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	Health Care Cost and Access Challenges Persist Initial Findings from HSC's 2007 Site Visits

Health Care Cost and Access Challenges Persist: Initial Findings from HSC's 2007 Site Visits

Conference Transcript
Oct. 4, 2007

PROCEEDINGS

Paul Ginsburg: I don’t have a name tag, but I am Paul Ginsburg.

I’m pleased to say good morning and thank you for getting up early. We figured that we needed to start early to squeeze in what we have to communicate to you before lunch, and I want to, you know, welcome you all to the -- what is it -- the initial findings of the sixth round of HSC site visits, which we conducted between February and June of this year.

In the past, every two, two and a half years, as we finished a round of site visits, we’ve held a media briefing to release the initial site visit findings, but the media briefings have been so good and so substantive from both the presentations of our researchers and the commentary from representatives of different parts of the health care industry that we thought that let’s get a bigger audience, we think there’s really something good there, and that was the genesis of this conference. So, you’re going to hear from researchers who were involved in the site visits, and then you’re going to hear from representatives from the hospital, physician, health plan, employer, and safety net communities who will share their reactions to our findings.

I also want to thank the Robert Wood Johnson Foundation, HSC’s principal funder, for making possible the sixth round of the HSC site visits, and we went to Boston; Cleveland; Greenville, South Carolina; Indianapolis; Lansing, Michigan; Little Rock, Arkansas; Miami; Northern New Jersey; Orange County, California; Phoenix; Seattle; and Syracuse, New York, as we always do. These metropolitan areas were selected randomly back in when we began this.

I also want to thank kaisernetwork.org, which is webcasting this conference, and the webcast will be available after p.m. on Friday -- that’s tomorrow -- and a transcript of the conference will be available on hschange.org early next week.

Now, the communities that we track intensively vary. But taken as a whole, they are representative of the metropolitan areas of , people and above. And as I said, this is the sixth time we’ve been to these communities, and what’s going on in these health care communities individually and collectively provides a good picture of trends across the country. Note: We don’t only go to leading-edge places. We go to average and laggard places, as well, to give you the big picture of what’s happening in the health care in the country, and we’ve seen over the years that some of the leading-edge communities just stop and they’re not leaders anymore, and others might be the leaders of some new trend.

We’re at the point in our site visit work where we’ve completed more than interviews with executives of various segments of the health care system in these communities, and we’ve identified cross-site findings that appear to be the most important, and those findings are summarized in the issue brief that is in your packet that we’re releasing today as part of this conference. And as our round of site visits continues, and we conduct additional follow-up interviews, we have concrete plans to publish more publications from this round of site visits. Some of them will be HSC issue briefs, and others will be journal articles, and these will go into more depth on many of the issues that we only get to touch on today because of time constraints. And those who have registered for HSC Alerts -- and it’s not too late -- will be the first to know about these additional publications.

Two years ago, HSC researchers identified several troubling trends warning of the growing cost and access problems, including a hospital building boom, intense competition among hospitals and physicians to expand profitable specialty services, growing stress on community safety nets, and few cost control strategies on the part of employers in health plans. For the most part, these trends have continued into , although employers and health plans have stepped up efforts to engage consumers and the hospital building boom appears to have abated somewhat. Nonetheless, already planned expansions of medical surgical capacity, especially in profitable specialties and in affluent suburbs with well-insured populations, continue to come online. Competition among hospitals and between hospitals and physicians for profitable service lines, such as cardiac and orthopedic care, remain intense in most markets, raising concerns about increased use of health care services and rising costs.

The bottom line: Little has changed in local health care markets since to break the cycle of rising costs to climbing health insurance coverage and widening access disparities. Unlike two years ago when employers and health plans focused on increased patient cost sharing to try to curb rising costs, employers and health plans envision a broader consumer-based strategy today where consumers take more responsibility not only for the cost of their care but also for lifestyle choices and treatment decisions, and the heightened emphasis on prevention and wellness activities, along with a growing availability of provider cost and quality information, arguably was the most striking development observed the communities in . But whether the so-called health care consumerism movement can produce results -- "results" meaning improved health and cost savings -- that still remains to be seen.

Continuing high-cost trends are threatening the affordability of health insurance, especially for low and middle-wage workers who work in small firms and their employers, increasing the likelihood that the number of uninsured Americans will continue to increase. And before I turn the conference over to Debra Draper, who HSC’s associate director and director of this site visit project, I will introduce and moderate the first panel. I want to make the same point I made two years ago in the press release for the press briefing on this for our initial findings in August , and that is there’s no silver bullet out there that’s going to alter the trajectory of our health care system, and that trajectory is one of spending more and more for care for fewer and fewer people. Looking forward, policymakers, the public, and industry stakeholders will have to more explicitly address the problems underlying these trends and either revisit solutions that have been discarded, get serious about developing new ones, or accept the ramifications of the continuing status quo.

I’ll close by saying that over the past two years, I’ve only seen continuation of the status quo.

Debra?

Debra Draper: Good morning. Good morning, and I’m very pleased that you all have joined us this morning.

Our first panel this morning will focus on position and hospital trends, and we’re very pleased to have such an excellent group of panelists this morning.

We have Dr. Pham who is here with us; Dr. Bob Berenson, Carmela Coyle, and Dr. Don Fisher.

Dr. Pham is a senior health researcher at HSC, where she coordinates the Community Tracking Study Physician Survey. Her research focuses on the organization of care delivery, payment policy, quality performance and improvement, trends in physician and hospital markets, and health disparities. She has a particular interest in the Medicare program and is involved in Medicare quality-of-care program and policy design work with Mathematica Policy Research. Dr. Pham was a Robert Wood Johnson clinical scholar at Johns Hopkins, where she received her M.P.H. She previously worked on health services issues for the Population Council in Vietnam. She practices general internal medicine at a safety net clinic and received her M.D. From Temple University and her bachelor’s degree from Harvard.

Dr. Bob Berenson is a -- he’s a consulting researcher with HSC and is also a senior fellow at the Urban Institute and an expert on health care policy, particularly Medicare, with experience practicing medicine, serving in senior positions in two presidential administrations, and helping organize and manage a successful preferred provider organization. From to , he was in charge of the Medicare payment policy and managed care contracting at the Health Care Financing Administration, now the Centers for Medicare and Medicaid Services. He served as an assistant director of the domestic policy staff in the Carter Administration. He was also national program director of Improving Malpractice Prevention and Compensation Systems, a grant program funded by the Robert Wood Johnson Foundation, from to . A board-certified internist who practiced for years in a Washington, D.C. group practice, Dr. Berenson is a fellow of the American College of Physicians and a graduate of Mount Sinai School of Medicine.

Carmela Coyle is the senior vice president for policy in the American Hospital Association’s Washington, D.C., office. As a member of AHA’s executive management team, she is responsible for the development of the AHA policy positions on behalf of the hospital and health system field. She manages AHA’s staff team responsible for analysis of legislation and regulation, policy issues, data collection, and trend analysis. Ms. Coyle is also a national media spokesperson for the AHA and represents the organization in various health care and other forums. She has been with the AHA for years, joining the organization after spending six years as an analyst for the Congressional Budget Office in Washington, D.C., and she received her undergraduate degree in economics and Spanish literature from Carleton College and completed the course work toward her doctoral in health policy at the University of Michigan as a fellow of the Pew Charitable Trusts.

Dr. Fisher is the president and CEO of the American Medical Group Association, a trade association that represents medical groups, including some of the nation’s largest, most influential integrated health care delivery systems. He has been CEO of the organization since October of , and under his leadership the association has become the premier voice for medical groups in the U.S., with its membership currently responsible for delivering health care to more than million Americans. The association advocates for the multispecialty group practice mode of health care delivery, the patients they service, through innovation and information sharing, benchmarking, and continuously striving to improve patient care.

I’m going to turn it over to Dr. Pham, who’s going to pick the panel off.

Hoangmai Pham: Good morning. I actually think it’s very apt to start off so early in the day on the provider sector, because it’s perfectly in keeping with Paul’s theme of evolutionary rather than revolutionary change, and if you think of it as being evolutionary in the sense of mutational and haphazard, that would be a perfect framing for some of our observations. So. Just to give an overview, we’re going to spend a little bit of time talking about changing relationships between hospitals and physicians, the push and the pull between different subgroups of physicians and the hospitals in their market, a bridge topic on hospitals that will take us from those issues around relationships to the underlying causes for what we see as an increased tiering of providers on both the hospital side and the medical group side.

So, we’ve observed this real push and pull growing between hospitals and physicians. Hospitals are definitely making substantial effort to tighten affiliations with select groups of physicians, and they’re doing this for a variety of reasons: partly as a defensive move to stave off physician competition for profitable services and partly as a competitive strategy. This is an arms race with other hospitals, essentially to develop specialty service lines. Hospitals are choosing to employ more of certain types of physicians, especially proceduralists, and they still engage with physicians in joint ventures at the same time for both outpatient and inpatient facilities.

So, we’ll take each of these drivers in turn. Hospitals’ motivations are varied, but we think of them largely as moves to compensate for where the traditional relationships between hospitals and their medical staffs have been changing over the past few years, and the roles that they each play in care delivery have also been changing.

Hospitals are having an increasingly hard time maintaining physicians’ allegiances in many markets; and where physicians, particularly specialists, have access to alternative work

settings, such as ambulatory surgical care centers or just in their own clinic offices, they would rather avoid traditional medical staff duties, such as taking emergency room or inpatient call coverage. And of course we’ve documented before that physicians compete with hospitals in many markets for profitable services.

That trend still continues although perhaps with not as much fervor as we noted two years ago.

So, in terms of growing employment of physicians by hospitals, this clearly serves some hospitals’ competitive strategies in terms of expanding specialty service lines, hiring your own neurosurgeons, not having to depend on loyal, community-based neurosurgeons, and compensating for the unwillingness of those loosely affiliated positions to take call or to treat uninsured patients. But hospital employment also seems an increasingly attractive option for some physicians who would just rather not deal with the pressures -- the administrative pressures of private practice.

We heard a lot about the generational differences in lifestyle priorities for established versus younger physicians, and hospitals are taking advantage of that to some extent.

The joint ventures that hospitals are undertaking with physicians are often defensive moves to at least guarantee that they retain some of the pie.

Some hospitals, however, do pause a bit out of concern that they’ll cross the line on anti-fraud and abuse laws, so just the overall message that it’s not a unanimous sense of enthusiasm for these ventures. And we’ve noted that in some markets investors have not seen the returns on these types of ventures that they had hoped. We didn’t hear about losing ventures that lost money but just sort of dampened enthusiasm. So, to this bridge topic, the growing role of hospitalists, and it’s a phenomenon that relates to both the push and pull of hospital physician relationships we just discussed but also to this phenomenon of increasingly tiered provider market that we’ll talk about next. Hospital (off mike) is being driven by many, many factors, but among them the strategies of hospitals, on the one hand, to lower length of stay further more, control costs, increase the sense of control that they have over quality improvement activities, and, not least, to have reliability call coverage; and then, on the other hand, the strategies of physicians that would allow primary care physicians and other providers of cognitive services to avoid hospital work and instead have time to bill for a greater number of visits in the outpatient setting and maximize their revenues, as well as for other lifestyle reasons.

We heard about quite a range of different practice arrangements for hospitalists. Some hospitals employ their own or contract through a medical group or national or regional vendors. Some health plans will employ hospitalists, or medical groups, and some hospitalists in some markets are not exclusively affiliated with a single hospital as is the most established model, and they will work in more than one hospital.

Indeed, in many of our sites it’s now the norm for most inpatient medical care to be provided by hospitalists, and this has led to much more fractured relationships with community-based primary care physicians and the hospitals that they used to know. Sometimes that’s by design, and we can talk about that more later, but in at least one market some health plans, as part of their credentialing criteria, disallow PCPs from following their patients into the hospitals.

And hospitals are clearly expanding their roles beyond just general medical services. They are now obstetric and pediatric and surgical hospitalists.

The hospitalist trend in part we think reflects the increasing leverage that some medical groups and physicians, particularly specialists such as neurosurgeons or EMTs and those physicians in very large groups that are enjoying versus hospitals in many markets, while other physicians, particularly primary care physicians and those in small practices, fall further behind financially. And we observed a similarly increasing disparity between different types of hospitals along dimensions like types of services that they can invest in to provide their payer mix and certainly their negotiating leverage for payments.

So, on the physicians’ side, physicians in small and solo practices and those providing cognitive services find it harder and harder to maintain profitable practices. In some markets, such as Boston and Cleveland, large systems are essentially forcing physicians to choose exclusive affiliations. There’s no judgment there done, and these pressures have pushed more such physicians to consolidate, to join large systems, because they can at least rely on the better negotiating leverage for private reimbursements.

On the hospital side, the already well- capitalized hospitals are, as Paul reported, following through on their set plans for capacity expansions. They do this in partnerships with hospitals in wealthy suburbs, through branding at satellite campuses, some of which are brand new; investments in specialty lines, whether on their old or their new campus; and expanding affiliations with primary care practices, not necessarily in employment but in tight affiliations in order to increase referrals for not just traditional tertiary care services but cortinary, very high tech services, such as transplants. And those well-capitalized hospitals, to a large extent, are making very heavy investments in health information technology.

In the meantime, on the other side of town, the safety net hospitals in those in poor communities fall further and further behind in terms of both payer mix, obviously their capital, and hence their ability to make those infrastructure investments in HIT.

So, to launch the discussion, I’ll just throw out a few obvious implications of these trends, which Paul has already touched upon. Ongoing intense competition between hospitals and physicians for profitable services fuels our concerns about increased use of services and rising costs. The strange relations between hospitals and physicians, especially around on-call coverage, mean either that hospitals will have to continue paying extra for those services and/or that some patients will be at risk for not getting appropriate care. And, finally, the growing gap between provider haves and have nots have implications not just for the providers practicing in those different settings but clearly also for the patient populations who tend to access in these tiered systems.

Debra Draper: Bob, do you have anything to add?

Robert Berenson: Let me do just a few minutes, because I think it will be more informative to hear from Carmela and Don, because Mai and I mostly drink from the same Kool-Aid when we come up with these findings. We’re on the team together.

In reviewing sort of this whole topic that we’ve been working on the last few years, few rounds of what’s happening with physician/hospital relations and then looking at what we found this year, I guess my -- the only thing I can have as a generalization is that you can’t generalize. There are so many things going on in sort of different directions that are so site specific that it’s very challenging to say well what is happening nationally in this area, and I think Mai has laid out a lot of the sort of forces that are in play, but the forces manifest themselves in different ways.

So, how to summarize the following situation: A group of specialists decides to start a specialty hospital as a direct challenge to hospital A and hospital B, and they’re doing it for various reasons -- for more control, to centralize their care, to be entrepreneurs. A lot of reasons. So, they’re now an economic challenge in the community, so what happens back at hospital A? They’ve got a void of cardiologists. They find a cardiology group that had been mostly working at hospital B. They make an attractive offer to the cardiologist to come to hospital A and do some joint leasing arrangements, and the cardiology group is now happy that used to be at hospital B is now mostly at hospital A in a nice relationship with that hospital. The previous cardiology group is off and now hospital B is filling in their hole and they may go and hire some cardiologists from somewhere else. What’s the score card? Is this tighter hospital/physician relationship’s fractured hospital/physician relationships? I don’t know you summarize it, but this is the kind of stuff that is going on.

