Part Four, conclusion of Interview with Arnold Milstein, MD, Professor of medicine at Stanford, and co-founder of Pacific Business Group on Health an

Preface: Mercer Chief Physician and US Health Care Thought Leader Arnold Milstein, MD, has been appointed a tenured Professor of Medicine at Stanford University, where he will establish a new research center dedicated to accelerating innovations in health care delivery in the US and globally that improve the value of health care.

Because of its length, this interview has appeared in four part/ What Dr. Milstein is saying takes time to digest and is best read in three parts to leave time for pondering.

The opinions expressed by the interviewee do not necessary reflect the positions of the interviewer.
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Q: What were the new organizational models that you studied and described in your “Medical Home Run” paper in Health Affairs?

A: They form a spectrum. Some have been around, though often unappreciated, for over ten years. Others are newly evolving. They include primary care doctors owning and operating Medicare Advantage plans, visionary PCPs operating in progressive independent practice associations, as well as advanced multi-specialty groups and hospital-medical staff organizations.

Q: Which model did you find the most innovative?

A: Two Medicare Advantage HMOs founded and owned by visionary PCPs willing to take a big financial risk. Rather than complain about stress and underpayment of PCPs, they seized upon a new business model that freed them from their constraining relationships with their predominant insurers. They formed specialized new organization to fund and care for seniors.

Q: What’s unique about this business model?

A: Creative, ethical primary care practices realized that they could not afford to care adequately for sick, unstable patients if they were only paid for face-to-face care. Those that didn’t start their own MA plans forged novel payment relationships with their predominant payers before the term shared “ACO” was ever uttered. This allowed them to participate in the downstream savings generated by their intensified care models. It also funded the intensified care required to keep very sick people out of health care crisis.

Their innovation was two-pronged. It included innovations in the payment arrangements with insurers and in the care model.

Q: How does this tie in with the idea of hospitals and doctors negotiating bundled pay arrangements and sharing savings?

A: Provider participation in downstream savings can occur via several vehicles. On one end of the risk-sharing spectrum are physicians who start and operate their own health insurance company. In the middle is a kind of “super DRG” – a single payment is made to a combined hospital-physician entity to cover institutional and professional services for hospital stays and a 30 to 90 day post-hospital period.

On the other end are shared savings payments from payers to all providers involved in lowering health care spending per adult illness or annual per capita spending trend, if quality also increases. The common thread is use of payment innovation to allow physicians to take accountability for improving clinical outcomes and lowering total health care spending by improving their clinical effectiveness efficiently.

There is tremendous unlocked potential among American clinicians and hospital administrators to innovate in their methods of delivering care. Once we give physicians and hospital leaders strong incentives to generate more health with less money, we will see a faster of valuable clinical innovation.

We saw this in California in the early and mid-1990s when California‘s managed health plans began delegating responsibility for managing total annual per capita spending to organized physician groups. It spawned valuable innovations in California care delivery, such as, the hospitalist model.

Q: An expectation exists out there that HIT in general, and EHRs in particular, will transform and improve health care. What is the potential of an interoperable IT system linked by EHRs?

A: The preponderance of evidence is that when well-chosen HIT is put in hands of highly motivated physicians who are supported by skilled managers, it enables big improvements in care. Like any tool, it carries a risk of adverse consequences. However, its potential for benefit far exceeds its risks.

Q: Early on, you mentioned Kobe Bryant of the Lakers. Because of your education at Harvard and Tufts and later in California, you must be a little schizophrenic about the outcome of the Celtic-Lakers NBA finals.

A: I am from Wisconsin. My loyalty lies with the Green Bay Packers and the subtle delivery system design innovations of Vince Lombardi.

Q: With that confession, I will pack this interview up. Thank you for sharing your thoughts.

Doctors’ Trilemma

These days independent doctors are feeling paranoid.

And for good reasons.

Congress refuses to provide a long-term solution to replace the draconian formula (SRG) to pay for Medicare. The new health care law blames physicians for rising costs by suggesting physicians ought to be herded into groups so they can be held accountable for costs. In other words, collectively legislators responsible for the unprecedented federal deficit distrust individual physicians to care for individual patients or the public at large cost-effectively.

