Each of the experiences I have described above has shaped my thinking, but each has done so in a different way.

The data center visit

I visited a large data center, in which the operators are using state-of-the-art monitoring systems for electrical power, climate control, and the performance of its computer and server systems.  A company on whose board I sit, Eaton Corporation, is a leader in providing comprehensive power management solutions for data centers. What is remarkable about the large data centers is the degree to which these centers no longer need human beings to monitor many system components.  The central control hardware devices and software programs provide data on thousands of points within the system.  There are less than 10 employees for a huge data center.

What insight does this have for health care?  To the degree that we are designing a system that enables remote and comprehensive monitoring of the state of health of a patient population, we can do so with relatively few healthcare professionals.  Although we talk about a serious labor shortage, the labor shortage assumes an indefinite continuation of the face-to-face diagnosis and treatment systems we now have, as opposed to the remote monitoring systems toward which we are heading.

The term the data center people when describing a center monitored predominantly by sophisticated hardware and software technology is a “lights out” system.  We must evolve to a “lights out” healthcare system on the same model.

The medical school advisory board meeting

As we think about healthcare professionals being trained in modern medicine, it becomes clearer than ever that healthcare professionals not only need to learn traditional human biology and body chemistry, but to be steeped in the field of bioinformatics.  Bioinformatics is a relatively young field of knowledge and skill in which diagnoses and treatments are developed through both onsite and remote data collection and the computer-generated analyses that use the data.

There will never be a complete loss of human judgment by trained health care professionals, but their efforts can be focused on those cases in which human judgment can make the biggest difference.  Getting good data on biometric indicators, health and healthcare history, and the foods, beverages, prescription drugs, over-the-counter drugs, and other items ingested by an individual is critical to enabling the human judgment factor to work best.

Medical schools are beginning to understand the importance of bioinformatics, and to incorporate course material on this field.

The visits with biometric device producers and health plan administrators

The Dossia Health Manager now is able to aggregate not only the comprehensive clinical history on an individual, but biometric and daily activity data that enables the healthcare professional to get a much more complete picture of the individual’s state of health.

Even better, there is an increasing effort to integrate biometric data tracking and management into health plan designs.  Employers and health plans have been providing services and incentives to get individuals to participate in health risk assessments, but these have been one-time exercises, as opposed to a program of capturing and tracking health data all the time.

There was a 2010 Kaiser Permanente study which supported the view that someone who regularly tracks blood pressure is 50% or more likely to control blood pressure.  This is consistent with a broad principle, often articulated about business objectives, that what gets measured gets managed.  The ability to capture blood pressure data with wearable devices is better than ever, and should be stimulated with incentives and rewards.

Shopping at the local pharmacy

Perhaps the most interesting learning I have done over the past month has come from wandering through several pharmacies while I was shopping for a few items.  Near the pharmacy counter at every counter is an increasing variety of home health test kits which are getting close to laboratory accuracy.

One which particularly caught my eye was a kit costing about $30, marketed by Bayer, which enables a user to draw a drop of blood and get a quick reading on his or her Hemoglobin A1c level.  Hemoglobin A1c is a leading indicator of Type II diabetes.  In the past, someone like me, who monitors this biometric indicator as closely as possible because of a family history of Type II diabetes, a genetic predisposition to the disease, and a slightly elevated level of blood sugar, would have had to get a physician to write an order for a laboratory test.  I would have had to schedule an appointment to get blood drawn, and would have had to wait at least one day, and possibly longer, to get my A1C reading.

Today, I can buy my own kit, draw my own blood, and get a same-day reading of my A1C level.  While I would not rely on a home test kit for a definitive diagnosis, I can track general trend information and can do so far more frequently than would be the case if I relied on a physician’s order and on having to schedule an appointment at a lab.

The next step in the evolution of these biometric devices is to make them able to communicate automatically with either a smart phone or a laptop or desktop computer, so that the data can be communicated directly back to a personal health record controlled by the patient.  Once that happens, the productivity of healthcare professionals will increase dramatically.

Instead of having nurses reside at a physician’s office or visit each patient at home, the nurse can work from either a home-based desktop computer or a mobile laptop or I-Pad device to track the health status of a much larger patient population than ever before.  Physicians would write orders to that nurse relative to what biometric indicators are most relevant for a particular patient.

Final comment

The biggest obstacle to adoption of this “lights out” healthcare system is the resistance of those who have built strong capability and income from face-to-face diagnosis and treatment systems.  If I operate a large medical practice based on the assumption that I must see every patient I treat, it will be very difficult to put into place systems and processes that operate as if I am not there.  The biggest challenge in diminishing this resistance is not technological or educational; it is the fear of losing income, jobs, or status.

“High consumption of care is driven by the crowd of academic medical centers, specialists, and equipment needed to perform tests. The Bay State has one doctor for every 267 citizens — versus one doctor for every 425 people in the nation as a whole. Supply drives demand. “

Supply-driven demand happens for two reasons, often overlapping:

• Healthcare providers believe in a particular treatment or therapy, and try to maximize the number of people who access it.  This is often reduced to the saying that “If you have a hammer, every problem is a nail.”  Supply-driven demand occurs when people who should not be customers for a particular service become customers because the provider of that service force it beyond its natural market.
• Healthcare providers have excess capacity, and try to get that capacity in use.  This happens with expensive diagnostic imaging equipment, hospitals, and outpatient centers.  It is even arguable that physicians react to reduced usage of their services by patients who become healthier by increasing the frequency with which they see other patients.

The other reason hospital capacity drives demand is that, even when it makes sense to close or shrink a hospital, there is a strong reluctance to shrink or close a facility that appears to be a strong job preservation engine in a community.  However, we must confront the issues associated with repurposing healthcare facility and provider assets, because our current healthcare architecture is unsustainable.  Too many Americans, probably now in excess of 15 million, are employed in healthcare, and too much of our GDP, now around 17%, is devoted to healthcare spending.  We need to redeploy a significant percentage of healthcare assets toward alternative uses.

Closing a hospital can be done in the situation in which there are other hospitals that can absorb the patient population the closed hospital used to serve.  In Stamford, Connecticut, St. Joseph’s Hospital was closed and most of its patient population migrated to the Stamford Hospital in the late 1990’s.  The Stamford Health System, which owns the Stamford Hospital, created a new wellness, outpatient diagnostic, and outpatient surgery center on the old St. Joseph’s Hospital site.

However, there are less drastic alternatives to closing a hospital, especially when there is one hospital in a community and closing it completely is not a viable option for the served population.  Repurposing big chunks of hospital campuses is an option that healthcare policy makers have to consider, and for which they need to develop an expertise. Although the examples I have found around North America all relate to redeploying complete hospital sites, as opposed to partial redeployment, they are instructive on what could be done with separable parts of hospitals.

In Vancouver, British Columbia, the unused hospital space became an Arts Center.  In Rogers, Arkansas, the closed St. Mary’s Hospital became a Center for Nonprofits.  At Virginia Commonwealth University, a former hospital was converted to student housing.  At the Tufts Medical Campus, unused hospital space became a café and fitness center.

The repurposing of hospital space that is no longer needed for patient care can also take into account the needs of medical residents, who could live in the space, which, in some cases, has been converted to residential and retail space.  Given the exorbitant cost of medical school and medical residency programs, subsidized housing could be a great alternative to more hospital beds.

I could also envision an innovation incubator, in which there are small offices for entrepreneurs of start-up businesses.  In downtown Stamford, Connecticut, there is an attempt to use an old government building as an incubation center.

While hospitals will lose revenue potential by shrinking, the overall healthcare system needs to look at what benefits society as a whole, as opposed to what will maximize an individual hospital’s revenue and jobs.

What happens to those no longer working at the hospital?