I guess the final point to make is it’s not directly about improving quality and efficiency. If you believe the focus factory theory of health care reform, then maybe there’s some advantage in having that specialty hospital. I’m a little skeptical. But, in fact, it is about positioning; it’s about factors, lifestyle factors, income; it’s not largely about what we talk about in Washington.

I’ll do just a couple more things. As you know, we typically publish in peer review journals. I see John Iglehart here, and we do a good job of trying to pass peer review and being able to support our conclusions. But occasionally what I enjoy about going on these site visits -- and this is my third round of doing it -- is the "aha" moments you get in a conversation with a senior executive of an organization, sort of the inside about a certain issue, and I’ll just share with you two "aha" moments that I had from this round, and I -- you know, I went to two sites this time. I’ve not been to most of them, but I don’t go to each one each time. We sort of share the load.

One of the "aha" moments came when I was speaking to an executive, an administrator of a multispecialty group -- not one of Don’s most famous ones but a real multispecialty group that’s been around for many, many years -- and he basically launched in -- I asked him how’s the weather, and he launched into what are you people in D.C. drinking? Your fee schedule in Medicare is absurd, and what you’re doing to us is making it impossible for us to hire cardiologists, because they want to stay in the fee-for-service sector because they are making so much money, and then he just launched into sort of almost CPT code by CPT code. This is crazy.

Now, some of us, like Paul and others, have been writing -- and I’ve been involved with this, too -- writing about how distorted prices affect behavior and you need to get the prices right. Well, I think one of the issues around what takes the policy, the enlightened policy, high ground, the goal of really moving towards more integration, more multispecialty group rather than single specialty group, and we’re trying to figure out how to do that. I think we’re finding it’s going the wrong direction, and it’s partly going the wrong direction because the payment policies or other policies that you might not think are relevant but are relevant, and so that was an "aha" moment on that one.

The other one had to do with -- I was speaking to a chief medical officer, and we are very interested in this round and trying to figure out what hospitals are doing -- this was the chief medical officer of a hospital -- what hospital systems are doing in response to Medicare’s reporting initiatives related to the premier demo and all that related activity into, you know, how the hospitals react to that. Is it a good thing, a bad thing? How do they operationally deal with? So, we asked questions about how the hospital -- what the hospital thinks about those measures, etc., and we got nice responses, and the hospital was responding and doing things, and this particular chief medical officer thought it was positive. So, my next question was what else is going on with quality and safety at the hospital? And he couldn’t think of anything in particular.

He mentioned a few things, and I said well, what else is going on sort of generally in the hospital? Well, we put in an electronic ICU. You might be interested in that. Well, anybody -- how many people in the room have heard of what’s called an EICU or tele-ICU? At least a few. And we then had a long discussion about it. It’s basically -- it’s a technology -- and I’m not endorsing it, I’m just saying it’s out there and some hospitals are doing it -- that has intensivists and intensive care trained nurses in a distant site with direct access -- visual access to patients, access to all real-time, moment-to-moment physiologic information around blood pressure and EKGs and all that stuff and is monitoring the patient, and it has a potential for significantly changing the way intensive care is provided in hospitals, and about , percent of patients are in intensive care. Certainly the costs are there. And he actually thought it was saving a lot of lives. He thought it might be reducing costs, but they had -- those are tricky studies to do. But the point I am making is that it’s probably a much more significant -- maybe not more significant, but it’s at least equally significant in the area of quality and safety, but we in the policy world have said quality and safety is about these heart attack measures and congestive heart failure measures, and so we sort of set of the agenda in ways -- now, happily there are things going on that we don’t know about, but it just -- I’m using it as sort of an example of the need to not be so focused on what we’re doing in Washington that we don’t know what’s going -- it really supports the reason, I think, that HSC is out there documenting this stuff. We would hope -- we are planning to do a special study for this round on this phenomenon of electronic ICUs and see what we can learn about this. Why do some hospitals do it? Why do some hospitals not do it? Does it really have impacts, etc.?

So, with that let me endorse everything Mai said. I’ve introduced a couple of "aha" moments, and let’s go to whoever you want to go to next.

Debra Draper: Thank you. Carmela?

Carmela Coyle: Thank you. I have the pleasure and the opportunity to work with hospital leaders, trustees, and physician leaders across the country every day, so I get a daily dose of "aha" moments, and I mention that as a background, because I wanted to start by thanking Paul and the team and the Center for Studying Health System Change. I mentioned to Paul earlier this morning, the work of the Center I believe is spot on, and I think their work is critical to everybody in this room, to anybody who has an interest in public policy, and, quite frankly, to all of us as consumers and patients. So, I want to say thank you for your ongoing work, and we’re very supportive of it.

And similarly, the implications that Dr. Pham laid out earlier are also spot on. Just a couple of observations.

Obviously as a nation we face great challenges. I strongly agree with Paul, and I’m going to guess with many of the panelists here, that change is needed in this country, change is needed in our health care system. Take a look at the rising numbers of uninsured individuals. It’s just one symptom, and in fact a pretty sad system, of a health care system that’s really in need of significant reform. The issue of affordability -- you all know that half of Americans are dissatisfied with their health care costs. It’s the number one concern on people’s minds. But throw on top of that the aging of the population, what’s going on in chronic disease and chronic care trends. We’ve got a serious problem -- the doubling of obesity. I’d like to say give us another couple of years and we’ll double diabetes as well, all of this leading to really significant concerns for those of us who are on the front lines of providing health care everyday. Of course, it’s also a driver of increased demand for services, increased volume of services, and that leads to increased spending. So, all of this is going to be a challenge, I think, as we move ahead.

A number of things were highlighted, I think, in this morning’s research results. On the positive side, this whole issue of involving consumers in their care, you hear a lot about wellness and prevention. It is happening. My own view is it’s still happening in a fairly disjointed way, insurers focusing on wellness and prevention, employers sometimes separately focusing on wellness and prevention, hospital organizations and communities focusing on wellness and prevention. I think we have a real opportunity to bring those efforts together and to make some steps forward. But we’ve seen significant progress. Similarly in the area of transparency -- and I think Paul in his opening remarks talked about how striking the change was in terms of information available to consumers on quality and on pricing. Perhaps we can come back and talk a little bit more about that.

Significant strides in the area of quality reporting. We have been integrally involved and were one of the founders of the Hospital Quality Alliance, which was an effort to share quality measurement information with the public. I’d agree with Bob Berenson. What we hear coming from the hospital field are concerns not about the collecting and reporting the sharing of this information, but this nagging issue of are we measuring the right things and are these incentives ultimately leading us to do the right things in the area of quality and in the overall area of performance improvement.

The second on the plus side. We heard a lot about chronic care management, and I think that has been a very important trend. From our perspective, we need much more of it. And, in fact, if you think about some of the chronic care management, the disease management trends, if there is a concern that I have it’s that many of those efforts are thin. They’re really just a layer over and a patching together of problems that we’ve got in care delivery. What we really need in terms of change is a redesign around chronic care management at its core; the involvement of primary care physicians; seamless continuum of care -- words that many of us have used for many years. How do we really coordinate care on behalf of the patient, not just as a layering on the top, but really from the beginning of their care delivery experience.

Now, the research today I think also highlights three important challenges. The first that have been mentioned are physician hospital relationships. I agree with the findings, and that is those relationships are very strained. It is driven by many factors. The increased competition instead of collaboration that we see is often driven by a few, and one of the things I would like to underscore is that in many hospital organizations in many communities, the relationships on the part of the majority of physicians in hospitals are quite strong, but it is the economic challenges faced by a few, often the specialists, that have led to a fracturing of that relationship so that even though it involves a few physicians it can be devastating in terms of the overall relationship and devastating in terms of the finances for that organization. Bob and Dr. Pham and Paul have mentioned some of those. The physician movement to ownership and development of their own facilities has a number of negative consequences. First, and the most obvious, the conflict of interest potential that it presents; second, the extraordinary increase in utilization that we’ve seen. If you’ve looked at the data, as an example, in Oklahoma City on spine surgeries, I really doubt that people in Oklahoma City need that many more spine surgeries than anybody else in the United States.

Concerns about eroding the ability of full-service community hospitals to cross subsidize all of the other services they provide -- burn, EICU, (off mike) -- those sorts of things are very important -- and the important issue of on-call coverage and the challenges that it presents.

Last trend highlighted in the research. I’d like to underscore is health plan consolidation. It is something that is going on. It is frustrating in many communities, and some of the largest health plans are those at the moment who are enjoying some of the highest profits, another area we may want to come back and talk about in more detail.

Let me just close by saying I think Paul may have mentioned one of the most important aspects of all of this -- that we will not get serious change unless people are in fact willing to look at new solutions, and it’s a place where the hospital field is working to make a contribution. We have been working under the leadership of the Board of the American Hospital Association on a series of proposals and a framework for healthcare reform in this country, something we’re calling health for life -- five essential elements of reform, including a focus on wellness and most efficient, affordable care; the highest quality care; the best information; and coverage for all that’s paid for by all. A lot more information and actions that we could take in the public policy environment to make these happen. We think it’s time to get serious about needed change, and we are ready as well to talk So, with that I thank you.

Debra Draper: Great. Thank you. Don.

Donald Fisher: Well, thank you, Debra, and I’d like to thank Paul and his team for inviting us here to participate on this panel, as well as to commend you for the outstanding work that the Center continues to do. I’ve just spent the last week and a half, two weeks doing an environmental scan myself for our strategic plan for the Association, and I wish I had waited because I could have just used Paul and his report instead. In any event, I think -- you know, I like to look for solutions, and when I look at the two-year-ago report and now the report today, Paul’s right, and Mai was right also -- there’s been very little change that’s taken place across the United States, and I bet if we were to roll this out to three or four more years into the future you’re going to see little change as well.

We’re coming upon on a crisis where we’ve got the baby boomers moving toward Medicare; we’ve got physician population on average years and above in age looking to retirement -- many of them are retiring early because of the strains and pressures on their practice. We’re looking at a crisis and nothing seems to be being done. So, my solution when I look at this is to look at what’s the underlying cause. Why physicians compete across specialties? Why do physicians and hospitals compete for services and try to do them themselves as opposed to coordinating it together for the benefit of the patient. And it’s all because of the way we’re paid. It’s just that simple. And if you look at the way we pay physicians today, it’s based on throughput.

The more you do, the more you get paid. Said differently, the worst quality care in this country gets paid the most. If you’re a physician out there that doesn’t get it right the first time with a diagnosis, you can bring that patient back again and again and again until you finally get it right, order all the tests you want -- and, by the way, every time you do that you get paid. The high quality providers that get it right the first time and coordinate this care so patients don’t have admissions to the hospital that are unnecessary don’t get paid as much, and so we’ve got a dichotomy here in which we’ve got a payment systems that is so perverse that it’s forcing providers to compete with one another across incomes and not really competing on the best quality of care they can provide the patients.

You know, we’ve got -- many of my members are own-and-operate hospitals. In fact, Carmela and I have a board member in common -- Nick Walter from the Billings Clinic, which is interesting. But, you know, these institutions are trying very hard to drive up quality, and if you’ve got a hospital physician organization -- like a Mayo, like a Cleveland, like an Austin, like a Henry Ford -- every quality improvement you make on the ambulatory side that reduces the hospital admissions and readmissions because you’ve improved the quality causes a loss of revenue to that institution, to that hospital -- large losses of revenue. And so at the end of the day for every quality improvement that you make and for every efficiency improvement you make, at the end of the day you get less revenue.

And I’ve got many examples of this where we get some of our members that have instituted lean production and quality improvement mechanisms only to find at the end of the day they were going broke, and they had to actually go in and negotiate with the payers to have a gain-sharing mechanism with the insurer and with the hospital so that for every dollar saved there were some dollars that came back into the provider community so they could continue to do the improvement, continue to it in production.

So, we’ve got to really focus on the root causes, and the root cause is the reimbursement system.

Now, this is something that would take probably a decade to get change, but it’s got to be changed. One of the first steps I think we could take is to begin to reimburse for care coordination. If you look at the data, over percent of their beneficiaries in the Medicare pool have three or more co-morbid conditions. Most care in this country is episodic. When the patient comes in for their diabetic problem, they’re looked at by that physician for their diabetic care. They’re not really paying attention to their cardiovascular or congestive heart failure problem. In many instances, the physician that’s taking care of that patient doesn’t even know what medications the person’s on unless they bring their bag and dump it out and they do an inventory. What we have is a situation where we’ve got episodic care where there’s no care coordination, so there’s a redundancy in tests and patients oftentimes go south pretty quickly because no one’s paying attention to their underlying diseases that are co-morbid to their primary condition they presented with.

So, what we really need to do is to begin to pay for care coordination -- real care coordination. Now, some people are referring to this as the medical home or the advance medical home. True care coordination requires an interdisciplinary team of providers. It can’t be a single specialty, because you can’t coordinate within that single specialty. It’s got to be multispecialty. You’ve got to have a uniform, interoperable electronic medical record that not only covers all those providers but reaches out into the community of referring physicians, as well, so you’ve got that connection out at the beginning, as Carmela said, at the beginning of the disease condition so it doesn’t get lost.

You’ve got to have home monitoring devices; you’ve got to have care coordinators or nurse coordinators that actually do the work; you’ve got to build registries; you’ve got to do demand management. You’ve got to do all these things in concert so that you can really truly coordinate that care. And now we will need to pay for that, and if you paid around disease conditions, a bundled payment around patients who have these morbid conditions, for true care coordination a couple of thing would happen.

First of all, we’d see the coming together of hospitals and physicians across this country like we’ve never seen before, because it would be a bundled payment paid to the institution -- not to the providers -- that then would be distributed locally based on the results that they’re getting for that care. You’d see all of a sudden the desire of physicians to come together across specialties, because it takes that to care for patients who have more than one multiple conditions that they’re presenting with. So, all of a sudden we’d see the disaggregated physicians across the country beginning to see hey, there’s a way we can come together, provide higher quality care, make more money, and provide a better patient-centric situation. So, I think you’ve got to look at the reimbursement system, I think we have to pay for care coordination, and all of that will drive the integration and really get us away from this problem we’re facing right now where we look out two years and go two more years and nothing’s really changed, and it’s never going to change in my mind until we change the reimbursement, we provide the right kind of incentives and get rid of the perverse incentives.

So, I’ll stop there.

Debra Draper: Okay. Any other reactions from any of the panelists?

