, we will never get costs under control. Think about the dollars you would save if we spent 8% GDP on healthcare and not 16%+, think you'd have more disposable income, well maybe not because you are part of the system benefiting from the rest of us having to pay more than we should or could? If the government becomes the prime payer where all outgoing $$ is a cost not a profit, and taxpayers see the true cost of healthcare through their taxes, then the pressure will be on to reign in costs, not satisfy the profit motives of insurance companies, drug companies, device makers, hospital CEOs and specialists. We can then also turn to the other driver of health costs and that is sickness, which is looked on by the healthcare industry as an income driver not a cost to society.
Posted by: Peter | Jan 29, 2009 4:31:41 AM
I am encouraged by the frank and open discussion. It is clear from people's comments that we all have plenty of work still to do. It's very important for me to chime in about a few comments here on the role of a not-for-profit board. Let me be the first to say our board and executive team are very focused on fulfilling our mission and vision on behalf of our patients and our community. This is our primary fiduciary responsibility.
Also, profitability is not the goal, but a net margin is an essential ingredient. Our patients and community count on us to provide high-quality care; stay up-to-date with treatment and technology; employ smart, skilled medical professionals; and keep our doors open. We simply cannot do any of these things without diligence and prudence -- and a net margin allows us to invest in our mission to improve the health and well being of the people we serve and our vision to be the quality leader in health care.
Posted by: Gary Kaplan, MD | Jan 29, 2009 11:42:35 AM
"Despite my very supportive board of directors, they will not allow me to lead our organization into bankruptcy by doing the right thing."
Gary, your above statement tells me you are trapped by the same money driven medicine the rest of us are prisoners of. The statement says there is plenty of room to introduce more cost cutting innovation, but because your hospital exists on billings you need to over utilize services to stay afloat and therefore add to the costs the rest of us pay.
Posted by: Peter | Jan 29, 2009 1:14:28 PM
Peter - I'm not sure how taxpayers are going to see the true cost of healthcare in their taxes. Are you suggesting that the government is going to have to breakout the amount of taxes attributed to healthcare? We're already paying several trillion in taxes each year. I'm not sure another trillion or two is going to have much of an effect.
The taxpayers and employers are already exposed to our high cost system through higher insurance premiums. There hasn't exactly been an uprising to contain costs. You have to understand that containing costs is a responsibility of every American, but few are willing to admit that.
I guess I'm just concerned that you are putting too much faith that a government run system is going to make everything better. Unfortunately, it's not. Our society is simply not comparable to the comparison companies with single-payer. If you looked at chronic condition rates, gun violence, teen pregnancy, etc. you would see just how different our country is. We are all about excess and excess is why we are where we are today. I think Bill McGuire was a crook, but guys like him are only a small fraction of the problem. I'm more concerned about the other 95% of the issues.
Posted by: Deron S. | Jan 29, 2009 4:18:47 PM
Gary,
I have been reflecting on the idea..and am wondering if we can talk sometime.
Due to spam reasons, I do not want to give my address....but mail sent rhought my webpage www.biproinc.com will get directed to me.
rgds
ravi
Posted by: Dr. Pandey | Jan 29, 2009 8:03:25 PM
Dr Kaplan, I appreciate your dedication to open discussion, which I believe is not as common as it should be among leaders of health care organizations. I also support your call for reforming the payment system.
I appreciate your clarification of your comments on "profitability."
I am not trying to quibble, but I still have a problem with your emphasis on trying to produce yearly operating surpluses. I certainly agree that a not-for-profit that consistently runs deficits will not long survive, and hence not be able to fulfill its mission. I also agree that it is nice for a not-for-profit to have an operating surplus in a given year, because it does make it possible to invest it in new capital spending.
But how is putting a priority on having an operating surplus (or net margin) each year different from trying to be "profitable?" It does seem to mean your thinking has become focused on making money, which is not the same as being focused on the health care and academic mission.
Could not you fulfill your mission most years by keeping to your budget?
Posted by: Roy M. Poses MD | Jan 29, 2009 10:50:01 PM
Deron, the true and transparent cost will be seen if there is a dedicated tax for healthcare, both at the federal and state levels. I'm not advocating using the taxpayer as a blank check, like Wall Street/Detroit is, I'm advocating a public system to reduce costs and save us money. But we will need budgets with a public system or it will fail as is the MA plan. If you think our unhealthy habit culture is what is driving costs then you will chain yourself to the approaching 20+GDP for healthcare. Not sure if that scares you or not.
Even if you could make a dent in eating/exercise/pollution/smoking habits how long do think it would take before enough people did it enough for a significant period to make a difference? You'd also have to fight marketing/lobbying efforts by American food and other industries. As with global warming, we don't have that much time, especially given the explosion in charity care due to the economy.
