Monday, October 20, 2008

Future - 2020: A Financially Sustainable U.S. Health System

Much of what is discussed in virtually all forums as health care reform is really health care financing reform. We really have not gotten sufficient national attention on the real underlying issue, which is the entire health care delivery system, needs to be modified.

Scott Serota, President and CEO of Blue Cross Blue Shield Association, which insures 102 million Americans and has networks that include 90% of doctors and 80% of hospitals.“A Plan to Improve Health Care and Limit Costs,” New York Times, October 18, 2008

January 1, 2020 – Back in 2008, Scott Serota and the Blues figured out America needed a more affordable, improved, and sustainable health system.

The Blue Cross Blue Shield Association proposed four starting points for a more financially sustainable system – eliminating 30% “waste” within the system, cutting prevalence of pre-diabetes, then numbering 57 million Americans, ceasing payment for avoidable hospital complications, and reducing costs so that everyone, private and public, could afford health care, thus assuring more premium revenues.

2020 Is Here

Well, it 2020. I’m happy to report the U.S. health system has finally developed a sustainable health system. It’s been a long haul, and it hasn’t been easy.

It’s the story of a 12 year struggle with realities – coping with a severe economic contraction; making tough political compromises between liberals and conservatives; decentralizing of health institutions, including virtual monitoring and managing of the chronically ill and dying at home; competing globally for the health care dollar; responding to consumer demands for affordability, convenience, choice, and access; optimizing
clinical benefits for money spent; and most importantly, developing sustainable business models in which outcomes matched money expended.

The resulting U.S. system hasn’t satisfied the two political parties. Democrats, particularly its liberal wing, are disappointed a single-payer approach hasn’t evolved. Republicans are unhappy a consumer dominated system hasn’t caught fire. “Progressive capitalism,” the U.S. version of socialism, has replaced unfettered capitalism.

U.S. Health Care Bubble Burst

In 2009 the U.S. health care bubble burst, like the bubble of 1999 and the credit bubble of 2008. The health industry deflated downward. Hospitals closed, hospitalists were laid off, some hospital-owned practices were discontinued, , turnaround consultants became the rage, people delayed going to doctors, patients cut back on prescription drugs and elective surgeries, and thousands of health workers lost jobs. Even the highly profitable managed care and pharmaceutical industries downsized, consolidated, and laid off workers. Doctors were affected less than other health care sectors, because of the shortage of 200,000 physician shortage.

No Economic Immunity for Health Care

Like other industries, health care had to develop sustainable business models that revenue streams supported. Hype and hope based on technological transformations – personalized genomic-based drugs, minimally invasive procedures, predictive interventions, Internet-guided algorithms for managing care, bonuses for superior performance, and enlightened consumers striving for more perfect health – weren’t enough. Nor were lofty thoughts about achieving great savings through information technologies, preventive programs, and coordinated comprehensive care of chronic disease. These were all good ideas, and some paid dividends in the long term – but not soon, not quickly enough to turn the recession tide.

Competing Globally

U.S. business found it could no longer compete in the global marketplace when health costs outstripped those of other developed nations by 6% of GNP. Similarly, U.S. hospitals found they had to meet the prices of foreign hospitals, which were luring U.S. medial tourists. The world, as Thomas Friedman of the New York Times, liked to say, had become “flat,” thanks to information generated and transparency engendered by the Internet, U.S. employers and patients found they could get equivalent care abroad at a much lower price.

Consequently, the business and health care industries slowly learned to to live within their means. They did so by innovating and developing business models that sustained themselves with adequate and realistic revenue streams.

Major corporations and small and medium sized businesses offering health benefits turned away from specialty dominated networks to primary care medical homes and to retail and worksite clinics to cut costs, and they set up wellness and prevention programs to increase productivity, improve workers’ health, ward off chronic disease, enhance employee satisfaction, and to serve as recruiting tools.


Meanwhile Medicare found itself in deep trouble. Federal budget officials knew by 2010 the federal treasury was well down the road towards bankruptcy. Medicare had to change its ways of doing things. In 2011, it reorganized by setting up new contracting processes and a competitive bidding system with physicians and hospitals in 15 jurisdictions. It launched demonstration projects focusing on pay-for-performance, medical home, and bundled fees for hospitals and medical groups.

The Medicare Payment Advisory Commission urged Congress to pursue three initiatives “expeditiously” – a medical home demonstration program, bundling of hospital-medical staff payments for all care during a given hospital admission to be paid to a single entity, and the creation of accountable care organizations much like existing large group practices.

These demonstration projects became permanent programs. All had the underlying idea of limiting expenses by setting budgetary caps and limiting fee-for-service options. Using these techniques, Medicare and Medicaid expenses were gradually brought under control.