Hoangmai Pham: Here -- just an illustrative case on some of the points that Don made, actually from one of your famous members, but a very influential, large multispecialty group that is coming up on a new round of payment negotiations, and they’re taking a bifurcated tactic that I think both illustrates the underlying problems Don is talking about but also maybe touches upon the limits of what even reformed payment can accomplish. So, on the one hand, they’ve chosen to use their stellar performance on standardized quality metrics to ask for higher reimbursements beyond the bonuses, and as a large group and a gorilla in that market they have more than enough leverage to do that despite health plan consolidation there.

On the other hand, they’ve made the conscious decision to also as, that private pairs meet target incomes for their PCPs. So, they’re willing to come down on the proceduralist incomes, but they want to set a target income their PCPs that they actuarially determined to the incomes that are similarly experienced professionals in other professions in the market, such as law. It’s I think a novel strategy. It certainly speaks to the disparities and how different services are varied within the fee schedule, but it was an interesting set of strategies to walk into negotiations with.

Carmela Coyle: I was going to say I agree with Don in terms of payment as a driver. It is the incentive. Some people follow those incentives. I’d add one more, perhaps, to Don’s list. Absolutely agree that the explicit funding of care, coordination, chronic management is essential. Agree that we need to look at package pricing.

The other thing we need to, I think, learn much more about but very seriously consider as we explore it is the issue of rewarding excellence, the so-called pay for performance. What we know about that is very little at the moment. We’re about to complete a synthesis of the research. and others have been looking at this as well, and we haven’t done a good job analyzing what works and what doesn’t and what it is about the various pay for performance mechanisms that may drive a result or not. Much more work to be done there but something else we think should be explored.

Donald Fisher: If I could comment on that pay for performance, Carmela. There are some real concerns about the P-for- P programs that are out there crossing the country today, and there’s hundreds of them if you look across the United States, and the first question is at what level do you measure and what are we measuring? And I have a real problem with the fact that we have decided as a country we’re going to create as many measures as we can possibly crank out over a period of time for every specialty and subspecialty of medicine when we really ought to be focusing on the high-cost, high- volume procedures first till we get it right and know how to use the data to reengineering clinical processes to get better patient outcomes. We’ve not doing that.

Instead, what we’re doing is covering the whole country and all the specialties with every measure you can possibly come up with that really aren’t going to make a long-term difference.

The second is at what level do you measure, and most of the P-for-P programs out there unfortunately are directing their measure at the individual provider level. This does nothing more than -- it continues to put pressure on this fragmentation, and it continues to drive physicians apart rather than bringing them together. What we need to do is measure at the team level or at the group level where you have a couple of things happening. You have the -- with individual physicians, you’ve got the issue of small numbers. Any one physician who has two or three or bad diabetic patients is going to look pretty bad on the score card.

What would you do if you were that individual physician out on the marketplace with those bad patients? You jettison them off, because at the end of the day you can’t get them to comply, you can’t get them to reform and take care of themselves. So, you get them out of your panel and all of a sudden your scores jump up, so you look pretty good. So, the concern is you’ve got the issue of small numbers, and you got physician behavior out there where you’d have patient dumping of the sickest patients who need most the care are not going to be able to get in because you’re getting scored individually.

You also destroy the idea of team building. I mean, after all, if we’re being measured against each other independently, what is the incentive for us to come together as a team to really, truly coordinate this care. So, I’d just, you know, caution everybody that as you’re developing the P-for-P programs, we need to focus on the high-cost, high-volume procedures, and you need to measure at the team or group level, not at the individual level.

Robert Berenson: If I could just make a brief comment, I first wanted to generally endorse what Don just said about P for P, but what I wanted to comment on had to do with chronic care management, chronic care coordination, and the role of hospitals in that, which I think hasn’t gotten nearly enough attention, and it’s another "aha" moment I had, this time not with HSC but based on some case studies I was doing about, in fact, multispecialty groups’ commitment to doing chronic care coordination and found that in some situations the hospital, despite this sort of negative return on investment were in fact engaged in helping fund the chronic care coordination nurses, the infrastructure, etc., and I said well, why wouldn’t you do that, and the chief medical officer of the medical group said because Medicare doesn’t pay for readmission within days for congestive heart failure. And I used to be in charge of that and said they don’t? In fact, I remembered in fact responding to an OIG report in saying we shouldn’t but we do.

So, I’m scratching my head. I’m calling -- I was no longer at CMS. I called the head person in the hospital and he said yeah, we do reimburse within the next day. The same day we would provide a new DRG payment. Well, it turns out -- I got to the bottom of it -- there was an aggressive intermediary for that region that was doing medical review on claims, and the way that got translated to the senior executives at the hospital was that you’d better be careful about readmissions; in fact, they forgot to be careful. Don’t have any CHF readmissions, let’s invest in a program to keep people at home. MEDPAC has a chapter in its last report about readmission policy. I think it deserves a lot of attention in terms of trying to change the business case that hospitals have, particularly around ambulatory care, sensitive conditions -- could really change the dynamics. It does go to the point which Don led with, which is that payment policy, whether it should or not, really drives behavior.

And the final point I would make is it’s not just payment policy, and in this area of chronic care management, I would refer people to a fabulous article -- essay that Ed Wagner wrote in Milbank in ’ about why physicians’ education and culture make them not the right people to take the lead on chronic care management. Out of that, he evolved his team concept. There are some real cultural barriers in the physician community in this area. Having said that, there are some physicians who really want to be part of change in this are. So, it’s more complicated than payment policy, but payment policy is necessary if not totally sufficient.

Debra Draper: Other comments from the team? Okay, well, we’re going to probably open up to questions. In your packets there are question cards. They’re green. So, if you have questions that you want to ask, please fill those out and pass them. I guess we’ll have people walking around, so pass them to the center and people will collect them.

But I think in the meantime I have a couple of questions for the panel. One thing is what are the implications that exist relative to the employment of physicians on quality of care?

Carmela Coyle: I’ll start. I assume you’re talking about employment in hospitals. We have seen a trend of greater employment of physicians in hospitals, but it varies quite dramatically across the country. We’ve got in some market areas percent or more of the physicians now employed by hospitals, and in other market areas really very little at all. So -- but back to Bob’s earlier point, it’s very difficult to generalize.

But I want to go back to, I guess, both

Bob and Don’s comments around aligning incentives. On the one hand, it does make it easier -- that is, everybody is pulling on the same rope in the same direction and you’ve got that relationship, that economic relationship that we’ve been talking about that’s set and that’s in place. But when employment relationships occur, it’s usually for only a portion of the organized medical staff, and that’s a challenge, because you’ve still got other folks who may be just privileged or using the hospital infrequently.

One of the things we haven’t talked about -- we’ve talk about payment alignment and how important that is -- how challenging it is to do any of this when we’ve got payment policy -- in particular, Medicare payment policy -- that is created in silos for physicians and for hospitals. It’s just the incentives themselves. It’s are the incentives even driving people in the same direction. So, we talked about physician/hospital relationships and the need to align those. The employment model is one model for doing it.

In fact, one of the issues is that there are very few options for aligning physicians and hospitals. You’ve got employment; you’ve got joint ventures. And we really don’t have anything else. We’ve been doing a fair amount of work on this notion of clinical integration that Don was talking about. Are there ways that we can change some of the laws and regulations that prohibit the sharing of economic incentives between physicians and hospitals? We have to do some changing to make that happen, but we think it would be important and ultimately improve performance in quality.

Donald Fisher: Comment on that. I don’t think it’s so much the employment but the compact that is derived from the employment between the physician and the institution they go to work for, whether it’s a hospital or large integrated system of care or a multispecialty group. You know, a lot of the not-for- profit multispecialty medical groups that own and operate hospitals have the on-bottom line that they’re looking at at the end of the day and the physicians are on a salary with a withhold for quality metrics that the medical group themselves have put into place. So, it’s not just being employed, but it’s how you structure that employment. You can actually structure it in a way that there is a real incentive for the physicians to get measured and paid based on quality improvements and quality results.

Robert Berenson: Just very briefly, one model of potential sort of promoting collaboration, especially around this chronic care coordination activity. There are a couple of models out there that I think need more sort of review and work with. In North Carolina Medicaid program, the community care networks that Alan Dobson has been developing sort of based on the notion that physicians are in onesies and twosies still, and they’re likely to be in a relatively rural state. They’re not going to have the infrastructure to do chronic care management themselves. They don’t have -- as Wagner would say, there are lots of reasons why they will not redesign their practices. So, they have actually set up in the community an infrastructure to be sort of the care coordination for the community physicians. So, it differs from disease management in that it’s not a distant call center three states over; it’s in the community, I think, with the hospital playing a significant role.

One of the PGP demos -- physician group practice demos --- that Medicare is working with is actually not a group practice at all; it’s a PHO- like organization based at Middlesex Hospital in Connecticut, and, again, that’s the organization that is working with a couple hundred community physicians in their onesies and twosies practices to provide -- to sort of do a collaborative care coordination. It seems to me, it’s a model where there’s some potential collaboration.

One of our set of findings that Mai mentioned and that we spent a lot of time on in the last round was the fact that primary care physicians often don’t set foot in the hospital anymore. So, here you have a challenge of how do you do chronic care coordination. We’re saying that the hospital has a role. That’s where case finding happens. There are often deeper pockets. They’ve got managerial know-how. But the docs are in the community, and yet those docs aren’t walking in the hospital anymore. So, how do you figure out how to get that alignment? I think, by looking at North Carolina and some other places, there might be some models that we could work with.

Carmela Coyle: And there are also -- we’ll let people ask questions -- there are also some insurance models out there, obviously in the area of chronic care. The concern is the benefits accrue downstream to the payers, the employers. How do you reallocate that funding upstream to make certain that we’ve been able to put the money where the costs are actually incurred?

Debra Draper: Okay, we’re going to -- we have a large group of questions here. It looks like this one is directed at Carmela. Has AHA ever spoken on the drive among hospitals to increase their capacity in suburban areas while abandoning underserved inner cities?

Carmela Coyle: Have we ever spoken on it? First of all, I disagree with the characterization of "abandoning care" in inner cities. If I didn’t, I’d probably be in a lot of trouble. But I think a couple of things. You know, when many of us think about health care and about hospital organizations, what comes to mind? People think of, you know, the -- well, the big one, the Cleveland Clinic, you know, Mayo, Johns Hopkins. The first thing I’d remind folks is that half of the hospitals in this country are in small rural communities all across the nation.

The second thing I’d remind people of is that one-fourth of all hospitals lose money treating patients, that one in four hospitals operates in the red.

The third thing that I’d remind us of is the Medicare program, which amounts to about percent of a typical hospital’s revenue, today is reimbursing cents for every dollar of care that’s provided. Medicaid is reimbursing about cents for every dollar of care provided. So, some of the trends that you may see on the part of some organizations to reach out into the more affluent suburbs is a strategy to try to make ends meet, to try to balance what’s going on in terms of under funding in other areas.

It is a strategy that’s been pursued by some organizations. It is not typically a strategy that’s pursued by the majority of organizations. And I guess final point, hospitals continue to remain committed to access in their communities. We remain the only place where there is a mandate to treat every patient who comes through our emergency doors regardless of their ability to pay, and that is something that’s held very seriously by our nation’s hospitals, and it’s a commitment that we take very seriously as well. So, is it going on? Yes. Is it a significant trend? My view of that is no.

Debra Draper: Okay. This is for any of the panelists. Where are the employers? If better primary care or medical management lowers costs, why aren’t employers demanding their health care plans capture the savings, benefits, drives, falling hospital admissions and revenues? Who supports the infrastructure that we need in hospitals?

Donald Fisher: I’ll just jump in a little bit. You know, I -- you know, when you look at where people work in the United States today, most people work in small companies. They don’t work for the IBMs and the Federal Express, and so forth. They work in small businesses, and most of the small businesses -- you look at the trends -- have been dropping their health insurance over the last five years. I think the employers ought to get out of the way, and I think that we need to have an individual insurance mandate and get away from this employer mandate model so that individuals are responsible directly for purchasing their own insurance. They can select their insurance themselves. If you look at a small employer, you know, the insurance companies will come in and they’ll say yeah, we’ll underwrite you but percent of your employees must be in our plan. So, by definition, you have one plan that the employees can choose from, which is what most Americans have today. So, we need to get the employers kind of out of the middle of this health delivery system game and get the individuals engaged and have more patient-centered care as a result of it.

Robert Berenson: If I could just say I know the next panel is going to be specifically taking up the issue of employers, but -- and I see Helen Darling is on that panel. She -- her organization, the ERISA Industry Council, have been very interested in this whole medical home idea, and I know the American College of Physicians and the other primary care groups that are promoting the medical home are working with at least some employer groups about the importance of it.

So, I’m not saying they’re necessarily in the leadership, but I think they also understand the problem of care coordination, the silos of care, and are interested. The issue of the role of employers in our health care system goes well beyond that comment.

Carmela Coyle: Can I just add -- I think there is a lot of agreement on what needs to be done. I think there’s also a fair amount of frustration that everybody’s going at it in their own separate way. So, you’ve got insurers going at it one way and employers going at it another way, providers going at it another way, and there is a growing frustration that I hear within the field of just a frustration and a sense of potential futility that we’re all trying to do the same thing, and it’s in no way organized or coordinated, and we’re just trying to check boxes and not really achieving the change that if we came together we might be able to do.

Debra Draper: Okay. I’m also going to say if you have questions and you want to go up to the speaker, we could probably -- or the microphones -- we could probably take a couple of those from the floor as well.

So, this next question is for Don. Why do you appear to be pessimistic about any material changes in the health care payment policies despite major underlined problems, such as rapidly rising health care costs?

Donald Fisher: Did I come across pessimistic? Heaven forbid. I’m the optimist. No, I think it’s just a check of reality. It took ten years to get RVRVS through the Congress, and I think it’ll take equally that long to get to a results-based payment initiative where we would pay based on results to entities and not individual providers providing the care. That’s just being a realist, I think, in terms of what it takes.

I also think that you’ve got the Medicare program as a driver, and the Board of Directors of Medicare is the United States Congress, and it’s very difficult for the United States Congress to deal with the Medicare program and to be sophisticated in moving the program the way it needs to move as a body of, you know, members of Congress. They just don’t have that expertise. They don’t have that ability. It’s too political. So, what we really need to do is to go to a Federal Reserve type of organization where we’d actually have a body of people who would be empowered to make decisions about the program who are removed somewhat from the political stream that Congress is faced with every day. I mean, look at the issue just this last week over the SG program. I mean, here’s something, a very good program, and we’ve got a divided house now between the White House and the Congress and it -- you know, these children could fall between the cracks as a result, so we need to move it away from Congress, and I think we could then be less pessimistic and much more optimistic about the change that’s needed. But it’s all about the money. If you listen, it’s all about the money.

Debra Draper: This next question is for Bob or Mai. Ms. Coyle mentioned the trend of health plan consolidation. Has this spurred increased attention to hospital physician cooperation to counterpressures from plans, our rates, and services?

Hoangmai Pham: Want me to take it first?