• Those working as healthcare professionals, doctors, nurse-practitioners, nurses, physician’s assistants and nurse’s aides can be redeployed to the remote or the onsite care of patients in their homes.
• Those working in clerical and administrative jobs could also be redeployed in organizations that provide care, but in a less capital intensive organization.
• Those who provide facilities related services can provide those services to whatever uses are substituted on the site.  There are some facilities services, such as hazardous medical waste management, that will go away completely, but food service, maintenance and repair, and delivery services will survive.

Who loses when a hospital is repurposed?

• Providers of expensive diagnostic technology will see a significant volume drop.  Eventually, Medicare and other payers will create payment systems that reduce payments to a level at which unconstrained use of diagnostic imaging tests will not be able to be reimbursed.
• Doctors who rely on scheduled surgeries will lose opportunity because the hospital will do fewer surgeries.  However, one alternative to a portion of a hospital is an outpatient surgical center, which can absorb a portion of the supply.
• Providers of ambulance and emergency medical technician services will see a volume drop only if there is not alternative hospital to which to take patients, so emergency departments will not be automatically reduced to handle real emergencies.  However, there are emergency department transactions for non—urgent care that can be taken out of the hospital altogether, and can be managed through remote care.
• Labor unions which represent certain groups of employees that will be scattered when redeployed among a number of employees will lose, to the degree that their collective bargaining agreement is narrowly targeted at a specific employer.

The bigger challenge in closing or repurposing a hospital is political.  Elected officials intervene on behalf of any group, which believes it will be disadvantaged.  This is especially the case if the apparently disadvantaged group is organized to effect powerful political advocacy, such as a labor union, or if there is a high proportion of people of color in the groups affected by the decision.

The biggest skill set required in repurposing healthcare assets is the ability to envision a future that is better for the community, better for the community patient population, and not unduly disruptive to the various stakeholders, which benefit from having the hospital remain intact.

Having leaders who can think through and implement a game plan to transition elected officials and the communities they represent toward an alternative future that reduces the footprint of the healthcare system is our biggest challenge.

Some large self-insured employers will move their employees to the newly created state and federal health exchanges.  They will pay taxes or penalties to do so, but it will be better economically, in the short term, for them not to have responsibility for employee health care costs.

However, many employers will invest in the health and wellbeing of their employees, and derive competitive advantage from doing so.  Why?  For employers free to design an optimal healthcare system, including onsite clinics providing comprehensive primary care and developing a selective specialist provider and hospital network, the ability to design a good healthcare system gives them much more control over their employees’ health status, sense of wellbeing, and health benefits costs.

Some employers, like American Express, are even building care delivery networks outside the United States, in countries that have single-payer systems and that have government-employed doctors and government-owned hospital networks.  The staff physicians for these employers provide far better care, which is very attractive for talent recruitment and retention.

What employers will opt out of offering direct health care coverage?  Companies that have lost control of health care costs, such as those with exceptionally generous collective bargaining agreements, will welcome the chance to offload their entire population to health exchanges.  In many companies, CEOs simply do not understand that they can manage employee health and wellbeing and deliver shareholder value.  In others, corporate benefits departments do not want to assume responsibility for health care cost reduction.

Employers who retain health care coverage will develop better provider networks, and may even create multi-employer consortia.  This is happening in Southeastern Wisconsin, with Quad Med, Briggs & Stratton, Miller Coors, and Northwestern Mutual Life.  It is also happening with a consortium of labor unions in the New York City in the UNITE Here Health Center.

What will these employer-based health plans look like?

• They will migrate toward consumer-directed plans with high deductibles and co-pays for plan participants;
• Plan participants will be given significant incentives for making the best choices for their health, health care, and health benefit plan spending;
• Plan participants will be given continuously improving tools for self-managing health, including consumer-controlled personal health management systems like Dossia, clinical decision support tools, choices among health and wellness vendors, and good information and technology tools for continuously monitoring health; and
• Employers will put more decision power into the hands of plan participants and will force health plans to market directly and successfully to consumers to secure revenues.

These employer-based “accountable care” systems will be among the world’s best health care systems.

The wealthiest Americans will leave the core systems of which they are a part and pay extra for concierge medicine. They will consult with physicians who accept no Medicare patients and who direct their patients to the world’s best care, wherever available.  These Americans may actually be consumers of medical tourism, when that care is superior outside U.S. borders.

There is precedent for this.  In the UK, the top layers of UK society initially acquired supplemental health insurance through BUPA and, more recently, seek out care wherever it can be best delivered, including India, Singapore, and the United States.  Medical tourism started to meet the demand from single-payer systems abroad, but it will get bigger here.

There will even be increased medical tourism within the United States.  Concierge doctors will refer patients anywhere in the country in which they can secure the best care.  This system will also deliver exceptional care.

Some Americans will receive world-class care because of the lucky accident of where they are living.  Those Americans in the seven states in which Kaiser-Permanente is licensed to do business, or in Utah, where Intermountain Healthcare is based, or in Washington state, where Virginia Mason is based, or in Southeastern Pennsylvania, where Geisinger is based, will get excellent healthcare.

Other systems around the country will attempt to copy them, and some will succeed, but most will have difficulty, because, for the most part, world-class accountable care organizations will have been created in business models in which the primary care physicians are staff doctors paid a salary and in which there are tightly controlled specialist networks.  These systems work because they effectively limit patient choice by steering patients into a single managed care network.  They will stop seeming like a satisfactory alternative when the limitation on patient choice produces bad outcomes in a handful of high visibility cases.

There is precedent for this.  Back in the 1990’s, payers were effectively controlling healthcare costs and utilization through tightly managed care networks.  These systems also delivered a reasonable level of care quality.  However, they were dismantled because there were a variety of high-profile cases in which it appeared that the healthcare delivered was of inferior quality because the patient could not select the provider of choice.

Most government-run systems outside the United States use some form of provider choice control or give patients no choice as to providers.  Some have “gatekeeper” systems in which the patient cannot directly consult a specialist.  In the United States, such systems can survive only if they can avoid getting legislated or regulated out of existence because of the appearance of delivering inferior care.  They survive, but are highly vulnerable to being dismantled.

Many people have used the Veterans Administration and Military Healthcare systems as models for great healthcare at an affordable cost.  They have electronic health record systems.  They take advantage of broad clinical learning.  They deliver convenient and low-cost care through staff physicians and nurses paid on salary, and they develop long-term relationships with their patients.

However, because premiums paid by users are so low, and raising the prices paid by veterans and military families is politically suicidal, the federal government will reduce the financial burden of this system by quietly reducing the supply of care, rather than working to reduce demand.  They will shrink the size of facilities, the size of their staffs, or the hours of service, rather than increase the cost of accessing them.  Although shrinking a hospital or outpatient center is politically challenging, demanding that users increase their premium payments by several thousand dollars a year would be politically suicidal.  For example, the military health care system charges a 60-year-old military retiree $426 per year in premiums, a ridiculously low payment, considering that this type of retiree costs the system in excess of $10,000 per year on average.  However, raising premiums to even $1,000 per year is the metaphorical “third rail” issue; politicians will not touch it.

The best place for low income Americans dependent on Medicaid or other safety net health care programs is at community health centers.  These centers are generally better equipped to handle the complex problems low-income Americans face, particularly those with language and cultural barriers.

The top community health centers have expert resources to assist patients in applying for government benefit programs, in managing transportation and childcare issues, in addressing related social service issues, such as domestic violence, and overcoming language and cultural barriers.  They also tend to manage appointments for patients with more unpredictable schedules far better than a traditional private health practice.  Finally, they develop expertise in managing the different kinds of health problems very poor people have, compared with their non-indigent counterparts.

The Medicaid legislation passed in 1965 contemplated that Medicaid and Medicare patients would be part of mainstream health care systems and that Medicaid and other safety net programs were simply ways of paying for health care for poor people. We now know, from nearly five decades’ experience, that low income people have other overwhelming life challenges.  Their health care, economic and family needs are different, and are interrelated.  They need expert care a community health center is better equipped to deliver.