Consumer-Driven Care

It became clear that expanding coverage expanded costs of care. It also became obvious that changing consumer-incentives to seek care and take care of themselves were keys to developing sustainable economic models. Unlimited generous entitlement programs, whether at the federal or corporate levels, were pathways to insolvency and non-competitiveness.

In December 2003, as part of the new prescription drug act, Congress made it possible for all citizens to have health savings accounts (HSAs) which were usually linked to consumer-driven high deductible health plans (CDHDPs). Shortly thereafter, health plans began to systematically increase deductibles on all of its plans, whether they are HMOs, PPOs, or variations thereof.

The great cost shift to employees and individuals was on. There was great suspicion on the “progressive” side of the aisle that HSAs and CDHDPs were corporate and conservative con games.
But these new approaches caught on – slowly- despite withering criticism among those who thought only government, not individuals, possessed the judgment and wisdom to make health care choices.

By 2015, nearly 25% of employees were in HSAs, which had been shown to significantly reduce premiums and as a means of setting aside money if care was not accessed. Critics complained patients delayed or avoided care to save money. But businesses, particularly small and medium sized businesses, pushed HSAs to save money and sustain profit margins.

By 2015, HSAs were still growing, the economy had recovered, and people had regained confidence in 401Ks and other retirement financial vehicles. Also a growing subset of consumers, many well-educated non-medical professionals, using the Internet to judge the value of health services, felt they have sufficient smarts and data to choose their care.

Focus on Value – Clinical Benefit for Money Spent

Meanwhile multiple activities are going that began to create a new understanding of what constituted “prevention.”

Codes were developed by the Reimbursement Update Committee to pay physicians more to spent time with patients and to counsel them about prevention.

Corporations set up health appraisals for employees and on-site wellness programs. Corporations also established worksite clinics where prevention was stressed and people at risk received free generic drugs and wellness counseling. The old adage – an ounce of prevention is worth a pound of cure – was taken seriously, and returns on investment in wellness programs were said to be in the 2:1 range.

On clinical frontlines, several developments were taking place..

• In the Southeast, a fundamental mind shift occurred among a wide swath of practicing physicians in diagnosing and treating cardiovascular disease and its metabolic manifestations. This new paradigm resulted in an organization of hundreds of practicing physicians, the Consortium of Southeastern Hypertension Control (CIIOSEHC). According to William Bestermann, MD, a COSEHC president. longtime student of cardiovascular disease, and a self-confessed data addict, hypertension, type 2 diabetes, heart attacks, renal disease and stroke, represented the same metabolic disorder. In diabetics, vascular events accounted for 65% of deaths. By following a protocol aimed at achieving goals of Hb1AC of less than 7%, blood pressures of less than 130/80. total cholesterols of 200 or less, and LDL of less than 100, Bestermann and his colleagues dramatically reduced rates of health attacks and avoided expensive procedures like angioplasties and coronary bypasses. They showed ordinary clinicians could achieve extraordinary results by sticking to preventive fundamentals.

• In another preventive approach, Dr. Mark Fendrick and his colleagues at the University of Michigan formed an organization known as the Center for Value-Based Insurance Design. They were able to demonstrate by decreasing co-pays for drugs that offered clinical benefit in chronic diseases like diabetes, they could improve outcomes in these disease by removing the cost barrier, and in the process, they saved thousands of dollars by preventing complications.

EMRs and Health 2.0

In 2004 with great fanfare, President Bush announced a goal of creating and perfecting a national interlocking information technology system within a decade. Its backbone was to be EMRs in every physician’s office connected to similar systems in hospitals. It was not to be. It was an example of “irrational exuberance” fostered by those who believed the Internet as some sort of Holy Grail for solving America’s health system problems.

By 2008, the original national medical director of the proposed system had resigned, and only 10% to 15% of practicing doctors had adopted complete EMRs. To doctors, most of whom were in small practices, EMRs were simply an unsustainable business model. EMRs cost too much, had little tangible return on investment, decreased productivity, disrupted normal practice patterns, and served as a punitive health plan vehicle for judging their practices, and even excluding them from networks. Yes, large enterprises – Kaiser Permanente, the VA, and the Department of Defense - showed it was possible to create system-wide EMR, but independent physician adoption remained stagnant

By 2015, however, doctors had begun to move towards EMRs because of multiple factors – newly designed, cheaper, more doctor friendly models, clearer certification standards identifying acceptable EMR systems, federal and state subsidies for doctors who identified themselves as medical home providers, requirements of Medicare and health plans to have EMRs to participate in pay-for-performance projects, and the movement of physicians toward salaried employment in larger groups and hospital systems with the infrastructure to support EMRs.

Meanwhile, a separate but related movement, Health 2.0, was vigorously growing. It too was based on a belief in the powers of the Internet, and Web 2.0, a term coined in 2003. Health 2.0 advocate said Web 2.0 methods could be used to rationalize, analyzc, aggregate, manage, select, prevent disease, promote good health, and signal the most likely cures.