Robert Berenson: Well, no, my immediate response would be that -- I mean, I’m reminded of -- the Wall Street Journal frequently in their editorials talks about how Medicare has Soviet-style price controls, and my sort of response to that is health plans do, too. They just pay more. And health plans, since they’re giving up, have largely abandoned capitation, essentially have a siloed payment to the hospitals and a siloed payment to doctors. The doctor payment is based on Medicare’s RVRVS. It’s not identical. They -- on the hospital, some have moved to case rates. Largely they’re paying per diems. So, the docs in the hospitals are in separate pools. What I think is happening in markets is that the doctor side -- well, on both sides there’s an attempt that -- getting larger to have more negotiating leverage. So, I think that that (off mike) HSC documented the hospital merger activities to have the horizontal mergers to develop hospitals systems so they have more negotiating leverage. And separately, like later, specialist physicians have figured out that they can bet more bargaining power by being larger, and so you have a lot of single specialty mergers.

But I don’t -- I do think in some communities -- and, Mai, I’d want your opinion of this -- some primary care physicians who have always felt that they really don’t have any power in negotiating have been more attracted to the employment model with hospitals where the hospital might be negotiating on their behalf and they can sort of ride the coattails of the hospital, but for the most part because payment systems remain siloed on the private side as well as in Medicare, I haven’t seen that kind of collaboration.

Hoangmai Pham: Yeah, I mean, my smart-ass response is going to be that it’s a tail of two markets in every market. It’s a tail of physicians essentially taking dictated rates if they are in small, medium, or solo practices no matter what specialty they’re in, but particularly if they’re primary care physicians, and on the other side you have the integrated systems and the large practices whether they be multispecialty or single specialty, and they do just fine with the health plan consolidation.

Debra Draper: Okay. This looks like it’s for any of the panelists. Any evidence of use of quality and cost information by payers or consumers?

Hoangmai Pham: I think this harkens back a little bit to the earlier question about where the employers are. One of my overall impressions from our visits this round was sort of the starkness and contrast between what I perceive -- and this is an outsider’s perception because I’m not on the team that interviewed all the private sector respondents, but from the provider outsider perspective, it seems as if there is a lot of creativity and energy around insurers and employers trying to work with providers on a variety of initiatives: quality measurement and reporting and other kinds of feedback loops, now prior authorization.

They’re not all positively, you know, received, mind you, but nevertheless a lot of activity, and to me stark contrast to the amount of activity on the consumer side, cost sharing aside. Once there is a tiered network or high-performance network, there’s no steerage of patient volume. It’s just posted. The designations are just posted on a website. So, Virginia Mason can do all that it does with lean, but they’re not going to see any new patients steered to them. Not that they need it, they’re full. But, you know, that was not the promise that was put on the table. So, I think that contrast is worth noting.

Carmela Coyle: From the -- I’m sorry, go ahead please.

Donald Fisher: Go ahead. Go ahead. Go ahead now.

Carmela Coyle: I was going to say from the perspective of the hospital field, I’d say are payers using the information? Yes. The real question is how are they using it and in some cases -- in many cases based on conversations. It’s not being used well. I think to Dr. Pham’s comments. Are consumers using it? I think the answer is certainly more than they were before. We’ve got much more information that’s out there and available to consumers, but I think the jury’s still out on how they’re going to use it, and to me that’s the important question. You may go look at the information. What we know much less about is is it affecting people’s decision making? How is it affecting their decision making? Is it the right information? Is it the information consumers are looking for. And I still think we have a long way to go.

Donald Fisher: I was just going to say we’ve got a lot of examples within our membership of medical groups who have driven up quality and lowered costs and are doing so to the benefit of the patient. But I think the best place to look is the group practice demonstration that Bob mentioned earlier -- the PGP demo of CMS. In the first year of that study they actually saved Medicare about $19 million overall if you get above the threshold of the two percent required for them to save. They did very well on all the metrics for quality as well, and that was just in the first year. And the million was after they made significant investment in infrastructure, because even though they had sophisticated electronic medical records, they really needed to invest heavily into redesigning some of those systems and creating measures around the metrics that were being reported to CMS in order to a really good job. At the end of the day, if you look at the first year’s data from the PGP demo, they saved money and improved quality. And the way they were able to do that is there was gain sharing back to CMS in order to recover some of their upfront costs and for the decline in revenue for increasing the quality over time.

Debra Draper: Okay. We’re just going to do one more question and then we’re going to take a break, but this is for Mai. What did you mean about some hospitals requiring doctors to declare allegiance and how does this affect pressures for them to become employed?

Hoangmai Pham: So, a couple of examples are -- well, the prime examples would be the Cleveland and Boston markets where there are very large influential hospital systems growing in strength in the markets and wanting to secure both referral base for the coronary care, the high-tech care that we talked about, but also just wanting to grow, you know, building on their success, and in both of those markets some of the most influential systems are essentially telling physicians -- demanding that physicians maintain an exclusive affiliation with one or another system where there are only a few to choose from. And it is forcing some physicians into very uncomfortable positions that the hospitals realize.

So, in one case it was -- the pressure was transmitted through a requirement for the adoption of a compatible electronic medical record. Physicians who wanted to remain affiliated with the system and benefit from a negotiating leverage that that system enjoys, had to choose either their home grown system or an approved commercial product. But there was a competing also large system that was asking the physicians to choose a different commercial product. There’s a deadline, and that group has to decide, and they’re tortured, and they feel an emotional pull toward the lesser system, but when they think with their heads they will probably go with the largest system in the market, and that’s sort of the type ofactivity that we’re seeing at the margin.

Donald Fisher: I just have to comment. I’m not sure that’s a bad thing --

Hoangmai Pham: Yeah.

Donald Fisher: -- when you look at it from the patient’s point of view. The more connection we have across physicians with electronic medical records so that information is shared, the less redundant testing there’ll be, the less questions that’ll be needed to ask every time they go from physician A to physician B, and what we need are more virtual medical groups out there. We’re not asking for everybody to go into a medical group. But we need these virtual groups, like in the PGP demo there’s one of those. It’s a PHO that Bob mentioned. That’s what we really need, and I don’t think this is a bad thing generally. I think what’s really bad is when you have individual physicians out there with no accountability. Nobody looks over their shoulder.

If you’re a solo practitioner out there today, you can do anything you damn well please and nobody’s looking over your shoulder. I call it the private practice of medicine. If you want to go into the public practice of medicine, you join a virtual group or a group where you’ve got a common medical record where everybody on that team sees what you did with that patient and what you didn’t do with that patient. That’s public practice of medicine. That’s public accountability. I don’t think it’s good for this country to have a lot of disaggregated physicians out there that are not connected without any accountability. We’ve got to get these virtual groups connected so there is accountability and we can drive up this coordinated care and quality.

Hoangmai Pham: Yeah, just a caveat to that is that there are some markets where it’s not entirely clear that they’re structured to perfectly support that vision, which I agree with.

Donald Fisher: We need to get it there.

Hoangmai Pham: But there are -- you know, there are markets where the edges of competing hospital systems overlap greatly, and there’s a lot of tension there, and it’s not clear to me how in those situations one creates -- unless everybody really is at the table all at once, and there’s shaky evidence that that helps or hurts, you know, to come up with a single vehicle. Debra Draper: Well, we’re going to wrap up. I just wanted to -- if you all will join me in thanking your excellent set of panelists this morning.

Debra Draper: Thank you.

PANEL NUMBER TWO: Employer and Health Plan Trends

Paul Ginsburg: Is this on? Okay. I know that the audience is very much looking forward to this panel about insurer and employer issues, because so many of the questions for the previous panel really were about, partly at least, what insurers and employers are doing, and I’m not going to spend a lot of time on introductions. We’re going to follow the format as the last panel, and we’re going to start with a presentation of the research by Jon Christianson. Jon is a Hamilton Chair at the University of Minnesota, and more important than that he’s been a senior consulting researcher with HSC, and he’s been involved as a valued member of our team throughout all six rounds of site visits. So, he really has history, and he’s going to make a presentation.

Then Debra Draper, who you saw at the last panel, will make some comments from the researcher perspective. And then we’ll hear from Helen Darling, who is the president and CEO of the National Business Group on Health, and she has an extensive background in health benefits. She was a leading benefits consultant at Watson, Wyatt and purchased health benefits for the Xerox Corporation. And then we’ll hear from Karen Ignagni, who is the president and CEO -- I don’t know which one, but I’ll say both -- of America’s Health Insurance Plans, the leading organization of health insurers in this country, and she has led the organization for many years, and she actually also has a background in benefits for the AFLCIO, being in charge of employee benefits there. Jon?

Jon Christianson: Thank you, Paul. A lot of the stuff that I’m going to be commenting on has already been touched on in the previous panel, so this is a good opportunity to sort of continue that discussion.

We’ll start by talking about a topic that has been receiving a lot of media attention here in Washington but also in the local communities in which we visit, and that is the status of consumer-directed health plans in these communities.

I think you could have summarized what we found -- was that employers and health plans continue to be -- maybe "bullish" is to strong a word, but quite optimistic about the future for these plans, despite the fact that to this point enrollment growth has been possibly slower than expected.

Typically the employers -- the large employers at least -- that are offering these plans are offering them alongside of a PPO option, and they suggest that one of the reasons that they haven’t seen a lot of take-up in terms -- "a lot" meaning , percent of their employees taking up these plans -- is that at this point they’re hesitant to structure the premium differences -- or at least the out-of-pocket -- not the out-of-pocket but the contribution on the part of the employee to favor the consumer-directed health plan -- is they are still feeling like this is a complicated product, and they want to make sure that their employees understand the product and how it works, so they want to offer it as a choice. They don’t want to provide a strong financial incentive yet for people to move into the product.

Probably you could characterize what’s going on out there as a lot of watchful waiting but watchful waiting with a purpose, and I think an example of that would be from our Indianapolis site visit. Indianapolis is probably the site that has had the most take-up on consumer-directed health plans to this point, and it’s no accident that that’s also the corporate headquarters of Wellpoint, and Wellpoint purchased Lumenos, which is one of the, you know, firms to develop this product and are really now pushing the product really hard in their marketplace in Indianapolis. And the watchful there revolves around one employer, a large local employer called Marsh Supermarkets, which has decided to -- it has replaced all of its benefit options with one plan from Lumenos, and as we went around that market, the idea was well, we’re going to see what happens with Marsh. And you can go from market to market and see this. They’re watching these sorts of employers that are making the strongest, most aggressive moves; and, depending on what happens, what the experience of those employers is, I think either we can see a substantial sort of new round of enrollment in these products or we can continue to see relatively (off mike), and that’s actually going to be interesting to follow in our next round of visits.

We have seen increases in cost sharing -- cost shifting to employees. That’s continued. But I think the interesting thing that we found out in this round of site visits is that it’s moderated. It’s not occurring at the same rate or with the intensity that it has in the past. Why is that true? I think partly for some employers premium increases have moderated, or if you’re self-insured the costs -- that your medical care costs are rising at a slower rate than they were four years ago. And so there’s less pressure to sort of shift more cost to employees. But I think there’s a more subtle explanation of it, too. I think the shifting of costs to employees was supposed to accomplish a couple of things from the standpoint of a more sophisticated employer. One is, of course, it does reduce their share of health care costs. But the other thing that it was supposed to do was place more financial incentives on employees to continue utilization, and we were told by some employers -- not a large number but some employers -- that they felt that they had moved deductibles up to the point where on the margin of further kinds of increases that they could contemplate probably wouldn’t have much of a further impact on utilization and of changing people’s decision making.

What has accompanied the increased cost sharing over the past few years and which we now saw very definitely in our site visits was increased pressure on employers -- from employers on health plans and providers for what employers call transparency. And what they mean by that is information on prices and quality pushed down as far as possible at the provider level that will help employees who now have these financial incentives to make informed choices to actually make those choices among providers. There’s a lot of pressure, but this as become -- this is a very challenging thing for health plans to do. Part of it is technically challenging just to figure out how to present those prices, to calculate them, how to present them so that they are most useful for employees. But part of it is political in terms of their relationships with their provider networks and how far they want to go in terms of price transparency. It turns out that providing information about differences in quality is, in some sense, less controversial for health plans and something that providers, you know, are concerned about the technical issues there, too, but maybe less so, less controversial than the pricing information.

Along with this responsibility for a greater share of costs, we found in this round that consumers were being asked to their greater sense of responsibility for lifestyle and treatment decisions. So, along with this pricing information and quality information, health plans, again at the urging of employers, are providing more and more consumer support tools, information support tools. The consistent comment on those tools from the people we interviewed was they’re out there, we don’t think they’re being used very much now, but we think this is going to be an evolving thing. The tools are going to get more sophisticated; people are going to become more aware of how they’re used; and they’re going to be used more over time. Right now they’re not seen as anything that’s really transforming health care decision making.

There’s been a shift in the way that health plans are responding to employers, and I think to understand what’s going on here we have to think back -- as Paul said, we’ve been doing this for six rounds of site visits now -- and if you look back to the late s or mid s when health insurance premiums were relative low, when we were kind of at the bottom of the insurance premium cycle, it was fairly common for large national employers to offer two or three different health care organizations -- not different products but different health care organizations -- insured products to their employees, because premiums were low. And so you got, from year to year, shifting of employees among those different products, and the business case for health plans in that situation to invest a money in disease prevention activities simply was a tough case to make. Now, the sort of modal arrangement for large employers is that large employers are insurance plans.

Large employers are self-insured. And what we think of as insurance plans are really providing services to support the insurance plans that the large employers run. So, if you think about it that way, there’s not the opportunity to move between health insurance products. These employees, by and large, are there for a longer term and so from employer’s point of view, the employer is asking the health plan to help manage the health of the employee population. And that’s a distinct change in terms of expectations for the health plan. The health plans have responded, so that the larger national plans in their dealings in the marketplace now refer to themselves as health companies, not health insurance companies, and the whole notion there is that we are developing a set of tools and developing a whole approach to help employers manage the health care of the employees from the preventive stage all the way through.

So, there is certainly, as part of this, a heightened emphasis on the part of plans and employers, on health risk assessments. These are surveys, questionnaires that are administered to employees or employees are given the incentive to take voluntarily that generate information about healthy behavior, so it’s the kind of stuff that’s not in a claim chit if the health plan is processing claims data for the employer, but if they want to really go beyond that and try to help manage the health care of the employers, they have to understand health behaviors, and the information on health employers is coming in part from these health risk assessments. The plans have been fairly clever in terms of promoting different kinds of financial rewards to employees to complete health risk assessments, and what this information allows the health plans and employers to do is move beyond what I would say were fairly generic attempts to improve health in the past -- brochures on, you know, getting into a walking program kind of thing to very targeted kinds of activities around people that are at risk for the development of different kinds of diseases. The health risk assessment data is being integrated then with claims data to provide this sort of very broad picture of what is going on in the health care life of the employees. And this is being facilitated by the fact most claim submissions now are electronic. So, you have real-time claims data now. In the old days, you had this big lag in claims data supplied by providers and processed by plans so that it was not possible to sort of use the claims data as information that would allow you to take action in terms of care management or other interventions.