Posted by: Peter | Jan 30, 2009 11:03:24 AM
You can prevent pre-diabetics from become diabetic in a very short period of time. You can get people to stop smoking and realize benefits quickly. What you're suggesting is that we are a stubborn nation that can't change, so we need a workaround instead. Chronic conditions make up 75% of our healthcare spending Peter. Most chronic conditions are preventable. There is no faster way to drive down costs than to treat current and prevent future chronic conditions. Budgets don't change that.
Your wonderful public program called Medicare is having a horrible time with it's Demonstration projects. The main reason is because the beneficiaries are not compliant with treatment plans and not willing to make all of the necessary changes to their lifestyles. How is Medicare for All going to change that?
Posted by: Deron S. | Jan 31, 2009 12:23:04 PM
"The main reason is because the beneficiaries are not compliant with treatment plans and not willing to make all of the necessary changes to their lifestyles."
How do you force them?
Posted by: Peter | Jan 31, 2009 1:47:42 PM
That's exactly my point. We shouldn't have to force people to take care of themselves. Let me break this down a different way. Our current system is wasteful and we all know that. I just don't understand why you want to focus on the symptoms of that waste. Let's attack the underlying problems that caused those symptoms. If we get people healthier and do it at the primary care level, there will be less healthcare transactions. What will that mean? Less demand for specialist services, less financial incentive to continue the spread of costly imaging modalities, less need for administrative personnel to battle each other, less malpractice cases, less exposure to those greedy insurance companies you talk about, a more productive work force, etc., etc.
Financing healthcare is a secondary event. Why would you want focus on changing the financing for something that shouldn't have been there in the first place? If we took better care of ourselves and if the % of the population with chronic illness was 10% instead of 50%, we wouldn't even be having this conversation right now and THCG would probably not exist.
No one said healthcare reform was going to be easy. That difficulty is no reason to cut corners though.
Posted by: Deron S. | Jan 31, 2009 8:45:20 PM
Good information.
Posted by: Buy Avodart | Feb 10, 2009 2:55:03 AM
While there are clearly examples of "doing the right thing" having a detrimental effect on reimbursement, there is still ample opportunity to improve the variance in quality on a day-to-day basis INSIDE each hospital. Virginia Mason does a better job than most, but a cursory review of public data on hospitals reveals that the way in which care is delivered is unacceptably and unexplainably different from day-to-day. When hospitals can produce the same "output" every day of the week, then the focus on perverse financial incentives will be more powerful.
Posted by: Hal Andrews | Feb 11, 2009 1:51:38 PM
Medicine must return to it's role as a profession, not a business.
The health insurance companies continue to compensate their executives out of proportion to any known formula. This executive compensation—millions of dollars every year—could be used to provide healthcare for millions of Americans.
ANNUAL COMPENSATION OF HEALTH INSURANCE COMPANY EXECUTIVES (2006 and 2007 figures):
• Ronald A. Williams, Chair/ CEO, Aetna Inc., $23,045,834
• H. Edward Hanway, Chair/ CEO, Cigna Corp, $30.16 million
• David B. Snow, Jr, Chair/ CEO, Medco Health, $21.76 million
• Michael B. MCallister, CEO, Humana Inc, $20.06 million
• Stephen J. Hemsley, CEO, UnitedHealth Group, $13,164,529
• Angela F. Braly, President/ CEO, Wellpoint, $9,094,771
• Dale B. Wolf, CEO, Coventry Health Care, $20.86 million
• Jay M. Gellert, President/ CEO, Health Net, $16.65 million
• William C. Van Faasen, Chairman, Blue Cross Blue Shield of Massachusetts, $3 million plus $16.4 million in retirement benefits
• Charlie Baker, President/ CEO, Harvard Pilgrim Health Care, $1.5 million
• James Roosevelt, Jr., CEO, Tufts Associated Health Plans, $1.3 million
• Cleve L. Killingsworth, President/CEO Blue Cross Blue Shield of Massachusetts, $3.6 million
• Raymond McCaskey, CEO, Health Care Service Corp (Blue Cross Blue Shield), $10.3 million
• Daniel P. McCartney, CEO, Healthcare Services Group, Inc, $ 1,061,513
• Daniel Loepp, CEO, Blue Cross Blue Shield of Michigan, $1,657,555
• Todd S. Farha, CEO, WellCare Health Plans, $5,270,825
• Michael F. Neidorff, CEO, Centene Corp, $8,750,751
• Daniel Loepp, CEO, Blue Cross Blue Shield of Michigan, $1,657,555
• Todd S. Farha, CEO, WellCare Health Plans, $5,270,825
• Michael F. Neidorff, CEO, Centene Corp, $8,750,751
The compensation of healthcare insurance company executives should be tightly capped.
Posted by: K Walsh | Feb 17, 2009 10:47:21 PM
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Posted by: Sonia | Mar 26, 2009 8:17:10 PM
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