And yet, directly or indirectly, Medicare already sets doctor fees, and health plans meekly follow suit. Merritt and Hawkins, in their book, Guide to Physician Recruiting, put it this way.

“Physicians rarely set their own fees. Their fees are dictated to them by Medicare, Medicaid, HMOs, PPOs, and other third party payments. The money reimbursed to them for services rendered may have little or no relation to their costs of doing business. What can be more aggravating is that sometimes third party payers also dictate what physicians can or can’t do for their patients, by declining to for services may believe their patients need…the Medicare regulatory codes by which doctors must abide is 130,000 pages long. Doctors must document just about everything they do or risk civil or criminal penalties for fraud.”

It should surprise no one that a doctor shortage looms. Why enter a profession where your pay is uncertain and where everyone second guesses what you do and your motives for doing so?

What are the physicians’ options? What is their leverage? I received a phone call from a primary care physician and asked him these questions.

He replied. “We only have three options. One, refuse to accept new Medicare or Medicaid patients or government payment for them. Two, drop all third party arrangements, and go into cash only or concierge practices. Three, push the hell out of health savings accounts with high deductibles, and pray HSAs catch on.”

Another potent lever is to keep preaching the gospel that a lack of doctors to serve the coming wave of Medicare and Medicaid patients will precipitate a political Armageddon. It will at last force politicians to pay attention to doctor discontent as doctors exit or young people do not enter the profession.
Unfortunately, with the forces arraigned against them, options for doctors, are not simple.

These forces constitute a trilemma. A trilemma is defined as three difficult options, none considered wholly acceptable or desirable, and all with upsides and downsides, usually with loss of doctor autonomy.

• The first option is the government option. Play along with the new law and pray for the best - the best being new rules and regulations, pressures to install money-losing electronic records, acceptance of thousands of new and shifting diagnostic and procedural codes, swallowing declining reimbursements, rationing of high tech, and herding into accountable care organizations, in which you will be paid by salary or within budgetary limits and not be fees for your services. This option assumes Big Brother knows best.

• The second option is the managed care or the corporate option. Allow yourselves to be “managed” by remote management professionals deploying a myriad of management techniques including check lists, protocols, evidence-based guidelines, standardized methods, and continuous improvement processes borrowed from industry and designed to improve efficiency, effectiveness, safety, and outcomes. This may come to be known as the Berwickian Option, a hybrid blend of government and management options. This option assumes health care is too important to be left to doctors.


• The third option, preferred by many physicians, is the free-market approach. This consists of Darwinian competition among providers setting their own fees and services , and individual consumers making their choices based on value (bang for the buck, better outcome ) and data-based information gleaned from the Internet and industry sources. Presumably Health 2.0 information technologies will make it possible for “empowered “ consumers to judge and separate good doctors and hospitals from bad and to choose between various practice models – small practices, multispecialty group practices, single specialty practices, practices of integrated health systems, hospital-based systems, off-shore and foreign hospitals and clinics, retail clinics, work site clinics, practices not accepting third party insurances but offering discounted fees and/or 24/7 personalized services. This option assumes doctors and patients are intelligent and sensible human beings, and acting together, will do the right things for the right reasons for the right price.

Only one thing is certain. Life and practice will never be the same. It may be better. It may be worse. But it may not be what physicians envisioned when they entered medicine.

To Sum Up

Physicians may salute government’s noble mission to cover all, but they deplore the bureaucratic and documentation gauntlet through which they must run to get there; they may acknowledge management’s role, but they question the methods and wisdom of those who are not there and who have never been there or done that; they may appreciate the power of free markets and free choice, but they know health is no ordinary Darwinian commodity.

When all is said and done, the trilemma will always loom large and will always be there.