And as a result of all of this is the plans are making a, I think, a big effort to better integrate these kinds of various care management activities, and part of the integration involves moving in-house vendor programs which employers had previously contracted with separately from the health plan contracts. In the past, self-insured employers had a contract with health plans to the standard health plan stuff, and you might have had a contract with another entity to provide disease management services, another entity to provide intensive care management, and so forth. The way the health plans are repositioning themselves now is this health company that can do all of this stuff for you is to try to compete with these vendors in some cases by buying the vendors out or developing their own programs in-house so that they have a full range of things they can offer employers, the argument here being if you really care about integrating the care and managing the employees’ health from the preventive side all the way to good care inpatient utilization, you need to contract with us, the health plan, because we have all those tools and we can use them all for you rather than sort of disaggregating these contracts to different entities.

There is still traditional managed care out there. The traditional managed care tends to be very focused, very focused in areas where costs have been increasing rapidly or where there seem to be real questions about the appropriateness of utilization. Probably the most common area in which health plans, at the behest again of employers, were taking these taking these kinds of steps were the high-end imaging services, the question here being -- sort of the way that it would be described to us typically would be well, somebody will go to a physician’s office, the physician would have in the office imaging equipment. It might not be state-of-the-art imaging equipment, but it was there, it would be used as part of the diagnostic testing. A referral would be made to the specialist. Another image would be taken of the same body part with a better piece of equipment, and so forth, and so this sort of notion of duplicative imaging going on whether the imaging was of high quality, whether it was being interpreted correctly, and so forth. So, there are vendor organizations that the health plans are now contracting with that really do old-time managed care. There’s preauthorization in some cases. There’s accreditation of physicians’ offices and machines in physicians’ offices. There’s audits. There’s the whole nine yards. Now, where that’s going in terms of whether the health plans will eventually bring that in-house or not, it’s too early to tell. I think in this case what the health plans are doing now is sort of taking advantage of the fact that some of these specialty companies have experience with multiple health plans to draw on in terms of managing these services. But I think once a model for management becomes developed, we can probably see that being brought in-house again by health plans just they’re trying to bring the disease management programs in-house.

We should talk a little bit about restructuring of health plan markets, and we thought that the thing that we observed that was at the local market level that probably had the biggest implementations for health plan markets was the -- were the challenges that are being faced now by locally based -- smaller locally based health plans and communities. The popularity of their -- these plans were often started by provider systems to compete with other HMOs, and they are very much stuck onthe HMO product line, and they’ve been a little late in terms of getting out of that product line and offering alternatives that employers are now demanding. There’s also -- they also sort of have a restricted network of providers in their communities compared to some of the other health plans. Both of those things put them at a disadvantage in competing locally, and because of their smaller enrollment their ability to leverage discounts out of providers locally is also questionable. Enrollment has been declining, so that ability, whatever it was, has been eroding. And they have relatively limited access to capital to mount consumer- directed health plans and other new things that require investment in information systems.

You put this all together with the increasing preference of employers for single carriers, and you can see what kind of a problem the small local plans are having. What they’re trying to do is offer new products, not always successfully. Many of them are now being taken -- to a degree which we haven’t seen before -- are now being acquired by national plans or going out of business. So, we have large local plans which seem to be able maneuver in this new environment.

The hybrid pilgrim health plans and toughs of the worlds -- the group healths in Puget Sound -- these plans have more resources and large enrollment on which to base their survival strategy. But even those plans are partnering in many cases with national plans to get access to national networks so that they can serve local employers who may have employees that reside around the country.

So, we’re seeing a lot of shifting around and strategic maneuvering on the part of these large local plans, but on the part of the smaller local plans it’s all about survival, and, frankly, they’re not surviving.

So, I guess a way of sort of wrapping up these comments would be to say we were told two to four years ago, the last two rounds of site visits, that employers were going to change their model, that they were going to change the way they related to their employees, that they were going to shift both financial risk and responsibility onto employees and they were going to provide them with tools -- the employees, that is -- to better manage their own health. And I think it’s reasonable to say they’re doing it. You know, you can question how quickly they’re doing it, how rapidly the change is occurring, but they have stuck to the strategy and we’re seeing it play out in a lot of different ways and along a lot of different dimensions, and we’re seeing health plans respond to the employer demands and changing their business model as a result of that, and it’s -- and I think that is probably the most interesting development. It wasn’t -- I think when people were first hearing this four years ago, the question was well, are employers really serious about this, or is this just kind of a lot of lip service to the fact that a lot of costs are being shifted onto employees? And I don’t think that you could reach any conclusion other than the large employers are serious about it.

Now, I think that the caveat that was mentioned by one of the panelists in the first session is very appropriate here when we about employers and when we have a question-and-answer session; that is, even among large employers, what you want out of your health benefits varies dramatically. GM is in a very different situation and Starbucks in terms of what they care about in terms of health benefits, and their solution to health benefits is going to be very different to say nothing of the difference between the large employers, large self-insured employers, which is mainly what we’re talking about here -- that’s mainly what we have information on -- and the very small employers that are concerned primarily about are we going to offer health insurance to our employees next year? Are we going to be able to figure out a way to do that?

So, I think that’s the way we’ll kick off this session, and Paul?

Paul Ginsburg: Thanks a lot, Jon. I’d like to hear any additional comments from Debra Draper, who’s a member of our team that covered insurers and employers at this conference.

Debra Draper: Yeah, I just had a couple of points. I think one of the things that’s important to acknowledge is that despite the limited take-up of consumer-directed health plans, the concept, the consumerism really has advanced over the past two years and we see this really manifest in a number of ways, all of which focus on the consumer taking more responsibility for their health and life style. And, as Jon mentioned, health plans have made significant investments in consumer support tools, like providing pricing and quality information to their enrollees, and they’re also providing information on resources like access to WebMD or -hour nurse lines to really help their enrollees with managing their medical conditions or questions or helping them with their lifestyle management. But I think what we also see across our markets is the level of sophistication and, you know, the application of these tools and information really varies significantly, and, you know, many of these tools are still very much in their infancy and are still evolving.

The other thing that Jon also mentioned was that there’s been a great deal of focus on health promotion and wellness, and I think one of the interesting developments that we’ve seen in the past two years is that much of the impetus for this is really coming from employers, and I think in the last two years we’ve seen -- in previous rounds of site visits we’ve seen employers take -- be a little bit more complacent or passive, but I think in this round we’ve seen a dramatic change in the response of employers in getting more engaged and trying to implement strategies to really look at addressing their cost trends and also positioning themselves for providing tools for their employees.

Just one other thing I wanted to point out is that despite all the activity around disease management and activities like health promotion and wellness, you know, it’s really still unclear how extensively these tools are being used or if they’re even changing care delivery for people. There’s still very little evidence on the return on investment related to these activities, and I think that employers, despite that, are still making the investments in these activities and they continue to be concerned, as I mentioned, with rising health care costs, and they believe that it’s really -- we hear crossed when their markets -- that employers really believe that these are the right things to do for their employees. And for some employers, setting up these types of tools is really the next step or -- and implement an interim step towards moving towards implementing tools like consumer-directed health plans.

So, I’ll stop with that. Those were really the two points that I wanted to make.

Paul Ginsburg: Okay, let’s turn to Helen Darling to speak about employer perspective.

Helen Darling: All right, thank you very much, and thank you for the opportunity to join this group and hear about these great results. When I listen to comments about what people see now versus perhaps what we expected, I’m reminded of the constant problem we have in this country of their always being a lag between the hype that you get out of trade press and sometimes proponents and true believers who of course because in many instances they overstate the case. That of course draws the journalists to them. If you reasoned and you qualify everything, you’re not as likely to get interviewed or quoted.

So, what you get always is well, what’s the latest thing. In fact, I was always amused when I’d be called first about well, what is this? Are employers getting out of the game? And there’s an exit strategy and all the usual terminology. And I’ll say actually no, you know. In fact -- anyway, go on and on, and that of course would be ignored. And then they’d say well, isn’t it true that consumer-directed health care failed? And I said well, it didn’t even get started yet. But they didn’t want to hear that either. So, I guess we’ll just note that a lot of what we’re hearing I think is an accurate reflection of what is the normal, slow movement -- first of all, in almost anything in this country, in health care especially, and benefits but even more so in benefits, the strongest force in health care benefits in the country, if you’re looking at it from the consumer side, is inertia. Most people never read their material. They should but they don’t. Even when there are changes. They frequently come in later and say to you well, I didn’t -- I don’t like this or I don’t want that, and you say well, but we announced that, you know two years ago when we had, you know balloons with it on it. Well, I didn’t know about it. And then they’ll bring in their benefits package still with the slick stuff outside. It hasn’t even been opened. So, there is this huge lag, and I think part of what we’re hearing about in the site visits is the normal, slow movement of something. It isn’t just that it’s a little more complicated. Frankly, it’s all complicated.

If anybody’s in a point-of-service plan, and you’ve made a claim anytime, it’s a complicated system. So consumer directed health care isn’t actually more complicated. It’s almost identical. The difference is it has a few more deductibles perhaps, and it may have a savings account, but that’s not that different from flexible spending accounts. So we have a normal slow changing going on. I thought John’s comment about the changing business model was correct.

Large employers in particular decided some years ago that they were going to change the business model and they have been implementing it slowly, and slowly for lots of reasons. First, I mentioned the inertia, but I would say that as life has become more complicated in health benefits, people have actually come to appreciate their health coverage much more. If you go back about years and you interviewed people and said what do you value, it would be pay, my manager, vacation, and a whole bunch of other stuff, health care would be way down there. It is now usually number one or number two, and it has been for several and for lots of reasons which I won’t go into. But now of people are paying attention, then the willingness to make any changes changes, and in addition, in the last few years, most employers have been doing reasonably well. We are out of the recession. So the behavior that we saw during the recession especially both before / and after / in fact has flattened out and become like it was for a number of years when we had a booming economy. So those are all things going on.

I thought Debra’s comment about consumerism was really important. In fact, again going back to the changing model, most employers figured out that if we don’t change the engagement of consumers, not just in terms of spending and in terms of benefits and how they think about all of their own behaviors including individual behavior, that in fact we will always lose, all of us, we will have hyperinflation for the rest of our lives. So they moved into this different model and it is a combination of a changed business model and an emphasis on consumerism in the best sense of the word, not cost shifting, my least favorite term that John and other use, but cost sharing which is what we call it. And I might note that for several years employers have absolutely not changed the percentage of cost sharing. The reports frequently talk about increase on consumers. It’s increased on employers at about percent and percent on consumers, and it is unfortunate for both of them, but the percentage of cost sharing has not changed in the last years, including this year.

I would also just add a couple of other points that we see a lot of, emphasis on personal health records, and we will see more and more of that. And consumers, and again it’s part of the consumerism that Debra referred to, but we will see much more emphasis on the employee owning their records and in fact using them essentially to help with their own use of the health system.

The other support, decision support and tools that employers are giving their employees or making available to them to the extent possible are what we call navigators. Interestingly, we have gone from the old model of care management of the system managing on your behalf, to putting in the hands of consumers all the tools including even something like the equivalent to a personal navigator who helps you if you have a serious illness or if you have a complex case and you’re getting mixed information or getting multiple information and you don’t know how to sort it out, so you actually would have your own personal navigator. So that’s another important trend.

And I would say finally that the other really important item that’s being used is that consumers are at this stage being rewarded absolutely in dollars against their contributions, their premiums are being reduced if they don’t smoke, if they have healthy lifestyles or choose healthy lifestyles. There is controversy right now about whether or not in the future there will be anything tied to the obesity epidemic and the very serious problem that a consumer who is obese will probably cost about twice as much in terms of health care. This is the kind of thing that got us to nonsmokers discounts and the question is we already have changes and rewards related to choose activities which we believe will help to move people toward a healthy weight or to maintain a healthy weight. Where we are headed in the future we don’t know, but we do know that there is going to be much more emphasis on the individual and how he or she interacts with the health system and interacts with support services that move them toward a healthier lifestyle. Those things will become much more important.

Paul Ginsburg: Thanks, Helen. Karen Ignagni?

Karen Ignagni: Thank you. Good morning. I really read with interest the paper prepared by John and I very much enjoyed his presentation. The Center does a great job. Paul, you should just feel terrific about all the wonderful work you’ve done and your terrific team. So it’s a pleasure to be here, and it is always fun to be here with Helen. I wanted to make five points to spur your thinking about questions which I think is probably the most important thing for all of you who have been sitting here for a while, so I will try to be very quick.

First, it struck me as I was listening to John that it might be helpful to just be reminded of the prism through which a health plan looks at the marketplace and to reduce it to the lowest common denominator. You could give a -day lecture about this, but I’ll just give you one little thing to think about. Our job is to be agnostic about what people purchase. Our job is to offer a portfolio of products so that we can be nimble enough to give purchasers the alternatives that they want and consumers the alternatives they want. The good news is that health insurance premium growth has slowed for the fourth consecutive year. That is a very significant accomplishment. The Kaiser Family Foundation has indicated that the latest increase is the slowest since .

We have been looking very carefully at plan data on disease management and care coordination and we can see that plans are now documenting reduced ER visits and days per thousand in the hospital. We are going to be undertaking a very comprehensive study looking at these data so that we can get them out in the public domain, and that has played a major role in the slowing. The utilization review on things like imaging where you’re seeing dramatic growth as John observed is also something that has been very important. The tiering in pharmaceutical, and I will talk about pay for performance and tiering in the physician arena and the hospital arena in a moment, that has also contributed to a slowing. Just several years ago, pharmacy expenditures were increasing at almost percent per year and now we’re down to roughly six, in large employers’ business sometimes it’s in the three range, but generally five to six is a good guide for where we are and that is a significant reduction, and I think that is borne on what you are seeing.

I think a cautionary note here is that it is interesting to hear the policy dialogue, and I am not speaking about the dialogue this morning, but largely within the policy community, when we talk about costs we talk about premiums and I think it is time for the public policy community to recognize something that is the elephant in the room, premiums follow costs. HHS has done a marvelous job in the department that I used to work in many years ago chronicling the expenditures on administrative costs and they have been consistent for almost a -year arena or span. What we see is as we look at the HHS data, and Paul, your team has done marvelous data in this regard as well, disaggregating the rate of increase year over year, you have a component attributable to inflation, one to medical care inflation, and utilization is increasing roughly about percent according to PricewaterhouseCoopers who just a recent study for us. You see that both on the physician side as well as on the outpatient and hospital side.

The physician side is very relevant for the discussion we’re having in the policy community, or are about to have, about SGR. I think folks it’s very curious that people forget that we had an approach, a cap, on physician payment and the reason that physician prices and reimbursements are going down is because the cap has been blown through and utilization is soaring. We don’t have anything about that in the policy community and we have to look at that in the health plan community because as purchasers, whether they are individuals or whether they are employers, are coming to us and they want reductions, they want to see a lower rate of increase, and so it really then motivates us to think about how do we deal with these challenges. But it is very curious that we don’t have a conversation about the underlying cost drivers, and I think it’s very hard politically and that’s why we don’t, because there are five drivers. The Institute of Medicine did a report back in , "Crossing the Quality Chasm," and very little has been done about that. Jack Wennberg and Elliot Fisher have done a wonderful job documenting variation, and I am going to talk about some things that we’re trying to put in place to deal with this wide variation that everybody wrings their hands about, but we don’t have a public policy dialogue about why are they practicing very, very differently in Boston versus Minneapolis, just to give you one example. And what does the Mayo Clinic know about practice that perhaps the folks at the leading medical centers are not agreeing with or are not subscribing to, but there is just a significant variation that needs to be addressed?