Medicaid and other safety net programs could have paid more for health care, and enabled private practice physicians to handle Medicaid patients, but the reimbursement rates for Medicaid providers are so low that private practice physicians have increasingly stopped seeing Medicaid patients.

Therefore, the community health centers will end up handling them, and will actually do a reasonably good job delivering care.

In trying to address budget deficit issues, the Obama administration and its successors will try to reduce what Medicare pays for health care.  This will cause even more medical practices to drop Medicare patients, because these patients have more complex health challenges for which the doctors will be paid less.

We continue to see a hemorrhaging of primary care physician populations, which leaves the Medicare populations even more poorly served by private practice physicians.

Medicare patients will seek out more care at retail clinics for minor illnesses or injuries, at urgent care centers for serious conditions, at emergency rooms for acute conditions.

We will see shrinkage of the physician population with the skill and will to take on older patients with more complex health care challenges.

Most Americans who work in small businesses, who freelance or are self-employed, who are unemployed, or who work for large companies that have abandoned health care coverage will end up in health exchanges.  They will get a progressively poorer quality of care from private practice physicians. They will wait longer for care, have long waiting times in doctor’s offices and hospitals, have short visits with healthcare providers, get too many diagnostic tests in place of more careful physical examinations because the fee-for-service system will survive and drive dysfunctional behavior by physicians and hospitals.

They will also visit urgent care centers and emergency departments more than they should, because these parts of the healthcare system will be accessible to them.

While the quality of care delivered through this government-regulated system will decline, the cost for patients will increase significantly.  There will be high deductibles and co-pays, and the risk pool in this population will get worse over time.  The state-run exchanges and any other system created and managed under the Affordable Care Act or any regulations emerging from it will receive those members not wanted in other systems.  For example, employers with already healthy populations will retain their health plans; employers with unhealthy populations will happily dismantle their health care coverage and drive employees to the exchanges.  There will be an “adverse selection” problem.

The titanic battle between proponents and opponents of the individual mandate, that is, the requirement that individuals either purchase health insurance or pay a penalty for not doing so is constitutionally and politically critical, but arguably irrelevant to whether our country will end with everyone insured.

The individual mandate design created by the Affordable Care Act, as well as the Massachusetts design, both are flawed in driving individuals to secure health insurance because the penalties an individual has to pay if he or she does not elect to secure insurance are inadequate.  I have commented on this more than once: if an individual driving into New York City were to have a choice between paying $40 to park legally in a garage or paying a $20 parking ticket for parking illegally on the street, the vast majority of individuals would elect to park illegally.  It’s nice to have a symbolic penalty, but such a penalty works only if the cost of noncompliance is close to, or better yet, greater than, the cost of following the law.

Because our elected officials did not have the courage of their convictions to create meaningful incentives or penalties for getting every individual covered by health insurance, a significant part of the population, many of whom will be young, healthy people who usually subsidize older, less healthy people, will remain outside the health insurance system.

They will actually have more attractive health care options available to them.  They will access retail clinics for treatment of minor illnesses and injuries. They will have more retail choices for both immunizations and periodic screenings.  They may even be able to access medical tourism options for surgical procedures that would otherwise be prohibitively expensive, even in an insured health care system. They will continue to access acute care at emergency departments.

They really do not need to secure health insurance until they have a condition that is both expensive and chronic, one in which emergency department care is inadequate.  In the past, they would not have risked waiting to get health insurance until getting a chronic condition, but the Affordable Care Act eliminates any barriers to them securing insurance whenever they can no longer operate in the uninsured system.

Oddly enough, absent a much more punitive individual mandate, the Affordable Care Act may actually drive more individuals into the uninsured system for longer stretches of their lives.

Final Comments

It is very difficult to reform the multiple health care systems that, in aggregate, employ over 15 million people, most of them in middle-class jobs, that contribute almost $3 trillion per year to our economy, and that are perceived to deliver two public goods, healthcare and insurance protection against catastrophically high healthcare expenses. Change will come from a combination of evolutionary development of better care for those who can acquire it outside the systems heavily regulated by the government and increasingly complex and dysfunctional government interventions.

The goal of universal healthcare equitably available to all Americans will not happen.  Those smart, rich, or resourceful enough to demand great care will get it; the remaining Americans, overwhelmed in trying to manage their daily lives or not sufficiently “street-smart” or rich will be lucky to get adequate, affordable care.  The more government tries to intervene to achieve fairness or to correct fraud, waste, and abuse, the more the system will create new opportunities for fraud, waste, and abuse. Moreover, as noted above, the government’s misguided attempt to eliminate denials of coverage for preexisting conditions will provide a perverse incentive for more individuals to drop out of the health insurance system until it becomes economically untenable for them to stay out. Every government intervention will result in a new set of “gaming” opportunities.

Some people would say that we have a crisis in health, healthcare, and health insurance, and that the crisis should be a call to action.  Unfortunately, the history of our representative form of government would suggest that crises are noticed and acted upon when they are triggered by highly visible events, coupled with strong leadership and large movements to take advantage of them.

Moreover, even when there is a crisis, there has to be an agreed-upon paradigm for how to think about the issue.  We do not have that:

• We do not have a consensus on how to resolve the healthcare crisis.
• We want everyone to have health insurance, but are not prepared to take the hard steps to penalize those who refuse to buy it.
• We support the goals of unlimited patient provider choice, unlimited access, very limited penalties for irresponsible and destructive patient behavior, and the belief that more access to care always yields better care and better health.
• We know that unlimited access and unlimited choice yield bad economics, but do not fully understand that most of the cost of healthcare comes from preventable and controllable decisions that should be penalized more; and
• We have exceptionally little understanding of the degree to which more care often means worse care and poorer health.

Our system will simultaneously improve in certain respects and deteriorate in many others for the next decade, but I am confident that it will settle into a complex, multi-segmented system like what I have described.

When governments, private insurers, and self-insured health plans try to drive drug prices down and, specifically, to convert patients from using generic drugs instead of branded drugs, there is a limit in terms of cost-saving opportunities available, without putting patients at risk.  To push cost savings beyond that point inevitably raises a huge risk of acquiring generic drugs priced at a level that does not optimize patient safety.

We cannot solve our health care cost crisis entirely primarily by driving prices down for drugs, supplies, devices, and medical services.  We have to reduce unnecessary usage of the health care system, and to drive the healthier behaviors that are the most sustainable way of reducing health care system usage.

Publicly held businesses and governments under stress for excessive costs often have the tendency to flex their muscles in procurement processes to demonstrate their ability to save money.  The unit cost savings are visible, the savings opportunities are often immediate, and the purchasers can present themselves as fiscally responsible.  Moreover, it is far more comfortable for payers to beat up on suppliers through the procurement process than to deal with the messy questions associated with inappropriate usage of the health care system, or driving people to engage in healthier behaviors.

There are two things wrong with relying on procurement strategies as the primary cost reduction tool:

• Unless there are tight controls on what is purchased, cost reductions are often covered by sellers cutting corners in what they are providing, or reserving the right to charge for what had been given away.  Government contractors have mastered the process of low-balling initial contract price offers, and then making huge profits from “extras” which are inevitably required by the government at a later time.  The so-called savings are phony; they are merely costs that are deferred to a later time and are often higher than a more comprehensive competitive bid.
• The sellers who agree to accept lower prices and try to honor them according to their terms often find themselves unable to perform profitably.  Over time, the pool of sellers willing to bid on business that is consistently likely to be unprofitable shrinks.  Eventually, the purchaser has no competitive options.