Part Three. Interview with Arnold Milstein, MD, Professor of Medicine, Stanford, and Co-Founder of Pacific Business Group and Leapfrog Group

Preface: Mercer Chief Physician and US Health Care Thought Leader Arnold Milstein, MD, has been appointed a tenured Professor of Medicine at Stanford University, where he will establish a new research center dedicated to accelerating innovations in health care delivery in the US and globally that improve the value of health care.

Because of its length, this interview will appear in four parts

The views of this interviewees do not necessarily represent the views of the interviewer.
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Q: In your work at Mercer, you described two innovations in peer-reviewed publications - travel surgery and the Ambulatory Intensive Caring Unit (A-ICU). Could you talk briefly about those innovations?

A: The idea behind travel surgery is pretty intuitive. We’re in a world where it‘s become easy to compare crudely the relative value of major high risk, high cost elective surgeries across borders. Patients and major employers are growing interested in travel to hospitals where complication risks and the total cost of care are lower, including surgery performed outside the U.S. As surgical outcomes become more validly comparable across hospitals and surgeons, travel surgery will slowly increase.

Q: And what about Ambulatory Intensive Caring Units (A- ICUs)?

A: One strategy for lowering costs is to provide much better quality care to the segment of health plan enrollees who are at the highest risk—that is, the 20 percent of enrollees who generate approximately 70 percent of a health plan's spending in a given year.

With funding from the California Health Care Foundation, I led a team of clinicians and engineers who designed a new primary care model called the Ambulatory Intensive Caring Unit (A-ICU). The model paired redesigned clinical teams with high-risk patients—those with severe chronic illness and/or socio-economic challenges that contribute to preventable health crises, high health care usage and very high annual per capita health care spending. Our strategy for lowering costs was to form specialized teams to provide much more intensive primary care to this 20% segment of health plan enrollees.

Our aim was to prevent high immediate "downstream" costs attributable to the limits of traditional primary care. The A-ICU team also intensively managed discretionary specialty care and ER care. We implemented three design features:

• "First Floor" care was provided by well-trained community health workers. These "health coaches," were supervised by A-ICU nurses and/or physicians. They help patients to manage their primary hospitalization risk factors 24/7.

• "Second Floor" care was provided by physicians supported by a team of medical assistants and nurses. The team uses an electronic health record, on-the-spot telephone consultations with specialists and selective in-sourced onsite specialist services to reduce the costs and increase the health impact of primary care visits. For example, a behavioral health specialist visits the second floor regularly to work with patients in need of such services.

• "Third Floor" care was careful management of specialist consultations including hospitalist care. Using data from a cooperating insurer, the A-ICU team selects a narrow referral roster of cost-effective and high-quality specialists with whom to coordinate actively.

We estimated that the A-ICU could reduce annual per capita spending by 15-30% net of its higher operating costs and substantially improve clinical outcomes and experience of care for high risk patients that consume almost 50% of total spending for populations under 65 and over 70% for populations over 65.

Q: Were you happy with the results?

A: Yes. Physicians’ operation of ambulatory intensive caring units (A- ICUs) was often inspirational. Implementation testing sparked additional organizational innovations. It showed that collaboration among American clinicians and engineers can create new care models that generate much greater value per dollar for their patients. Taking care of highly unstable sick patients with traditional care models is like trying to guard Kobe Bryant with a high school player. They can’t keep up with the rapidly shifting needs of highly unstable patients 24/7.

Different Perspectives on Obamacare

Yesterday, I listened to Ezekial Rahm, MD, senior medical advisor to Obama, expound on the benefits of Obamacare in an interview with Andrea Mitchell on MSNBC news. Obama’s health plan, Ezekial said, will lift quality, expand coverage, and serve doctors and the public well.

If that were so, said Andrea, why are so many doctors saying they will opt out of Medicare and why is the public not convinced.

Well, said Ezekial, claims that doctors will opt out of Medicare are wildly exaggerated and so is public resistance.

Well, maybe so, but in Texas in 2008, 42 percent of Texas doctors participating in the survey said they were no longer accepting all new Medicare patients. Among Texas primary-care doctors, the percentage was 62 percent.