Second, new technology. It is exploding both in terms of drugs, bios, which is only going to grow dramatically, and we are all going to want everything available, and new devices, without any national apparatus to assess cost-effectiveness. So you will hear us in our community partnering with the manufacturing community and public policy advocates to advocate for cost-effectiveness analysis and a new body to do exactly that.

Defensive medicine, and you all roll your eyes, malpractice is a very significant issue for physicians. They are worried about practicing medicine in today’s environment and we need to address it. I understand the political dynamic very, very well, but we ignore it at our peril. And when we talk about costs, we really need to be focused on how much is attributable to defensive medicine and how difficult it is for physicians these days. Personal health habits, again, that’s enough to clear a room. Nobody wants to talk about that, but what we’re trying to do is develop new benefits packages that incentivize positive behavior.

Then finally, cost shifting. The AHA has a marvelous chart done by Avalere on their website that talks about cost shifting roughly on average in the to percent range. That is very significant, both cost shifting attributable by what’s happening on the Medicare side as well as the Medicaid side. In our health plans in Medicare Advantage we have begun to document what we are paying hospital systems around the country and I can tell you in some major cities we are paying percent of fee for service. So I think that hopefully that gives you some subtext about how we think about this.

Finally, what’s new? We realize there are things that health plans can do and there are things that we can do as an industry together. First, in terms of what health plans can do. Consumers and purchasers want more data, and I am going to talk about an effort to address that in a way that we are working collaboratively with the provider community. Clearly, purchasers are looking at incenting high quality, but you have to have an underlying building block system so that we know what constitutes high quality. Pay for performance is definitely coming, paying for quality is the way we think about it. It’s talked about in terms of pay for performance, we’re thinking about paying for quality and being very transparent about how that moves forward.

Also the kinds of incentives that you see how being built by health plans, and you may see a number of experiments in this regard, but I think that you will see that purchasers are looking for these sorts of things. We are rewarding good health and health maintenance. I have asthma, for example. Health plans are looking at strategies to penalize folks like me who don’t fill their prescriptions when they need to because that increases the probability of my going to the ER. That is a simple example to give you the kinds of things that we’re thinking about. Again, you could give a -day speech this.

In terms of what we can do as an industry, our plans have committed to three things. Many of you have probably heard about PHR effort. We realize we heard a message loud and clear from the physician community that no one health plan can build one template and then have another seven health plans build their own templates. So we have worked collaboratively with the Blue Cross/Blue Shield Association and we have developed an industry template to PHRs. We have tested plan-to-plan transfer of information. It will be loaned to the PHR by consumers. We will be the custodians. It will be all through the Internet. Plans are moving toward that right now, but there will be a template. We have worked very closely with the advocacy community and the physician community.

Second, data aggregation. A number of physicians have raised concern about being evaluated through the lens of only one health plan notwithstanding how large a health plan may be because they want their entire patient population looked at. So we have made a strong commitment to the concept of data aggregation. I thank the Robert Wood Johnson Foundation. They have just funded our foundation. We are now mounting a major effort that will be built on quality metrics that have been developed by an organization called the AQA. Many of you are familiar with that. We are going to be taking those quality metrics and aggregating data not only in the commercial side but also working with Medicare and hopefully eventually Medicaid as well to give a full picture of a physician’s population. We are going to do that very collaboratively with the physician community as we have in the AQA.

Finally, we have committed to a very aggressive program of administrative simplification. You see this in the area of credentialing. We have , physicians now who are part of our new uniform credentialing system that has been developed. You will be hearing more from us about administrative simplification. Nancy Chockley, my colleague is here. She is the queen of administrative simplification, has done marvelous work in that area, and we are all working collaboratively to try to address these issues.

So I hope that gives you something to think about and put some perspective from our community on the table, and I look forward to your questions.

Paul Ginsburg: Thank you very much, Karen. Are there any comments?

Jon Christianson: I think we should get to the questions.

Paul Ginsburg: This is a good time to start filling out your question cards and hand them in. I have a couple of questions first. People can also come up to the mike, a higher probability that your question will get asked. One thing I wanted to say is Debra made the point about how consumerism thought of broadly is really advancing in the sense that clearly the employers and the health plans are very committed to it. Consumer-directed health plans meaning plans that have large deductibles and either HRAs or HSAs, John was mentioning there’s optimism about the growth, but the growth progressing somewhat slower than expected. The question is, how important is that particular product to the future of consumerism, for both Helen and Karen?

Helen Darling: It’s not the only thing that’s going to move it forward. I think what you’re going to see what we seeing already is a range of products with the main difference, the only significant difference being the size of the deductible. Right now many employers offer plans that have $250, $500, $750, $1000, deductible and they are not "consumer-directed" health plans. But depending on how the premium is set up and very often the higher the deductible the lower the premium, obviously, you may have in terms of out- of-pocket costs a PPO with a relatively high deductible that actually costs you more because of the way the premium is in the cost sharing than a s-called high-deductible health plan. What we are already seeing and will continue to see more of is this spread of options that people if they are fortunate will have many choices, if they are less fortunate they may only have one or two. You may have seen the announcement recently that Wal-Mart has come up with a set of plans that gives their employees different options. It’s almost hard to imagine doing that, but you have to have a model to do it. But having consumerism is going to keep moving because whether it’s a $1,200, deductible or a $1,000, deductible or a $750 deductible, with all the other things that come along with it, that’s more than enough to motivate people.

Paul Ginsburg: Karen?

Karen Ignagni: I think consumerism is having actionable information so that consumers can be empowered to analyze and act given information, and we are working very, very actively as I said to build that ability for consumers to do that. I think that HSA products with health accounts is an arrow in the quiver, if you will, but I think that it’s under the heading of having actionable information where consumers can do something in the delivery system. But I think that the addition of an account is something as we probe consumers, that they value the ability to put resources away later on for what may be larger health care needs. At the same time, we also see consumers valuing traditional products. So I think that from our lens or through our lens we are trying to make sure that we are nimble enough to give them a lot of alternatives.

Jon Christianson: I could add one thing to that. The products aren’t essential for consumerism, but I think one of the things that we need to at least acknowledge is that the development of those products as they came into the market they tried to create a niche for themselves and part of that niche was around providing consumer support tools. The people we talked to all are fairly quick to give credit to those products for providing a lot of the impetus and momentum for developing those tools initially which we now see available in PPO products and high-deductible products and so forth.

Helen Darling: There is a change in views about retiree medical especially as there’s an interest in, and we already see some, success in retaining workers beyond the normal retirement ages, an interest in having accounts of some sort that people can save money for retiree medical whether it is during their working years and they have a way to save money for the future, at the very least the out-of-pocket costs, or it’s something that they can have when they move in and out of the workforce by choice so that they can save some money for retirement. That is totally new and different from what we’ve had in the past.

Paul Ginsburg: Another question I have is about these various wellness and health- promotion activities. What was really striking to me is the difference over a period of a little over years in how much employers talked about how aggressively they were doing these things and saw that was their future vision and the health plans telling us about the pressure they were under from employers to provide these products. On the other hand, when you talk to them about have any of these tools proven themselves, no. What’s your perspective on how long will we be pursuing this before we come across X, Y, and Z really works, we’re going to do that, and these others things we know they won’t work?

Helen Darling: It is so early to have data. The scientists will tell you that in a nanosecond. I think there is a belief that there is a value to helping people change their attitude toward themselves and their lives and how much their health is tied to what they do versus using the health care system. There is a sea change among large employers in this understanding, and maybe it should have been obvious all along but it wasn’t. There is a recognition that they want to help people change their views. This is the spirit of the consumerism, the movement. But I think if we had a recession tomorrow, a lot of these things would be challenged, and by that I mean including even cost sharing and what design and all sorts of things. We are at least temporarily, we hope a long time, in a relatively healthy economy, maybe much of it is smoke and mirrors, but it is there. But if in fact we had a change in the economy and employers began to struggle more, I believe that some of these extra benefits which now are good to do because they’re good for morale, they’re in the spirit of what they want to have happen, could be really at risk.

Karen Ignagni: Just two quick examples.

We have done a great job over the last years in smoking cessation and what we’re doing now is taking those same tools, building them out and aiming them in the area of obesity which is the source of so many issues within the health care system, that’s one example, and incenting people and giving them support in terms of dealing with weight management, et cetera.

The second simple example is in the area of patient information, giving people more information about cholesterol and what role that plays, what their numbers mean, why they should pay attention to it, why they should regularly get tested. Just two simple things, but we believe very strongly that investing in prevention and early intervention is not only very good from a health perspective, it is a good strategy, but as Helen observed, it is a kind of strategy that sometimes takes a couple of years to demonstrate both the efficiency as well as the effectiveness on the cost side. We can already see the quality and the satisfaction associated with that, and that is positive as well.

Paul Ginsburg: Let me go on to some of the questions on the cards, and if anyone would like to get up and take a turn, that’s fine, too. This one is for John Christianson. John Fisher recommended that the United States eliminate the employer role of sponsoring coverage, moving to individual purchase of insurance. Based on your research and personal opinion, should the employer get out of the middle of the insurance transaction?

Jon Christianson: I’m not exactly sure what research I would have done that would answer that question so I’m going to try to not so gracefully ask for the opinion of Ms. Darling on that issue, should employers get out from the middle of the health care equation.

Helen Darling: Actually, they don’t think of themselves in the middle, period, but they are not providing health coverage because they sat back and said this is what we’d like to do, what a great idea. What we have is a system in place that is certainly imperfect, but the concern that most employers would have, not all, there are actually three broad groups of employers, so when you say employers, there is no one employer.

There is a group of employers where it is clearly to their advantage to not be providing health benefits. Ideally, a government solution or a connector or a HIPC or whatever we are going to name this thing could take it over. They clearly would be much better off. There is another group that would be somewhere in the middle, that there are companies that they completely with. There are some grocery stores, for example, where they provide very good benefits at considerable expense. It makes them not competitive with their competitors who provide fewer benefits. So they would be better off with a different solution many of them believe, and both groups are well represented in the press and in the public eye. Those are the ones you hear the most from. And their competitors may or may not feel the same way, by the way.

But then there’s another big group, and it is the larger group of companies that first of all are doing relatively well in managing their benefits. They are the ones that in the best practice research and things like that are at the percent and not the percent. They are for the most part are not thrilled, they are not in it because they want to be in it, but the first thing they’re going to think about is if we are not, what’s the impact. Because if you right now are providing very comprehensive benefits including health programs and things like that to your employees, you’re managing considerably under the average in terms of cost, and you’re giving your workers what they want given where they are in the country or what industry, then a general solution might actually cost them quite a lot of money. They would also lose control and they are very skeptical that turning it over to someone else is going to put them in a better position. That group is very different. Who knows how all this is going to sort out in terms of politics and policy, but it’s not a no-brainer for that last group to say we need to know what the alternatives. We’re not in love with this system, but the alternatives could be far worse.

And just one final point, and I apologize for the length, most large employers, I would say virtually all large employers, are absolutely committed that if they don’t continue to have ERISA preemption protection that their costs will go up and a lot of other problems will occur and will really, really hurt them as businesses or as large employers, and that suggests a national solution. So if there is any solution, it is not going to be states, the desire would be to have the ability to have a national solution.

Karen Ignagni: Paul, could I just make one quick comment? I think Helen did a great job of talking about this in that it is a labor market issue. You are all probably much too erudite to be reading the "Food Section" in the "Washington Post," but there was a marvelous article yesterday which said it all about how employers think about this, it was in the "Food Section" on the front page, in the "Washington Post," and it talked about Wolfgang Puck is opening a new restaurant in Washington, they’re offering health benefits and (k)s, and they didn’t say what the benefits were, but they said they have had no problem recruiting folks. Other chefs are bemoaning the fact that they can’t open new restaurants in Washington, and the "Post" didn’t draw this directly, but the implication was clear, they weren’t offering those kinds of benefits and they’re finding it hard to recruit, et cetera. So it is a wonderful I think illustration of the very smart points that Helen made.

The other thing is on the individual side, I think that all of us recognize that as the baby boomers are changing their connection to work and moving from perhaps full-time or connected to one employer to more individual consulting and things of that sort, they are going to be in the individual market and not necessarily the employer market. So that’s how we’re looking at it as well.

Paul Ginsburg: I have a question for Karen. One thing that I was perceiving in visits this year is almost like a bifurcated health insurance benefits market in the sense that you had the distinction which initially I thought of as large firm/small firm where the large firms may be following the emphasis on wellness and health promotion and they’re keeping their patient cost sharing fairly modest. Whereas in the small firms, everything is premium, they’ll do whatever they have to do to get the premium down including very lean benefits, high deductibles, et cetera. I thought it was small/large until almost by mistake we talked to benefits consultants and brokers and we went through a broker looking, but it wasn’t your typical broker. This broker specialized in law firms and other professional firms, and that sounded just like large employers. But in a sense you have somewhat lower-paid people working for small firms having a very different health insurance experience and very different sensitivity to financial incentives. Do you have any perspective where this is heading and then whether somehow we’re going to run out of room in some quarters at least to increase patient incentives?

Karen Ignagni: I think you are asking a very smart question. Let me go back a bit in time because I think it provides some perspective on it.

We went through a very difficult discussion in this country about so-called patient protection. But at that time when we were going through this on Capitol Hill, not one consumer was complaining about the fact that we drove health care cost year-to-year increases to virtually zero. What the issue was about is choice and a range of other issues, but at that time it was possible for more small businesses to get into the system, it was possible to keep costs down for individuals, the transaction costs that they pay, whether it’s deductibles, co-pays, et cetera. We took off the tools because that’s what the political system said it wanted, and what we have been going through over the last or years which is why I think the data say what they do in terms of the rate of increase now down for the fourth year in a row, is rebuilding tools that are more transparent and that are done in a way that is very targeted. We explain to purchasers, consumers, and the practitioners why we’re doing it. And I think also people can see how it has a health consequence.

I am not making the argument that we were doing everything perfectly, but I do think that the political pressure to move away from the tools that drove health care costs down really has not been assessed and needs to be assessed as we look at these drivers which are intractable problems as we begin to build the kinds of skills. I had a member of Congress ask me yesterday about why we weren’t penalizing a hospital where his daughter went for care because the hospital had given a drug that she indicated very clearly on her records every step of the way she was allergic to. We had a very interesting discussion about incentives, they started being up-side incentives and people are comfortable with that, everybody wants simply up-side incentives, but now we’re moving to the arena where purchasers and consumers are asking for us to pay for quality and not pay for never events and not pay for poor quality and things of that sort. That is going to start a whole new political discussion which as a society and as a policy community I don’t think that we have completely assessed.