The Health 2.0 movement, was created in 2006 by Matthew Holt and his partner, Indu Subaiya, two San Francisco health analysts and consultants. In The Health Care Blog, Holt announced a September 2007 Health Care 2.0 conference. Over 500 people attended, including big Internet players like Google Microsoft, Yahoo, and WebMD, and swarms of software entrepreneurs and “user-generators,” representing those who creators of Internet-based wikis, mash-ups, videos, social net workers and consumers sites.

A second Health 2.0 conference, scheduled for October 22 and 23, again in San Francisco, was sold out. Health 2.0 was variously defined as,

The use of social software and lightweight tools to promote collaboration between patients, their caregivers, medical professionals and other stakeholders


A new concept of health care wherein all the constituents (patients, physicians, providers, and payers) focus on value(outcomes/price) and use computers to compete over the full cycle of care as the catalyst for improving the safety, efficiency, and quality of health care.

Interest in Health 2.0 was at a white heat, partly because Google and Microsoft had entered the arena of creating personal health records for individuals and employers as the missing piece of a national information technology system, and user-generators thought the world of Health 2.0 was their oyster..

But their was a cloud on the Health 2.0 system. It was reminiscent of the meltdown, namely, the lack of sustainable business models to support all the innovation going on among user-generator software aficionados.

The Revolution Health Group (RHG), which three years before, had been started by Steve Case, founder of AOL, and backed by $250 million of his money, was failing because of lack of revenues. Case had started RHG, a consumer-oriented site, to “revolutionize”care by providing consumers with unlimited information to help them drive the system and improve their health. But RHG lacked focus, and it focused too much on specialist driven care. In 2008 RHG wit Waterfront Media. Waterfront's Everyday Health was the #2 health care Web site, after WebMD, and Revolution Health has been #3. Waterfront had a number of sites emphasizing consumer health issues.

Health blogger Dmitriy Kruglyak saw the demise of Revolution Health as undermining the "Health 2.0" movement. He said that, given Steve Case's substantial funding, Revolution "tried almost every Internet health idea under the sun. Many of those came by way of acquisitions, while many were developed internally by copying competitors. But, "despite impressive starting war chest and exhaustive experimentation, most revenue streams failed to materialize, aside from plain-vanilla advertising."

Kruglyak argue"Health 2.0" companies were suffering the same illusions of the Dotcom bubble--they are in love with the technology but do not have a sustainable business model. He concluded, "The sooner people ditch the hype and focus on proving their claims with metrics, the faster we will realize the true promise of the eHealth."
Part of the “irrational exuberance” of Health 2.0 may have been the belief that, given enough information and enough transparency and enough rationality, consumers and employers and health plans would surely pick providers offering lower costs with better quality. Somewhere along the line, they forgot too much information could hinder and overshelm good judgment, and consumers would trust their doctors more than algorithms generated by payers.

Health Plans Push Sustainability

From 2010 to 2020, health plans adjusted to political and economic realities. Health plans were not popular among consumers, physicians, or hospitals. Indeed, polls indicated Americans ranked health plans right down there with oil companies and pharmaceutical companies.

Public sentiment and politics forced Congress to health plans to abandon Medicare Advantage plans, which had been created to market Medicare drugs and which had served as profit vehicles for HMOs; to accept all who applied for membership regardless of pre-existing illness or health risks; to cease canceling claims from existing members who had become burdensomely expensive for HMOs to carry as members; to compete with or to join health plans fashioned after plans offered members to Congress, government employees, and military veterans; and to make premiums uniform across state lines. These were not trivial adjustments.

To survive, health plans responded by; 1) not paying hospitals for “never” events, i.e. complications in hospitals that should never have occurred – infections, blood costs, mismatched transfusions, venous thromboses, surgical errors.; 2) insisting on a massive switch to generic rather than brand name drugs; 3) striving to cut the prevalence of obesity, and its twin sister, type 2 diabetes; 4) reducing 30% to 50% “waste” in the system – unnecessary, duplicative, and overly expensive drugs and imaging procedures; and 4) by using IT to identify, rate, and exclude doctor-overusers and abusers.


In this year of 2020, health costs and other burdens on the federal budget, energy costs, have been brought into line with the rate of general inflation. Don’t misread me. All isn’t well in 2020. Technologies still drive costs, too many patients are still fat and diabetic, people still demand access to the latest, and .administrative efficiencies are still lag behind other developed countries; the doctor shortage still exists, access to care is limited, but drug prices, in part due to government negotiated prices, are down; hospital costs are dipping, thanks to transparency and foreign competition; and American people and health providers have recognized they can’t have it all and can’t afford total dependency on government with the ensuing tax burden They have begun to live within their means, to take better care of themselves, to pay more out of pocket for care, to exercise more, and to watch their midriffs.

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