In the pharmaceuticals context, the corner cutting can be fatal to patients, as was the case with heparin.  Although I obviously cannot know what happened in every health plan procurement negotiation, I would not be surprised that purchasers which drove a hard bargain on pricing for generic drugs created an environment in which the supply chain functions of pharmaceutical manufacturers attempted to acquire ingredients for the drug at a price that could not be supported with the extra cost of a tightly controlled supply system.

There are no “magic bullet” ways to take drug prices down beyond a certain point.  Major drug manufacturers are administratively inefficient; they spend excessively on marketing and sales; and they may still have less efficient research and development processes.  However, beyond a certain point, cost cutting will cause people in their organization to take actions that put processes at risk.

Employees of pharmaceutical companies are not excessively evil or reckless compared to other businesses or governments; this is true of every large organization.  Employees under severe pressure anywhere to cut costs make stupid and reckless decisions to keep their jobs.  They particularly cut costs in areas in which the consequences are less visible or more likely to appear at a later time, especially if they can transfer the risk to someone else.  They are unlikely to go after the most sustainable cost reductions, which involve messy structural reform of their organizations.

In the health care marketplace, this was illustrated particularly with the Johnson & Johnson manufacturing safety problem in the last few years.  Much of the publicity about that case demonstrated that the root cause was a culture that, over time, became excessively focused on cost cutting at the risk of patient safety.

Relative to other areas of health care, the same principle applies: there is no free lunch when costs are cut excessively in the procurement space.  One major firm was very happy with the fact that its insurance plan administrator significantly reduced the payments due to physicians, hospitals, and other healthcare providers. The plan administrator secured a very good long-term contract because it presented itself as having a better ability than other administrators to negotiate prices with providers.

Unfortunately for the Company, the consequence of this hardball negotiation process was that many providers left the network and stopped treating patients with whom they had long-term relationships.  As a result, the Company lost in two ways:

• Some patients stayed with these providers, who were now out of the network and were charging much higher prices.  Even with lower reimbursement percentages for out-of-network care, the Company still paid more.  Out-of-network costs shot up.
• Some patients changed providers, received disruptive and suboptimal care, and were very unhappy with the Company for causing this to happen.

As a CEO, I was never comfortable with strategies based predominantly on procurement-based price reductions.  They tended to work for 2-3 years, and then fell apart.  The better strategy was to work with vendor-partners to get better products and services through sustainable cost reductions.  For example, I always liked solutions in which parts were re-engineered or packaging was reduced, or a less expensive, but equally reliable, way to ship the product was found.  These kinds of cost reductions were more challenging, but they worked.  Cost reductions based solely on price concessions struck me as a very lazy way to reduce costs.  I supported them, but, to a limited degree and for a limited period of time.

Ultimately, the challenges of reducing health care costs will require us to make deep and broad structural changes on how we live our lives, and allocate societal resources.  The move from branded to generic drugs is a small step in health care cost reduction, but, like every other, it has limited value and has to be managed with great care.

The Old Paradigm: Healthy people subsidize those who get sick or injured through no fault of their own.

Throughout the history of U.S. health insurance, the prevailing paradigm was that everyone paid for health insurance, with the healthy people paying higher premiums to subsidize those who became sick through no fault of their own.  State insurance regulators authorized the issuance of health insurance policies with three rating frameworks:

• Community rating: everyone paid the same premiums;
• Adjusted community rating: differences in premiums are allowed, based on population demographic factors like gender, age, and geographic differences in health care delivery costs; and
• Experience rating: those with pre-existing conditions either were denied coverage, paid more, or had coverage exclusions.

All these systems assumed that insured people had no control over their health.  Therefore, adjusting premiums based on individual behavioral risk factors, such as smokers’ penalties, allowed in life insurance policies, or premiums based on taking a drivers’ education course, part of automobile insurance ratings, were not allowed in health insurance policies.

The old paradigm made more sense in the early 20^th century because most health care costs arose from life-threatening infectious diseases or catastrophic injuries, believed to be beyond individual control. There were fewer treatment options for major diseases, and they did not have huge cost differences. Therefore, rewarding patients with lower premiums, deductibles, or co-pays for intelligent, discretionary treatment decisions made less sense.

The New Paradigm: Health insurance premiums, co-pays and deductibles are adjusted based on patient behaviors.

Recent decades have seen a radical shift in health care cost drivers.  Preventable and controllable diseases, such as Type II diabetes, heart disease, many cancers, and behavioral health and substance abuse conditions, comprise the vast majority of our health care costs.

Additionally, there are huge differences in the intensity of care provided to individuals, based on their providers selections and decisions they make among discretionary treatments.  Differences among end-of-life treatment options are hundreds of thousands of dollars.  Prostate cancer or back pain options can vary by tens of thousands of dollars. More health care costs are controllable.

Health insurance regulations and plan designs have not recognized these realities. Self-insured employers have the best chance to design health plans with the new paradigm because they feel the most pain and have the most plan design flexibility.

Value-based health insurance plan design is the new paradigm for self-insured employers.

Principles

Value-based health insurance plan design for self-insured employers is the new paradigm.  It is based on the following principles:

• Plan members are rewarded for behaviors reducing the risk of incurring preventable medical conditions.
• Plan members are rewarded for making intelligent choices of high value providers.
• Plan members are rewarded for intelligently evaluating treatment options.
• Plan members that adhere to treatment protocols get rewarded.  Those refusing to adhere to treatment protocols get penalized.
• Providers delivering better care at lower cost are rewarded with higher reimbursement rates.

Evolution of value-based health insurance plan design

Employers like Pitney Bowes adopted relatively simple versions of value-based health insurance, and obtained excellent results:

• They made preventive care free to plan participants, while charging participants for accessing the health care system.
• They supported health plans by making preventive care such as immunizations, health screenings, and health risk appraisals conveniently available, and paid participants for health-promoting behaviors.
• They enabled individuals to adhere to chronic disease treatment plans by making maintenance medications free of charge.
• They steered participants to treatment paths that increased their intelligence in making treatment decisions:
  • Pitney Bowes provided higher mental health reimbursement rates to participants accessing eight free behavioral health counselor visits before selecting their treatment path.
  • Pitney Bowes introduced a multi-stage treatment path for treating morbid obesity, with bariatric surgery as a last-stage, as opposed to first-line, treatment.
  • They created higher charges for emergency department use for non-urgent care, or for excessive diagnostic imaging test use.

These plan design implementations were successful, but the patient-controlled, portable, personal health management system, with a core personal health record, takes value-based health plan design to a new level.

The newest paradigm: value-based health insurance plan design rewards the right behaviors more precisely, faster, continuously, and more powerfully through a personal health management system.

Large self-insured employers understood that employees needed help navigating complex health care systems.  They purchased disease, care, and large case management programs, often from third-party insurance administrators to improve engagement. They also provided health-promoting behavior incentives, either within health plans or in separate employer-sponsored wellness programs.

The 2011 Towers-Watson Survey of employee benefits executives indicates that large employers are dissatisfied with these programs.  These programs achieve about 10% engagement from the target population, and have not produced hoped-for health outcomes.

Employers are also dissatisfied with prevention and wellness programs, because they believe that they are not securing additional participants.

How do personal, portable, patient-controlled health management systems solve these problems?

Personal health management systems allow data collection more frequently, more precisely, and in real time.

Daily tracking of biometric data increases the likelihood of controlling the disease being managed. For example, tracking blood pressure for a person with hypertension increases the likelihood of controlling hypertension by over 50%, based on a 2009 Kaiser-Permanente study.  This supports Peter Drucker’s observation that “what gets measured gets managed.”

A new value-based health plan design application would reward an individual partially for tracking key biometrics and partially for controlling them.

Personal health management systems create new and more effective ways of delivering health care coaching that an employer can reward.