We are going to navigate through this very differently based on the experience of the past, but I think that from the lens of a small employer, they are depending upon us, but they are also depending upon the policy community to have these straightforward debates which is why I observed that it is easier I think for the policy community at large to talk about premiums and we never to underlying costs because it’s much, much harder, and the strategies associated with driving underlying costs will hit every stakeholder group.

And having head a great deal of experience with that, I can tell you that many of my other colleagues in the other stakeholder groups are not anxious for that. I recognize that. But for the small employers and for the individuals purchasing on their own, and for the large employers, we have come I think to the point where we have to tee all of this up and have a broader discussion that we haven’t been able to have.

Paul Ginsburg: Thank you. I have a question here about wellness and health promotion which is from the employee perspective. The question is, how do you address employee resistance, fear, to the increasing employer control over off-duty behavior such as not hiring or firing smokers or overweight individuals? Probably that one would be for you, Helen.

Helen Darling: There is so much in that question. First, from the employer’s perspective, and I think health plans as well, and frankly I think increasingly the government, has a perspective as the payer, that at some point is it the responsibility of the payer to totally ignore behaviors that are not only driving up their costs which then they’re expected to pay, but in fact putting other people in danger. So the question is where do you draw the line. Do you say if you smoke, not in the workplace presumably because it’s already not allowed, but you smoke in off hours, you will indeed both in terms of medical claims costs, days absent, the number of times they are sick, disability claims, and lower productivity, costs the employer a lot more. So it seems to me it is perfectly reasonable, and I think most employers think this way, that that individual who costs them more should in fact pay some of those additional costs, or the reverse, that if you do all the right things, then you will pay less in your share.

Interestingly, even for people who smoke, the employer is still paying percent of the costs for the most part, maybe it’s ., but they are doing a whole bunch of other things, and there is so much data on that. And by the way, the American people when you look at the polling data on that, more than two-thirds of them including some smokers even agree that nonsmokers should receive a discount if they make healthy choices. You probably know already that if you drive in a company truck and you have an accident and you don’t have a seat belt on, you’re in big trouble. In fact, there are a lot of things like wearing helmets at the worksite, a lot of things are required because the employer pays. If you don’t care about your body, you should, but if you don’t, the employer at least cares about the cost consequences.

So the question of obesity which is the next really big one we have coming up has some of the same problems. An employer could say I don’t actually care what you do in your private life, but if what you do in your private life has an impact on the costs that I will have to bear, and again, disability, lower productivity, absenteeism, all sorts of other things, and medical claims costs at twice, at some point the question is if someone is working hard with their family to keep themselves healthy, should they be paying the same thing that someone who is not doing that? We haven’t had that debate. In a point that Karen made, there are a lot of these topics of great importance that we really haven’t started talking about very much.

The polling data on that one, and I know this because we’ve done it, and this won’t surprise you, two-thirds of the American people are overweight or obese, one-third are obese. Therefore, when you do an opinion survey, two- thirds think that it’s okay to have a nonsmoker’s discount, but it’s not okay to have a healthy weight discount. But if you say what we’ll put in is not a healthy weight discount, but we’ll put in something like if you participate in healthy activities that lead to a healthy weight and you will get the same discount, then most of them say, yes, that’s okay, but there are still quite a few who don’t want any kind of distinction.

I think we are in obesity where we were in smoking years ago. We are the beginning of a sea change in how we talk about these things and how we act on them. We are not in the middle, we’re very much at the beginning, so I think things will change.

Debra Draper: There is one comment. This is an interesting issue for strategies around health promotion and wellness and across our markets we hear for example that employees are often reluctant to fill out health risk assessments because they don’t really know how the information is going to be used. So there are a lot of privacy issues with this type of information. I think employers have responded in a number of different ways one of which Helen had talked about, trying to incent employees to really participate in these activities, but I think there is a broader issue about privacy and the reluctance of many employees to provide the information that will somehow label them as whatever it is. So I think there are a lot of issues and I think employers are really grappling with this, and we’re seeing this across our markets.

Paul Ginsburg: This brings up the issue of given the whole range of consumerism activities such as price and quality, transparency and incentives for promotion, to what extent to legal barriers get in the way of promising things? And are these legal barriers, barriers that are reflecting societal values or just laws that happen to be there that might have been written for something else? I don’t know if anyone would like to comment on that.

Helen Darling: We certainly think as an organization that the work that Robert Krughoff from Consumers Checkbook has done to try to make CMS release the data that they should release, is heroic, and that he deserves great credit for doing that it seems to us. We think that there’s a lot of foot dragging and excuses. It seems outrageous that we have as little information about health care use, costs, prices, all the things that we need to have. There are lots of reasons for it and we could go on and on about the reasons for it, but we’ve been needing this information for a very long time. I’m hoping that sometime in the next year that some renewed interest in health care and trying to actually manage health care costs and quality and ensure transparency not just for consumers because that’s really important, but it’s also key that most purchasers don’t have any information either including Medicare, or if they have it they don’t use it. But we are flying blind on so many things in health care, and if you look at the data, and I think Karen mentioned this, of the Dartmouth Atlas and you think of the power of information and yet that information is only released to a small number of researchers usually years after the data, so there are a lot of problems. But think of how powerful and how many changes we could have in our system if that information were available to everyone.

Paul Ginsburg: The final question is, this is a long one and it’s for anyone, we’ll see if there answers, in the last panel someone said that health plan consolidation has not led to more cooperation among hospitals and physicians, but instead has led to consolidation among hospitals and separately consolidation among single specialists, presumably physicians in single specialty groups. For negotiations between plans and health care providers, is size the only thing that matters in terms of negotiating power, or do other things such as quality also matter?

Karen Ignagni: I think it’s a very new world now. I can see perhaps in the past that there was more attention given to size, but now as health plans work very closely with purchasers there is an effort to both build the data systems that we all talked about with respect to how do we analyze quality performance, but really incent those physicians and hospitals that are meeting best-practice requirements. Increasingly we’ve been thinking I hope as you can tell from my brief remarks the nexus between what we can do in the private sector and what government needs to do and comparative effectiveness is one area that I talked about. But Paul, going directly to this question, what I didn’t talk about is this whole diffusion question, how do we get diffusion into the health care arena of the latest scientific information as quickly as possible? We are beginning to work with academics and others, thoughtful folks in the scientific community, about fashioning some proposals about a more active role for NIH role in this in terms of this translation and jumpstarting this and getting it out so there isn’t this lead time with information going to journals and it isn’t subject to different interpretations, so I think that that would also help here.

Paul Ginsburg: John or Debra, do you have any thoughts on that?

Jon Christianson: I think the health plan market in most of the communities we visited is very consolidated by most economic measures that economists use. The leading plan in terms of percentage of enrollment in almost across America is Blue Cross, it’s not the national plans. The national plans are there as competitors in all of our markets but not always competing for every employer because if you’re a national plan and you sign a contract with a company in Boston to serve all of their employees, that means you have to go out there in Houston and be offering a product in Houston to serve those employees, but Houston may not be where you’re going to target your efforts, that may be a market where it’s going to be tough to get more enrollees. So you’re there in Houston but you’re not a major player in Houston, so that is the kind of thing that we see a lot of, a lot of consolidation but not necessarily -- I am trying to think just off the top of my head whether any of the markets we were in where one of the national plans is the dominant plan and I think there are a couple, but those would be plans that used to be Blue Cross and are now part of a WellPoint situation.

In terms of is it a negotiation of anything other than price, yes. The more dominant the plan is, particularly the Blue Cross plans in some of these markets, the more they are able to negotiate around the issue of what kinds of performance measures are you going to supply to us and how are we going to use those data so that negotiations between plans and providers cover the range of issues that employers want plans to address for them. The plans are the agents of the employers. I couldn’t agree more with the people who made that comment. So the employers have an agenda in terms of what they want the plans to do. Price is a huge part of that agenda, but all of the other stuff that we’ve been talking about in terms of consumerism is part of that agenda too. So it does affect negotiations around those issues as well.

Debra Draper: I would just add that I think size does matter. There are other factors involved too, but if a physician group is a must have or a provider is a must have in a health plan based on reputation or size, that’s a key driver in the negotiations as well.

Paul Ginsburg: One final comment, health plan size I think matters a lot today. It didn’t or years ago because then it was some of the small HMOs with narrow networks got the most favorable rates from providers because they had the ability to move patients which the large plans didn’t have. Today when everyone wants broad networks, that’s out the window and we’re back to size.

This completes the time for this panel. Before I ask you to thank the panel, I just want to say that we don’t have a break now so we’re going to change panels here. I’m going to lead you in stretching at your place, but please stay where you are so we can get going in just a couple of minutes. Thank you very much.

(Applause)

PANEL NUMBER THREE: Safety Net Trends

Debra Draper: We’re going to go ahead and get started. The final panel focuses on safety net and public health trends. Again we are very fortunate to have an excellent group of panel members. Joining us today is Dr. Bob Hurley. Bob is a faculty member at the Department of Health Administration at Virginia Commonwealth University. He is also an HSC consulting researcher. He has been involved with the last I guess four rounds of site visits. So we are happy to have him here with us this morning. Laurie Felland, she is a senior researcher at the Center for Studying Health System Change. She has also been I guess involved with the last four rounds of site visits, so her area of expertise is doing qualitative health services research particularly focusing on the community tracking study site visits.

Our other panel member this morning is Larry Gaga, and he is a partner in the Washington, D.C. office of the law firm of Powell Goldstein where he directs the firms National Health Care Practice. He is also the President of the National Association of Public Hospitals and Health Systems. Also joining us this morning is Dan Hawkins who is the Senior Vice President for Policy and Programs with the National Association of Community Health Centers.

We are very fortunate to have all our panel members here this morning, and Bob is going to lead us off with a brief presentation.

Robert Hurley: Thanks, Debbie. It’s a pleasure to be with you. Actually, this is a first this morning. This is a good example in which the private sector has crowded out the public sector, and we only have a short time for our presentation this morning.

(Laughter)

Robert Hurley: I hope they’re watching up the street. We’re going discuss the public sector trends that we’ve observed during this past round, and I do apologize in advance for doing pretty quickly through this. There are three areas that we want to highlight, what’s happened on the policy front, some of the prominent issues that are pertinent as far as the safety net, and something that is responsive to our panel members’ interests. A few words about public health issues because that’s where these observations fall under in terms of the structure of HSC. And then a couple of comments about some persisting problems and looming concerns that are evident to us based on our continuing years of watching these things unfold.

I think the big story on the policy front to sort of coin a phrase here is this relief, restoration, and reform that we’ve observed through this last round particularly contrasted with Round when many of the states were still in the midst of a significant recession. We have really seen an upturn in the budget picture in nearly almost all of the states, probably nine of the states. There are a couple of our communities, Phoenix and Little Rock, which actually avoided most of the vicissitudes of the last recession. Then there’s Michigan, Lansing, our city which is the one state recession which has continued up until this very week if you’ve been following the newspapers about this.

But this significant improvement in terms of the revenue picture is also amplified I guess by the fact that the Medicaid growth rates in most of these states have also leveled off in the last couple of years giving some relief. So we have seen a fair amount of activity in terms of Medicaid modifications. This is the interval of time when the Deficit Reduction Act has been playing out and particularly the citizenship requirements have introduced a goodly amount of maneuvering at the state level. I think our takeaway from this has been that the impact has not been that pronounced at least based on the people who we have interviewed. It certainly has had a differential effect on some of the providers. We also have states that have been involved in some very high-stakes negotiations around the renewal of their waivers, particularly their waivers for their uncompensated care, because we have Florida, Massachusetts, and California, which have these penultimate waiver deals that they’ve had to keep going to maintain their uncompensated care programs. Also we have a number of other states that have gone for more modest kinds of waivers.

This is also a period that corresponds to one of intensifying federal scrutiny, particularly the oversight of intergovernmental transfers and certified public expenditures. I think this is one that we will hear more about or observe more about in the future because the states are quite aware of the hot breath of the feds if you will in terms of watching what they’re doing and you can begin to see this affecting behaviors and also in terms of going forward with financing of certain kinds of programs.

Interestingly enough, it’s a long way from February to October one could say when it comes to SCHIP. We really didn’t expect very much to happen and we didn’t really probe very much on this when we began studying these communities back in February, and those of you within the Beltway maybe new this was coming, but most of the people out in the hinterlands did not. They assumed that this would be taken care of relatively straightforwardly. Little did they know that they were out there promoting socialized medicine as they’ve now been advised. So the angst on this I think we didn’t capture, but certainly it is much more prominent than it was.

Commissions are a hot item in many of our communities dealing with a host of issues. A number of them have had blue ribbon commissions to deal with coverage issues, we have a couple of states that have had very high-profile commissions looking at the financial viability of their hospital systems, New Jersey and New York, the Berger Commission which is advancing the closure and consolidation of some of the hospitals in New York. Syracuse is one of our markets where that is very much in play. Then we have the good fortune of having Massachusetts, Boston is one of our cities, and the center has had a chance to study this in additional detail and has an issue brief on this.

The health reform scenario that has played out over the last couple of years, and I think if you look at Massachusetts, and many of us have done this in different capacities, what they have done in Massachusetts is exceptional in many respects. It is also highly idiosyncratic to Massachusetts in many respects. And it may also be unique in terms of no one else being able to replicate it because we see in several of our other communities efforts to do something under the rubric of reform but the scale, the achievements, associated with that have been really quite modest and one has to come away wondering where is this going.

A good example of this is Ohio, and Cleveland, one of our markets, a commission to study and to take a look at what would happen if you took the Massachusetts model and planted it in Ohio and their conclusion was in Ohio we have two as many uninsured people and we invest one-half as much of federal and state dollars in the safety net, so those numbers don’t compute in terms of their capacity to go forward. I will return to this in my closing remarks.

The safety net, this falls under our watch as far as the public sector team. We have used this in tact but endangered nomenclature for almost every round that I’ve been involved in and it all depends on where you sticker almost, and I would say that this round is probably more of an in tact but endangered period. The saga continues with rising demands and expectations on the safety net providers and their capacity to respond and the growing list of things that we’re asking of them becomes more and more taxed. They have, lucky them, solidified their lock on the uninsured market in most of our communities. They have achieved magnet status for low-income persons with special needs. In fact, if you looked at our communities, virtually every one of our communities, and looked at the needs for specialty care for the Medicaid as well as the uninsured populations, if you look away employed physicians and the safety net hospitals and the faculty physicians in the academic health centers, specialty care would not be available, period.

You just wonder where it would come from in these communities with the safety net providers not so prominent.