These numbers in Texas, as elsewhere, will grow unless Congress bites the bullet and institutes some long-term payment plan for paying doctors, in place of the current Sustainable Growth Rate monstrosity formula which this year calls for a 21% cut and next year 25% slash.

As for the public, a July 5 Rasmussen poll of likely voters indicates the following approval/disapproval ratings on the new health care law: for/favor + 36%, opposed/against +60%, spread for/opposed -24%. Now, it may be Rasmussen polls favor the GOP, but nevertheless it is clear that the $125 million Obama charm offensive, through Ezekial, his brother, and other supporters, to sell Obamacare isn’t working very well. More work on the Democratic side will have to be done to sway the public before the November 2 election.

In his TV interview, Doctor Rahm admits the new law will be “complicated” to implement. With Obamacare, “complicated” is the Mother of all euphemisms.
This law is so “complicated” it will take ten years to put into place, will cost over $1 trillion, will raise costs of drugs, medical devices, health plans, and medical services, will require over 150 new government agencies and 1600 IRS agents to assure compliance; will compel doctors to install money-losing electronic medical records, and will bewilder consumers with its good, bad, and ugly mix or rules and regulations.

From one perspective, Obamacare's benefits are understated and under-appreciated; from the other perspective, its liabilities are underrated and under-appreciated.

What is needed is a middle-of-the-road perspective of what this reform is all about.

Part Two. Interview with Arnold Milstein, MD, Professor of Medicine, Stanford, Co-founder, Pacific Group on Health, Leapfrog Group

Preface: Mercer Chief Physician and US Health Care Thought Leader Arnold Milstein, MD, has been appointed a tenured Professor of Medicine at Stanford University, where he will establish a new research center dedicated to accelerating innovations in health care delivery in the US and globally that improve the value of health care.

Because of its length, this interview will appear in four parts. Part One, Ambitions and Objectives at Stanford; Part Two.The Potential Role of Government and Impact of Health Reform Law; Part Three. Clinical Innovation Business and Care Models; Part Four, Other Clinical Models Lending Themselves to Accountability. What Dr. Milstein is saying takes time to digest and is best read in three parts to leave time for pondering.
In these interviews, I do not necessarily agree with the interviewees' point of view, in this case, top-down management of physicians.

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Q: Will you be working closely with the federal government?

A: Given the Institute of Medicine’s recommendations on priorities for comparative effectiveness research, funding for testing the effectiveness of care delivery innovations will originate from the federal government is likely. We also might find ourselves working with the government to the degree that care innovations discovered at our research center would benefit the Medicare and Medicaid population.

Q: The reason I asked about the government was I was just reading a government-directed report from the Council of American Medical Innovation. The report is called “Gone Tomorrow, A Call to Private Medical Innovation to Create Jobs, and End Cures in America.” The report claims the U.S. is falling behind other nations in health care innovation. According to Richard Gephart, former Congressional leader from Missouri, “Advancing a national strategy for medical innovation that engages all sectors – public, private, and academic- through a empowered federal office is an effective first step in turning around our health and economic crises.” Do you agree?

A: It’s a worthy government priority. The well-being of Americans depends on increasing their yield from our investments in clinical innovation. Comparisons of the U.S. health system to the systems of other countries show that we’re not getting enough in return for our much higher levels of health care spending than are other wealthy countries. With a coherent national clinical innovation investment strategy, we can unlock the creativity of U.S. clinicians and make the U.S. health care system a basis for global competitive advantage.

Q: What are your hopes and expectations this new health reform law?

A: For the past 6 years, I’ve served as an adviser to Congress on the Medicare program. I received a sobering education in federal health care politics. I realized that any health reform legislation likely to be signed into law was going to be “half a loaf”.

The new reform law is a step in the right direction, but falls short of what ultimately will be needed. It was not a failure in legislative drafting; rather, it reflects how political campaigns are financed. Industries that have the most at stake invest the most heavily to influence legislators to limit reform to changes that will least disrupt them. We now have a health reform law that covers most of our uninsured and moderately encourages physicians to align with larger organizations generating more health with less money. Congress will need to twist the legislative dial from “moderately” to “strongly”.