Rewarding someone for engaging in a wellness program or for engaging with a health coach, nurse, or physician to manage a medical condition has produced disappointing results.  Wellness program providers routinely get only between 10-15% of the target population engaged in these programs.

Tailoring communications to consumer preferences will improve consumer engagement. The ability to supplement face-to-face and telephonic communications with text messages, or online web site, e-mail, and live chat tools makes these programs more effective, especially if the consumer receives rewards for every contact, not just the initial contact.

The value-based health plan could vary the co-pays and deductibles for an individual who engages frequently with health coaches or nurses in managing a chronic condition.

Personal health management systems are more effective at monitoring adherence with chronic disease treatment plans and other necessary medical practices.

One inherent frustration of self-insured employers is that high health care expenses come from individuals who fail to adhere to their chronic disease medication regimens, thereby ending up receiving expensive acute care.  A personal health record will receive information as to whether a prescription is filled within minutes after it is filled. The Vitality Glowcap device also enables monitoring of whether users are taking their medications.

In addition to making maintenance medications free of charge, the value-based health plan could provide incentives for filling a prescription within a specified period, for taking medications on schedule and for getting timely refills.

Personal health management systems can provide exceptional patient decision support tools for health care treatment decisions on conditions for which a variety of imperfect treatment options are available, such as back pain, obesity, mental health, prostate cancer, and end-of-life care.

Treatment differences manifest themselves in such discretionary decisions as:

• caesarian surgeries,
• surgery as a first-line option for relieving back pain,
• prostate cancer victims using either the most expensive laser treatment technology instead of watchful waiting,
• administering chemotherapy extending life a few weeks, but resulted in shortening life for many patients, and
• using bariatric surgery for morbid obesity.

The personal health management system can provide tools for patients to understand the strength and weakness of all treatment options.  Requiring patients to study these options does not automatically nudge them toward the least expensive option, but helps them control the decision, as opposed to having it imposed on them by their physician. It also makes them more active partners in managing their health.

The value-based health plan gives strong financial incentives for patients to engage in a careful, interactive decision process before making a choice among discretionary, imperfect treatment options.

Personal health management systems are great vehicles for helping patients, those making care decisions for them, and those working with them to improve their health to determine their life goals and values, as well as their sources of well being in their daily lives. Armed with such information, physicians and other health care professionals can help patients and those making care decisions for them make the best decisions on how to optimize health and well being.

Many flawed health promotion strategies assume that, if we educate individuals on healthy behaviors, they will engage in those behaviors.

Optimal health does not generally drive individual behavior.  Otherwise, no one would smoke, abuse alcohol, overeat, play inherently dangerous sports, or drive recklessly.  Many factors influence health-related decisions, such as peer and family acceptance, the pleasure derived from unhealthy behaviors, the perception that unhealthy foods cost less than healthy counterparts, and the belief that the unhealthy behavior has healthy side effects (smoking suppresses appetite and keeps smokers thinner.)

We need to understand life goals and values before changing them.  The personal health management system is wonderful for engaging in a dialogue to determine life goals, and figuring out what motivates both healthy and unhealthy behaviors.  The Mayo Clinic has a wonderful tool called “motivational interviewing,” which is great for this purpose.

These life goals are particularly critical to understand when the individual is unable to make healthcare decisions.  End-of-life decisions lend themselves to decision processes tested against life goals and values.

Value-based health plans, combined with personal health management systems, would be a major step forward in helping us produce better health care at lower cost.

I have now been the President and CEO of Dossia for almost four months.  As I look at the personal health record landscape, I think that those who care about this space need to rethink some fundamental directional assumptions about health information technology.

We are “consumers,” not just “patients”

The term “patient,” as applied to health information, has two flaws: first, we need health-related information at all times, not just when we are in a doctor’s office.  Health management is a 24×7 activity, not an activity confined to our clinical encounters, which are a tiny fraction of everyone’s life.  Second, “patient” is a passive term.  We should be controlling the management of our health, not being a passive recipient of clinical care.

We need all clinical information, not just medical information.

Our health care system encounters are with doctors, hospitals, outpatient centers, pharmacies, labs, imaging centers, dentists, alternative medicine providers, nutritionists, fitness trainers, health counselors, and retail outlets at which we receive immunizations and screenings.  We need all information, not just what our preferred doctor, hospital, or insurance company wants us to see.

The “medical home” and “accountable care organization” concepts contained in the recent health reform legislation are somewhat flawed because they assume we will concentrate our health care in one system.  That will never happen because we will want choices, even if we stay in the same geography. However, a sizable part of our population will change residences, which will force changes in health care providers, employer plan sponsors, and insurance plans.  We need a comprehensive and portable health information system.

We need all health-related information, not just clinical information.

Much of what matters to our health relates to non-clinical activity: what we eat, how active we are, how much sleep we get, how much stress we feel, what vitamins, herbs, and over-the-counter drugs we take, what infections are exposed to us, our genetic make-up and expression, what environmental hazards present themselves to us, and what injuries and cumulative physical stresses we risk.  We need all of that information presented accurately, automatically and comprehensively into a health record, not just what we can remember when asked by a doctor.

We need help navigating through health care payment sources.

The days when most Americans could anticipate having all their health care costs covered by a health plan are long gone.  Today, we navigate payment through four sources: the health plan, a tax-deductible vehicle like a Flexible Spending Account, a Health Savings Account, or a Health Reimbursement Account, an employer or other incentive program, or self-payment.  We need help navigating through these different payment streams.

We need help making health care decisions.

Health care decision making is increasingly complex.  It is influenced by cost, quality of care, relative effectiveness of treatments, and what health plans and other payment sources will cover.  Consumers increasingly need more decision support, because choices are imperfect.

We need to recognize that health-related decisions are often made by someone other than the patient.

The health care system and policies related to it, such as privacy policies, assume that most health-related decisions are made by the patient.  However, we know that this is not the case for many parts of our population.  Parents make health decisions for children, but a parent also drives health decisions for a spouse, for elderly parents, and even for elderly in-laws. People living together outside of traditional marriages are also making health-related decisions for domestic partners. Additionally, more elderly people are giving others health care proxies to make decisions for them under certain circumstances.  Our health care system needs to recognize this reality and accommodate in access to health information.

We need to recognize that people need help with decisions relating to health management.

The personal, consumer-controlled health management system assumes that, for many medical decisions, the decisions are not simple and the choices are both imperfect and inherently based on incomplete information.  Health management tools have to be available to make the health record more valuable in bringing to bear on health care decisions.

Privacy preferences are not simple and they will change, based on changing life circumstances.

Many privacy advocates, who are highly suspicious of the security and privacy of any health information system, and who may have experienced or been made aware of bad health outcomes because of misuse of health information, assume that everyone wants health information kept private. The real world is more complex.

Some people freely share their health status on public web sites, and on semi-public sites like Facebook, knowing that the information is no longer secret as a result.  For some, they do not care who knows.  For others battling a debilitating disease, they want to share information to get the best possible sources of help.

Others are willing to share information based on their need to find out better sources of help on allergies, back pain, or injury rehabilitation, but do not wants others to know that they have heart disease, because of job-related concerns.  Anyone who expects to apply for a health insurance policy wants to keep health information secret to the degree that it affects their ability to get insurance or to get the lowest possible rates.

Privacy consent management has to allow patients or caregivers to express precisely patient preferences and to have those preferences honored.

Moreover, people who express a preference at one time may change that preference, based on changed life circumstances.  Someone who is newly diagnosed with a condition may have more desire for privacy, or, in the alternative, may want information communicated more broadly.

Any privacy system has to make it easy for individuals to change preference profiles.

Conclusion

The state-of-the-art personal health management system needs to take all these factors into account.  Too much of what passes for personal health record systems today are based on flawed assumptions about how health, health care, and health benefits actually work. Dossia strives to help people function in the world as it is, not as we believe it once was.

In early 2009, the Obama Administration included significant funding in the ARRA stimulus legislation for the upgrading of medical records in physician offices, and directed the U.S. Department of Health and Human Services and the Federal Trade Commission to issue regulations, which would implement a transition process over a multi-year period.  Those regulations are largely in place and the legislation and regulations have enabled Dossia and the other players in the market, including Microsoft and Google, to get anchored in a relatively stable, coherent regulatory environment.

When many members of the public do not understand is the difference between electronic medical records, which a physician or hospital might maintain on their patients or a pharmacy, or insurance company might maintain on its customers, and a personal health record, which the patient or customer maintains on his or her own.  Even the Executive Branch of the federal government and members of Congress did not understand the difference when we started four years ago.

Many people ask us: why should a patient maintain a record separate from the records held by these other parties?  After all, could not the patient simply be given online access to these other records when he or she needs that access?  There are three big reasons why the Dossia founders, of which there are now ten companies, including Pitney Bowes, my old company, have invested in a separate personal health record business (although the founder employers’ only role is to give Dossia access to their employment base for marketing and enrollment purposes. The employers never have access to any individual or population health records.):

• The majority of Americans access more than one doctor, one pharmacy, one hospital, and one health plan.  Having your records scattered all over the place is not a good way of managing your own or your family’s health.  None of us who have to file an income tax return or manage our personal or household budgets would feel comfortable if we had to access relevant financial information in several record systems we did not control and could not consolidate.  Dossia is like Quicken in its goal of consolidating records from multiple and disconnected systems.
• To manage your health, getting records put together in one place is essential.  Bad health outcomes sometimes happen because individuals forget to tell a doctor or dentist that they have been taking a particular medication, or that they have a particular health history.  For example, something as simple as whether a person is taking a blood thinner medication for a cardio-vascular condition becomes very relevant for even the most routine surgical procedures.  Recently, I scheduled a minor surgical procedure to get a mole removed from my back, and was asked if I were taking a blood thinner.  Like most males over 45 years old, I am taking an aspirin tablet, which I was directed to stop taking a few days before and after the surgery, but, if I had been taking Plavix, Cumidin, or one of the more potent blood thinners (which, fortunately, I am not), the consequences of my physician not knowing about these medications could have been serious.
• Sometimes records get damaged, lost, or destroyed.  When we formed Dossia in late 2006, one of the first parts of the country that indicated an eventual interest in a portable patient-controlled record was New Orleans, since many paper and some electronic records were destroyed.  Many residents moved to Houston, Baton Rouge, and other cities but lost permanently any health records that had been in physicians’ offices, hospitals, or pharmacies in New Orleans.  Sometimes, hospitals have a policy of destroying certain records, like imaging tests, after many years of inactivity relative to a patient, simply because the electronic storage of that test is cumbersome and expensive.

Microsoft and Google are better known than Dossia in the personal health record space, but Dossia is different in four key respects:

• Dossia, as the agent for all of its users, secures all of the user population records and gets them downloaded from insurance plans, pharmacies, and providers.  This is called “pre-populating a record.”  Microsoft and Google depend on the user going to each separate data source and directing it to download health records to their “vaults.”  You can imagine how time-consuming and difficult it is to do that, and, as a result, despite their stronger name recognition, the Microsoft and Google vaults are not used actively by many who have signed up for them.
• Dossia’s model is to integrate with other employer-based health programs and benefits, including wellness and prevention programs, chronic disease programs, and health benefits and services.  Microsoft and Google have an excellent array of personal health applications, but they are stand-alone and they depend on the user’s ability to figure out how to integrate them in an overall health plan.
• Dossia has done the legal and conceptual work to allow it to have a single caregiver for a family to open up and manage the records for all the family members.  To our knowledge, no one else has this capability. The health care system is based on a model that each individual manages and controls his or her own health information, and, while I believe that works for most adults, there have always been three populations, children, the elderly, and people with certain kinds of disabilities, that need caregivers who have access to their health information.  One of the best uses of Dossia at our existing customers is the ability of mothers to manage the scheduling of immunizations and school physicals for their children.  Keeping track of who needs what shot at what time is challenging for busy parents.  Dossia helps solve that problem.  Microsoft and Google, like every other electronic health record, expect every individual to access his or her individual health record.
• Dossia has integrated medical and dental records, and, over time, will integrate records from a wide range of non-traditional health-related providers such as alternative and complementary medicine providers, nutritionists, fitness trainers, and behavioral health counselors.  The mistake lawmakers and public commentators make relative to health records is that they believe people have, or should have, a single primary care physician. The term “medical home” implies that there is a goal of having every patient get funneled to the same doctor for all purposes all of the time.  This is not the real world.  People change practitioners. People are mobile and get care whenever and wherever they need it, often far away from home. People seek care from alternative practitioners.  More and more people will access care from outside the United States, as they have been doing for a long time.  We had an emergency hospitalization for one of our children six years ago in Florence, Italy, when we were on vacation, and had voluminous and complex records, which we have no electronic medium in which to store.  Most electronic health record systems are what we call “tethered” to a particular doctor, hospital, or health plan.

Given the compelling value proposition for Dossia, why do we not have millions of users today?  There are many possible explanations, but I would suggest three primary reasons:

• Like every start-up business, it takes time to get customers comfortable with the offering.  In this environment, selling to users through employers has been challenging because of the bad economic environment from 2007 on, the uncertainty around the survival of employer-based health care during the pendency of the health care reform legislative debate, and the thinning out of HR and Benefits Departments, which has made large companies much less ambitious on health-related initiatives.
• In the early years, there was a great deal of uncertainty about privacy laws and regulations, which, thankfully, recent legislative and regulatory pronouncements have largely cleared up.  In our first rollout with a major company, 90% of the people who wanted to sign up were scared away by ominous-sounding privacy disclosures and consents, which were put in place to cover a wide range of possible legal risks, which turned out to be unfounded. From this point forward, we expect much easier sledding.
• The expected primary source of health-related information was the claims data from health insurance plan administrators.  This has been harder to secure because insurance companies are not organized to download member data in bulk to health record systems.  They are organized to feed that data to print-based systems to mail individual transaction data, through what is called an “explanation of benefits” statement, to an individual member.  They have attempted to direct members to the insurance plan’s own patient-specific portals, but, by their nature, these portals are incomplete representations of a person’s health history.

I am more optimistic than ever about the future of Dossia for three reasons:

• We have solved many of the technical, legal, operational, and communications problems that we confronted in our early days.  We have some very demanding customers, and have secured their trust.
• We have a more compelling set of applications than ever before, and we are continuing to develop partnerships with prestigious organizations like the Mayo Clinic, Healthways, and Vanguard Health, in addition to applications like the Healthcare Bluebook, which helps consumers select and price physician and other health-related services.  The usefulness of the record is increasingly good and will only improve.
• We have an increasingly large body of knowledge about the value proposition for personal health record systems like Dossia, and are reinforcing the value through continuous research.

More will follow as Dossia enters a most exciting time.  I am pleased to have the opportunity to be of service to our employer customers and those who use Dossia.

So how do we solve this problem?  It’s very simple, but the answer varies between pension and retiree medical expenses.

Pension Benefits

The future pension obligation for an employer is determined with the following factors taken into account:

• The pay taken into account and against which the formula will be applied;
• The assumed level of pay increases for current employees;
• The percentage of pay that will be provided;
• The life expectancy at retirement age;
• The investment return on monies in the pension trust;
• The discount factor applied to future year obligations; and
• The cost of living increases applied to pension payments.

Many employers also provide for a lump-sum pension payment right from their plans.

I want to zero in one of these factors: life expectancy.  The fundamental assumption under the laws governing pensions is that individuals “retire” and draw a pension when they are no longer working.  The end result is that employers are paying retirement benefits to individuals no longer delivering any services to them.  This is also true of other post-employment benefits, but, other than retiree medical coverage, these benefits tend to be temporary.