Q: These days there is a lot of talk about “disruptive innovations.” Do you think this new health reform law will be disruptive to current medical practices?

A: It will not induce highly disruptive changes in the ways that care is delivered. Its effects will be gradual. An example is Medicare’s new bundled ACO payments to doctors and hospitals. Wider bundles that encompass longer time periods than a single patient encounter will shift accountability for quality and total costs more squarely onto the shoulders of doctors and hospitals. Unless other big payers harmonize with Medicare, ACOs will stimulate incremental but nonetheless valuable clinical innovation by physicians and hospital administrators.

Part One. Interview with Arnold Milstein, MD, Health Care Innovator.Health Improvement Activist, Co-Founder, Pacific Business Group on Health and Leap

Part One. Interview with Arnold Milstein, MD, Co-Founder, Pacific Business Group on Health and Leapfrog Group, Professor of Medicine, Stanford

Ambitions and Objectives at Stanford


Preface: Mercer Chief Physician and US Health Care Thought Leader Arnold Milstein, MD, has been appointed a tenured Professor of Medicine at Stanford University, where he will establish a new research center dedicated to accelerating innovations in health care delivery in the US and globally that improve the value of health care.

Because of its length, this interview will appear in four parts. Part One, Ambitions and Objectives at Stanford; Part Two. . The Potential Role of Government and Impact of Health Reform Law; Part Three. Clinical Innovation Business and Care Models; Part Four, Other Clinical Models Lending Themselves to Accountability. What Dr. Milstein is saying takes time to digest and is best read in three parts to leave time for pondering.
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Q: Dr. Milstein, I am conducting this interview on behalf of The Physicians Foundation, which represents all physicians in state medical societies, most of whom are in physician-owned independent practices. The interview will appear in my blog, ReeceMD.com, and in modernmedicine.com. As for myself, I have recently written two books, Innovation-Driven Health Care and Obama, Doctors, and Health Reform. My main interests are innovation and reform. Dr. Milstein, what is your present title and your forthcoming title at Stanford University.

A: I am currently the Chief Physician at Mercer Health and Benefits and Medical Director of the Pacific Business Group on Health. Beginning in July, I will be a Professor of Medicine at Stanford, remain medical director of the Pacific Business Group on Health and maintain a part-time connection to Mercer.

Q: What are your ambitions at Stanford? What do you hope to accomplish there?

A: At Stanford, I will found and support the development of a new research center. The center will bring together three different sciences in an effort to hypothesize and then test, better, more affordable ways of producing health: engineering science, management science, and medical science.

Q: Stanford has a glittering reputation in all three of these disciplines. It produces a host of innovative information technology graduates, including the two founders of Google. It is cheek to jowl with Silicon Valley, which has an innovative culture all of its own. Are you excited about your new job?

A: I am. Stanford offers globally recognized engineering, business, and medical schools within a ten minute walk of each other. In addition, Stanford has been a long-standing contributor to innovation and entrepreneurship in America’s IT and bioscience industries and more broadly to global prosperity that depends on knowledge creation.

Q: I am conscious of the scope of your work at the Pacific Group on Health, your co-founding of the Leapfrog Group, your articles on medical tourism and Medicare “never events”, and your service on the Medicare Payment Advisory Commission (MEDPAC). I begin with knowledge of your work. You are considered America’s leading activist specializing in health care improvement. What do you hope to achieve in your new position at Stanford?

A: Our first objective is a research objective- to mobilize a more disciplined scientific effort to accelerate improvement in the value of health care, first for the U.S. population and over time, for the world population.

Our second objective is a service objective. The tests of the new care designs will typically be at Stanford-affiliated clinics and hospitals. If the test results demonstrate more value for patients and payers, then we will test their replicability more widely.

Our third objective is to transform our discovery process into useful educational experiences for students in clinical and pre-clinical training, since continuous study and redesign of care needs to become a much more prominent component of the professional identity of health care professionals.