When the Social Security system and private pension plans were created in the 1930’s, the life expectancy for a benefit recipient retiring at age 65 was around 5-7 years.  Today, many organizations have agreed to retirement benefits at age 55, and the life expectancy is around 27 additional years.  In effect, pensions are paid over a much longer period of time than they were decades ago, both because of earlier retirement and longer life span.

Moreover, in the early days of Social Security and private pension plans, people truly stop working when they retire.  Today, many retirees from one employer, especially at age 55, go to another employer and work full-time.  This is sometimes called “double-dipping.” We want to provide income for the elderly who cannot work, but many pensions go to people who are working or are able to work.

Many solutions have been proposed to reduce the pension obligation burden, among them:

• Changing the pay calculation formula to reduce the wage or salary base subject to the pension formula;
• Reducing cost-of-living adjustments;
• Requiring an individual to work longer to begin collecting retirement benefits; and
• Reducing the percentage payout.

The common element of all these solutions is that they require employees or retirees to give something up. Inevitably, these solutions get resisted by employees or their union representatives.  But what if there were a solution that actually increased someone’s take-home income and cost the employer less?  There is such a solution.

The solution requires the tax law to be changed to allow someone to keep working, although at a reduced pay rate, but get enough of his or her pension benefit to take home more money in the current year. Current law allows someone to work part time for the employer and collect a pension, but limits that work to 750 hours a year.  We need a solution that allows an employee to collect a portion of his or her pension and work full time, although at a reduced pay rate.

How would this work?

Today, if someone makes $100,000 a year and has a pension that equals 75% of his or her pay, and gets the right to retire with a full pension at age 55.  In effect, the employer pays $75,000 per year for 27 years, plus cost-of-living adjustments.  Without adjusting for pay increases for an active employee or cost-of-living adjustments for a retiree, the employer is responsible for $1,725,000 if the employee lives to age 82.

However, imagine a law that allows the employer to start to pay down the pension immediately, but only if the employee takes a pay reduction.  For example, let’s assume the law allows the employer to pay $30,000 a year for the employee from the pension and $75,000 in base pay. The employee would get 5% more. The employee decides to work 10 additional years.  The first ten years cost the employer $300,000 instead of $750,000, and the employer can take an immediate reduction in its pension costs.

Why has this not been seriously pushed before?

• Historically, companies wanted older workers to retire so that they could replace them with younger workers.  The reduced pension cost of keeping an older worker was more than offset by the reduced cost of replacing the older worker with a younger work.  However, in my proposed solution, the employer can effectively replace a $100,000 worker in place with a $75,000 worker, without losing that older worker’s skills and experience.
• In many cases, the older workers were not as productive as those who replaced them.  Today, there is ample data to show that older workers are more productive, more loyal, and do higher quality work than those who replace them.
• Moreover, in many industries, it is extremely difficult to replace older workers, because there are fewer younger people with the same skills.  Such positions as mechanical and aeronautic engineers are particularly hard to replace.
• People always thought of pensions as a very small post-employment benefit that did not burden the employer.  Because of a combination of lower investment returns, higher percentage payouts, much lower discount rates on future benefits (which makes them higher), and longer life expectancy, the per-year cost of future benefits has grown dramatically.  This was not as attractive a solution under earlier conditions, but the math makes it much more attractive now.
• The math might be more complicated if the average employee can retire at age 55, but actually retires at age 62.  In that case, the program can be implemented at the average retirement age, rather than the initial retirement age.  There is still a savings, but it might be smaller, although still significant.

This is not a solution for every organization, because many employers simply need to shrink their workforce or to replace older workers with people who have very different skills. However, it should be available to employers who can make it work.

There needs to be another change in the law: employers need to be able to offer this kind of program to some workers, perhaps those over a certain age or a certain level of experience, but not other workers.  Right now, tax and labor laws severely limit discrimination within a workforce.  This is a great transitional strategy to help employers move away from defined benefit pension plans that no longer work for them..

Retiree Medical

I have talked about the easy solution to the retiree medical problem: helping people stay healthier longer, so that they do not have the long, slow decline with multiple chronic diseases that adds $200-300 thousand dollars to lifetime medical costs, relative to healthier retirees.  Taking the medical inflation rate down by 1-2% per year would significantly reduce what employers have to set aside for retiree medical coverage.  Moreover, healthier employees are more productive and do better quality work.  Employers just need the will and the skill to fix the problem by focusing on a culture of health for both employees and retirees.

The challenge for managing retiree health is more complicated, because retirees are more geographically scattered, but there are many opportunities for retiree outreach, especially if “corporate practice of medicine” laws can be modified to give employers an opportunity to provide primary care clinical services to retirees who do not have their own primary care physician.

These are win-win solutions, as opposed to solutions that involve cutting back benefits, and creating resentment by employees or retirees or their families.

As a result, I was gratified to see an incredibly incisive and thoughtful article on this subject by Dr. Atul Guwande of Harvard Medical School in the August 2, 2010, issue of The New Yorker. The subject of end-of-life care for individuals with terminal illnesses or diseases is not a new one, but Guwande brings new insight to it.

For example, he points out that many people have the mistaken belief that more intensive hospital-based care generally prolongs life, whereas hospice care shortens it.  Hence, many people make the decision to employ all possible life-prolonging measures for themselves or their loved ones, believing that, in so doing, they are buying time for something else to work on their behalf.  Yet Guwande states:

“Like many people, I had believed that hospice care hastens death, because patients forego hospital treatments and are allowed high-dose narcotics to combat pain.  But studies suggest otherwise.  In one, researchers followed 4,493 Medicare patients with either terminal cancer or congestive heart failure.  They found no difference in survival time between hospice and non-hospice patients with breast cancer, prostate cancer, and colon cancer.  Curiously, hospice care seemed to extend life for some patients; those with pancreatic cancer gained six weeks, those with lung cancer gained six weeks, and those with congestive heart failure gained three months. The lesson seems almost Zen: you live longer only when you stop trying to live longer.”

The second point Guwande makes is that there is often a trade-off between extending life and being mentally alert: those who receive hospice care are often able to manage their affairs without losing mental alertness, and are able to make plans for themselves and others with competent professional assistance.  Those who receive hospital care are often in situations in which they are removed from loved ones, lapse into unconsciousness, and experience completely debilitating pain and discomfort.

We tend to think of end-of-life issues mostly in terms of the elderly, but Guwande’s story focused on the terminal illness of a woman who was delivering her first child.  What none of us can know is whether, by opting for more aggressive treatments, she and her husband missed opportunities to discuss longer-term questions about the dying mother’s preferences as to how her daughter would be raised.  I lost a wonderful cousin to breast cancer 22 years ago when she was 41 years old.  She left behind a husband and a 4-year-old daughter when she died.  However, she had ample time and alertness to have many discussions with her husband that enabled him to gain the value of her insights on raising a daughter to adulthood as a single parent. The value of those conversations was incalculably large, but, in many instances, aggressive hospital care makes these conversations almost impossible to have.

The question Guwande’s observation begs is: why, if the more aggressive treatments shorten life, reduce the quality of life, and reduce the ability of patients to spend valuable time with loved ones, would patients choose more aggressive treatments?  He gives two answers:

• Every prognosis for a terminal disease contains a traditional bell-curve distribution with an average life expectancy for the patient, but with wide variations from a few weeks to years or even decades.  Although the size of the curve for those with the disease living a very long life indicates that few people survive for a long time, many people convince themselves that they will be the exception, rather than the rule.  When they opt for aggressive, expensive treatment, they are effectively buying a lottery ticket for the biggest jackpot of all, a long life, but often with the odds associated with buying a lottery ticket for a $200 million lottery prize.
• Physicians, either out of desire to keep up hope for patients, or out of the desire to keep patients from going elsewhere for treatment, or because they simply do not know the appropriate life expectancy, routinely overestimate survival times, often by over 500%.

Guwande pointed out that people seem willing to explore hospice options, as long as more aggressive treatment options are not foreclosed to them.  He cites a Johns Hopkins pilot program that reduced hospital care and costs for patients who opted for hospice care, but knew that they could receive hospital care at any time.  He recommended that Medicare and other health plans eliminate the irrevocable either-or decision for terminally ill patients.

He also has an interesting set of recommendations for changing the decision criteria and process for patients opting for end-of-life decisions.  Clearly, getting individuals to discuss their options with physicians and loved ones in advance is preferable to getting decisions made when a person is already terminally ill. That recommendation is not new.

However, the insight he brings to it is that the dialogue is as much about giving reassurance to the loved ones as it is to getting a particular decision from the patient.  Even loved ones who want to respect the wishes of the patient will feel guilty using less than the most aggressive treatments.  The discussion that, in advance, addresses their deepest concerns of guilt is extremely productive.  Similarly, a discussion between the patient and the physician, which helps the physician understand when being overly optimistic or recommending the most aggressive treatments is not helpful to the patient, is also desirable.

How do policymakers avoid getting caught up in the “death panel” trap?  The simplest answer is to broaden the dialogue beyond end of life treatment discussions.  There are many circumstances in which individuals are incapacitated and unable to register their preferences when a situation is not life threatening, but decisions have to be made quickly.  For example, the physician often encounters something unexpected during a surgical procedure when the patient is under a general anesthetic.

There are also many situations in which all treatment options are imperfect, and in which there is no ability to get a better answer even after all medical risks and probabilities are assessed.  This is the current situation with prostate cancer treatment options.  The discussion about the patient’s broader values and preferences is probably one that cannot be handled fully at one time or in one circumstance.  It would be most helpful for health plans and Medicare to cover an annual discussion that is free flowing and that simply enables a physician to get to know the patients far better than he or she can in the context of individual office visits designed to diagnose, treat, or decide on a treatment option.

Although many people legitimately criticized those who raised the “death panel” argument, the “death panel” advocates’ concerns could have been addressed, and the right kind of dialogue could have taken place if it had been framed as a way of increasing patient empowerment, as opposed to a piece of a larger program to increase government control over the health care system.

Nevertheless, the biggest conceptual breakthrough toward which Guwande takes us is that more aggressive care is not better care, and, in many end-of-life situations, it may actually shorten life and worsen the quality of the life that is led immediately before death.  Moreover, because of the inability of patients to engage with loved ones on transitional issues, it may have negative long term consequences.

Supporters of these pieces of legislation consider them a necessary first step toward longer-term health care system transformation.   Many point to a September 2009 Harvard Medical School study which estimated that lack of health insurance cost 45,000 American lives each year. If this admittedly imperfect legislation saved those 45,000 lives, how could it be negative? Moreover, how could anyone who cares about human life not enthusiastically support this legislation?

The flaw in their thinking is that they assume that the legislation has no other consequences that might result in reduced health care access, and, therefore, a potentially greater loss of lives for other reasons.

People fail to seek out health care for many reasons, of which the fear of financial ruin is only one:

• A significant reason for failing to get health care is lack of convenient access.  Many low-income people who get health insurance through Medicaid or SCHIP (two federally-funded state-managed programs) or other state-funded programs for the poor and uninsured find that they cannot get access to physicians because those programs do not pay the physicians an amount that allows them to make a profit on those office visits, and many physicians refuse to accept Medicaid or even Medicare patients.  In fact, based on the Massachusetts experience, the increased demand on scarce health care resources in Western Massachusetts and Cape Cod has actually reduced access to physicians for these populations.
• Some people, including those with insurance, wait to get diagnosed for medical conditions or fail to adhere to drug treatment plans that would treat their conditions because they are afraid to confront the reality of their condition.
• Some people do not know that they are at higher risk for a particular disease, and, therefore, do not get screenings that would detect that disease in time to get treated.  One unintended consequence of regulations issued under the Genetic Information Non-Discrimination Act is that the process of gathering family history information outside the physician’s office is far more constrained, and, therefore, will happen less frequently.  While everyone should get medical advice from his or her primary care physician, a significant part of the population does not have primary care physicians, and, therefore, will never get that advice.  Since this legislation has made it harder to get appointments with physicians because it has increased demand, but not the supply of physicians, it has probably worsened this problem.

While supporters of these pieces of legislation can envision the improved access health insurance creates, they cannot easily comprehend the reduced access the greater demand-supply imbalance creates.

If 32 million Americans get added to the ranks of those seeking health care and we do not change the number of health care professionals, that means that physicians have to do one or more of five things to manage the increased workload, four of which definitely worsen the overall quality of system health care:

• Lengthening their work days and weeks, which means that they are delivering more diagnoses and treatments while fatigued;
• Spending less time with each patient, which means that they will gravitate toward quicker diagnoses and treatments, as opposed to a more holistic approach to the patient;
• Delaying scheduling appointments for discretionary care, such as preventive screenings, in order to deal with acute care problems of their patients, especially the newly insured; or
• Deciding to drop patients for whom they are paid the least or who are the most challenging (Medicaid and SCHIP patients).

The fifth tactic is to delegate more tasks to nurses and nurse-practitioners, which would not degrade care quality or access, but there is a shortage of these professionals as well, so it is not clear that this is a viable alternative for many physicians.

In Massachusetts, it appears that most physicians are either delaying non-emergency appointments or dropping Medicaid patients altogether.  Why is this significant?

• If, for example, I am not excited about getting an invasive screening like a colonoscopy, and I find that I have to wait six months, I might simply skip the procedure.  We also have to ask whether delays in getting patients in for colonoscopies, mammograms or blood tests because of increased demand will cause individuals to reach stages of disease progression that they would not have reached if the physician’s office were less busy.
• Under the best of circumstances, Medicaid patients fail to show up for appointments in private physician offices almost half the time. Both pieces of legislation create incentives for physicians to drop Medicaid and Medicare patients to absorb newly-insured patients coming from higher-paying insurance exchanges, especially since the Medicaid patients take the most time and have the most challenging medical problems. Putting low-income patients in a position in which they have to travel longer distances (especially if they do not own an automobile), seek out new physicians, wait longer for appointments, or wait within a doctor’s office longer even when they have an appointment makes it more likely that they will skip needed care.

We need an objective study by the Harvard Medical or a similarly reputable research organization that analyzes the behavioral responses of physicians and patients to an increased patient load, and that determines the health effects from those behavioral responses.  Will patients who would have been saved through their current access to health care now see that access decline so much that they either delay or skip needed preventive screenings and end up dying because of that?  I believe this is likely, but, obviously do not know whether it will end up being more or fewer than the arguable 45,000 lives that could be saved through giving people access to health insurance.

That is why I felt that the most compelling priority for lawmakers was to address the imbalances between health care demand and health care availability, not to do a massive health insurance expansion program and leave the health care availability problem largely untouched.

Many pieces of the federal legislation attempt to increase the supply of physicians and nurses, particularly in under-served areas.  However, many major obstacles to health care capacity result from a variety of state and local laws, regulations, and practices that this legislation did not touch, such as Connecticut’s certificate of need process, which is often used as a weapon to protect small, local physician practices against perceived competition from small retail clinics.

I do not advocate centralizing the health care system, but the real obstacles to health care access, which is what matters more than health insurance access, relate to many policies and practices yet to be addressed.

It took much political will for the President and the Congress to enact this well-intentioned piece of legislation.  I just wish they had staged the insurance expansion more in parallel with health care capacity expansion, rather than jumping out ahead with insurance and leaving the health care piece to be addressed more slowly.