We are very fortunate. We have some of the supreme public hospitals in the country in our markets. We have Boston Medical Center, we have Metro Health in Cleveland, we have Wishard in Indianapolis, Harbor View in Seattle. We also have some of the most challenged. We have Jackson in Miami, we have Maricopa in Phoenix. Looking at the world through their lenses, you can understand the pressures that these organizations are experiencing, and Larry will probably speak to this as well. Some of our colleagues are working on a paper looking at the pressure on these organizations to engage in what might be called mission shifting or mission hedging, how do they act defensively, how do they protect themselves from being sucked into this vortex of more and more uncompensated care, and it is a very good example of great ambivalence on the part of these organizations that cannot and will not vacate their mission but at the same time have to worry about their economic survival.

By the same token, we have observed over the last couple of rounds of the work of the center the increased interest and attention to pricing and collection policies for the uninsured, and I think in terms of community benefits in general, we see much more attention to that. A claim by many of the private hospitals that they are doing more in this realm whether or not this is largely an accounting reclassification from uncompensated care to charity care remains somewhat in doubt, but all of them also are feeling this pressure but it doesn’t represent any relieving of the pressure on the safety net hospitals.

The community health centers I think are in somewhat better condition for a variety of reasons. I would like to point this out that I think it is underappreciated, they are outshining their private sector competitors as patient centered medical homes who believe in team based care in a way that many of the private sector physician dominated organizations do not yet believe, and I think there is more to be learned from watching these kinds of organizations. At the same time, and this is really pertinent as far as the issue of health reform, the safety net providers, both the hospitals and the community health centers, are anxious about what goes under the rubric of health reform for a variety of reasons. Some of these reasons are how will they be affected if we actually expand coverage. Another is will these expansions go forward, will they prove to be sustainable? I think the third reason would be what’s going to happen to the residual population who will never under any scenario benefit from this such as the undocumented immigrant population? Where will the financing for them come from if we portray the problem of coverage being solved through health reform?

In terms of public health issues, probably not the most exciting issue to many of you in this room, but I think because we have various constituencies that we think we need to be responsive to, we have been tracking this really since /, the preparedness issue continues to advance at an uneven pace. Communities really do profess to being ready for more things, but they also seem to have more things to be worried about because as we continue to discover the issues to which they have to be responsive and their continued relationship with federal and state officials is a puzzling and perplexing experience because of the shifting priorities of whatever the disaster of the day or year happens to be that is coming down to them.

We have in several of our communities seen very noticeable successes in antismoking campaigns or cigarette tax increases. Ohio and Arizona actually have no smoking rules in public spaces that were passed as a result of statewide referenda, and Indiana has a new substantial tax on cigarettes in that state. Some of the public health people we’ve talked to suggest that this is illustrative of unleashing more grassroots influence on our health care system by turning to the voters, turning to the populace, for promoting support. Obesity as we’ve heard in our earlier presentations from the private sector and from the provider teams is a prominent focus, and certainly much of this lies in the realm of what is possible under the rubric of public health.

Another issue, one that we’re studying in a follow-on study, is the workforce concerns within the public health sector. We have issues about skill sets, we have issues about adequacy of new hires, and also a substantial wave of retirement coming into the public health sector that is going to be create significant gaps as we go forward.

Given those issues as a backdrop, here are a few issues in terms of persisting problems or looming concerns that we might point out that have appeared again and again I guess over the years in terms of the site visits. This first one is a very interesting issue, the continued deterioration of public mental health services with a substantial spillover effect on the safety net. We didn’t look at this issue this round nearly as much as we did in the previous round, but this issue found us. There is a piece of data in one of the reports I think the Danza Organization has put out that said between and , the number of visits to FQHCs for mental health services went up by percent. In other words, the safety net acute care system is actually catching the failures of our public mental health services. We know this and we’ve written about this in terms of the emergency departments, but the FQHCs are in the line of fire of this as well.

Immigration, whether you think of this as the great social, economic, political, or moral crisis of our generation, the health care system is really in the midst of this, it is really at the center of this, and certainly the safety net providers are the ones who are bearing the brunt of the services needs in this realm. We have seen a growing interest in terms of quality and disparity issues some of which have been led by private foundations like Johnson as well as CMS directing more attention to this issue, and certainly some of the community health centers, for example, have had a number of years of experience with health disparities collaboratives.

Just to bring this back to reality, I guess the point, and this has kind of evolved even since we’ve been in the field, is the infection point in the economic recovery appears now to have passed and as a consequence, the burst of enthusiasm about the possibilities is beginning to be reeled in at the state level. So the fact that so little has been accomplished in health reform I think under this period and now we move into a new ear has to be a concern to all of us.

I will close with the comment that this latest era of state based reforms appears to be in jeopardy, and those of us, I think Dan and I were on a program years ago talking about Oregon or Tennessee or one of the other dazzling new state initiatives, you have to wonder just at what point we begin to ask ourselves fundamentally is it delusional to believe that the states can take the lead on sustainable reform in terms of what’s possible.

Let me just close by pointing out these implications, the uninsured, the stress on the safety net, the specialty issues which we’ve talked about for several years now, and the strain on the safety net as the reversal of fortune begins to be experienced over the rest of the health care system. So I will turn it back over to Laurie, I guess.

Laurie Felland: I know we don’t have a lot of time, so I just want to add a couple points to what Bob said.

Certainly, in the community health centers we are working on analysis and looking at this, the increasing demands that they are faced with and how they’re trying to respond to both more patients, more types of services, because other providers aren’t providing them. As well as other pressures they’re facing, public health preparedness and responding to performance measurements and disparity work, so we are working on that analysis right now. While community health centers are seeing more patients, so are emergency rooms and we’re doing a paper looking at what are safety net emergency departments trying to do to deal with the nonurgent care they’re seeing from low-income patients and are there ways they can redirect them to their own clinics, to community clinics, or take care of them in the emergency department in a more efficient manner. Then the third item I wanted to mention is dental care. Along with mental health, access to dental care is the number one or number two problem in all of our communities, and so communities are really struggling with this and there are no easy answers, but we’re working on a study trying to see what can be done and what types of strategies seem to be working or at least helping out.

Debra Draper: Larry?

Larry Gage: Thank you. Thank you very much. I do appreciate the invitation, and Paul, wherever you are, I really appreciate the fine work of HSC. If I can put in a plug for any of your funding sources who happen to be sitting in the room, this an outstanding organization and one of the few that can genuinely call itself nonpartisan, and we need to keep them alive almost as much as we need to keep some of the safety net institutions alive. I would also thank you for highlighting the role of the safety net, and I will try to limit my comments to a couple of minutes.

First, I think in tact but endangered I guess was invented or coined by the Institute of Medicine or years ago in their landmark report is in fact a very real way to describe the situation today, and while it is the growing number of uninsured that is at the core of the problem, that’s not the only issue right now. It’s just really the starting point. There are also a rapidly growing number of uninsured, some of whom are being covered under these new state initiatives, waivers, and demonstrations, but covered with inadequate benefit packages. It’s also not very well understood often until you go out into these communities that there are other barriers to access, that simply having a card in your hand, whatever it provides you doesn’t necessarily guarantee if you live in the wrong part of the city and the transportation is inadequate, if you are the wrong color, if your immigrant status doesn’t qualify you, there are other disparities that need to be paid attention to and that’s something that I hope stays on our radar screen, because it certainly is on ours.

And then there are, and this was touched on, the community-wide services and those services are expanding. At NAPH we have about a hundred members around the country and our members, where they exist, they are about percent of the beds in the country and they provide half of all the level one trauma center beds, they are two-thirds of all the burn center beds, a substantial majority of emergency psych, neonatal intensive care, and other services, and regardless of what percent of charges, and I don’t know if Karen is still here, health plans pay, that doesn’t always cover it because these services have many standby costs that aren’t being covered by insurance companies or insurance plans, and at the same time, the safety net institutions that provide them often have such a low percentage of insured patients and even of Medicare patients that cost shifting becomes relatively meaningless anyway.

It is mentioned in your report that the many states have budget surpluses today. I am here to tell you that those surpluses are not trickling down into any kind of substantial support for the safety net, and I’m sure that’s true of health centers as well. While there are policies being adopted that clearly have some implications for safety net hospitals as well as nonprofits in terms of charges and collection policies, that’s really just a drop in the bucket, and the primary funding source in many states, and again Dr. Hurley mentioned this, is the supplemental payments under Medicaid and to a certain extent Medicare, the so-called DISH payments and graduate medical education payments and so forth, and I won’t belabor the point here, but we are locked in a battle with the Bush administration over regulations that would seriously impact and reduce those payments. Congress passed a -year moratorium that expires next May. We need to keep up the pressure to either make that permanent or enact rational policies in those areas.

There is a little good news, and I don’t want it to be all bad. Stewart Altman used to get made to me at Princeton whenever I want to say some good things about the safety net and then he wouldn’t invite me back for a year and I would come back the following year because he felt the message should be all gloomy, but it’s not. I know here in Washington it needs to be as gloomy as we can possibly make it, but there is a great deal of high-quality health care being provided out there by safety net institutions. And if you just look at the nine or of your communities where NAPH has members, you see not just a high quality of services almost across the board, you see a great diversity of institutions that call themselves safety nets. You see not just county hospitals but public benefit corporations and public health trusts and authorities and the newly created hospital district in Phoenix where the voters of Maricopa County, conceivably one of the most conservative counties in the country, actually voted to impose a tax on themselves in order to fund the safety net and that tax now raises about $45 million a year. So, yes, there is an aging physical plant, but there is clearly a need being filled and voters are stepping up.

State universities play a huge role in many of these communities and around the country. And even the private sector, public-private partnerships like Boston Medical Center which is a partnership between the old Boston City Hospital and Boston University, and NAPH is seeing a rise in the number of actual nonprofit hospitals that are applying to join NAPH, the University of Pennsylvania, Mount Sinai in Chicago are the most recent members to join NAPH, and we don’t proselytize in that neighborhood, but they are seeing their mission be more and more consistent with ours.

Then just finally, two issues that were touched on earlier, one having to do with quality. We are not going to give up the quality issue to others, we are not going to want safety net institutions to be held to any different standards than the rest of the community, and we are proud of the quality of our institutions. One of our members in Hollywood, Florida, just won the Foster McGaw Prize from the American Hospital Association, New York City Health and Hospitals Corporation that some of you may know just decided to publish all of the standards to which it is held by the state and federal governments on their own website with clear explanations for consumer, and consumer orientation is another term that isn’t often used in the same sentence as public hospitals, but actually if anyone wants an explanation of what the CMS Hospital Compare website has on it which is almost impossible to get from that website, not a very consumer- friendly site, go to the New York City Health and Hospitals Corporation’s website and you see it explained in plain and simple language why it is important for consumers to know that information. So thank you very much for this opportunity, and I look forward to questions.

Debra Draper: Thank you. Dan?

Daniel Hawkins: Thanks very much. As the fellow member of the fellow member of the skunk at the garden party here, I think Lowell Weicker had a more colorful description, he called it the turd in the punchbowl, a mantle that I think is now being assumed by Chuck Grassley of late, but as Larry noted, I join him in saying it is an honor and a pleasure to be here, and Paul, Bob, and all of the staff, we appreciate that opportunity, and the recognition of the role that the safety net is trying to play and often is foisted on them in communities across the country. Not to be outdone by Karen Ignagni, and I’ll be quick, I have six points. She had five, I have six.

The first is absolutely true, and much of this is to reinforce what Bob already presented, immigrants and non-African American minorities in general are rapidly migrating to health centers. We are seeing that all across the country. Latinos will likely surpass non-Latino whites as the largest racial ethnic group of health center patients this year and that is a dramatic turnaround from I guess it was years ago, actually whites have always been because of the fact that half of all health centers are in rural communities, but African Americans were the largest nonwhite subgroup within health center patients, they are not third and falling fast.

It’s true not just in the Southwest or in the major cities and the places you’ve studied, but all across America, North, South, East, West, urban, rural. It has placed major pressure on health centers, and I know the same is true for hospitals. In fact, public hospitals are well out ahead of us in providing linguistic and culturally appropriate services, but that is a strain. We have health centers in rural Missouri and Wyoming who are struggling to provide care in the native language or the language that their patients understand. Ironically, the citizenship documentation requirements have affected health centers in the most bizarre ways, pushing some to them even as it pushes others to shy away, afraid that is a public benefit, they might be identified, they could be deported for getting the care. Educating the community on this is a major undertaking.

Secondly, the other phenomenon, and it was noted here, is the growing underinsured population. Private insurance patients are growing at twice the rate of the general population growth in health centers. We are up to million this year, million above , and that’s a percent increase, but the privately insured patient population is over . million out of those million. It’s literally one out of every six health center patient.

As noted, high deductible and high co- pay policies are a big issue. I’m going to say flat out, Karen, I hope you insult you, the other is crappy coverage. These are low-income workers coming in with what at least one colleague once called hey dude policies, the ones on the matchbook covers, really crappy coverage. But the worst problem is crappy payment. In fact, private insurance is the worst payer by far. It pays cents on the dollar for what it costs an incredibly efficient health center to provide care.

And it’s emblematic of the most profound force pushing the U.S. system in entirely the wrong direction, toward more specialty care rather than more primary care, everybody knows we’re the inverse of the European countries here in our specialty to primary care ratios, it’s only getting worse, and it is the principal cause of the next biggest problem facing the safety net and health centers and really the entire American health care system which is the severe and growing shortage of primary care clinicians. It is already the biggest threat to rural safety net providers, not just health centers, rural health clinics and others. Ironically, the retail clinic phenomenon is making it even more difficult because it is grabbing mountains of nurse practitioners and PAs who are desperately needed in safety net providers, and the trends only point to an ever-worsening future, the very smartest medical students are going into the very best residency programs, but then to the most extreme and narrow specialty areas while it’s left to the dummies, so called, who didn’t score so well in their residency training tests are to go into primary care, and that’s how they fail too.

This cries out for public policy action, but I note except for what the Bush administration is proposing to do with GME, nobody but nobody is talking about the need to change GME policy on a fundamental level. I claimed a year ago when this issue was broached that we’re just the canary in the coal mine, that what’s happening to the safety net in terms of a shortage of qualified health professionals is hitting us now and it’s going to hit the rest of the health care system soon enough. Duly noted, severe shortages of available dental and mental-health services. Interestingly, over the past years as part of President Bush’s initiative, health centers have doubled the capacity to provide care, Bob, you mentioned, yet much more is needed. Mental health has not only grown at the rate that Bob mentioned, it is the third most common diagnostic reason for a visit to a health center after diabetes and hypertension today. Thank God wellness care, well child care, immunizations, are the most common reasons for a visit to a health center, but diagnostically it’s diabetes, hypertension and mental health. And it’s not schizophrenia, it’s not psychoses, it’s all the stress, anxiety, and depression that goes with trying to keep a roof over the family’s head and put food on the table when you’re making a lousy seven bucks an hour.

And amidst all this angst, point five, it’s nice to see that health centers continue to shine. As Bob noted, they have been cited for cost effectiveness and quality improvement and for disparities reduction. They have long functions as primary care medical homes, and now we have joined with our primary care colleagues, the American Academics of Family Practice, Pediatrics, and ACP, to call for policy changes to recognize primary care medical homes. We tend to think of health centers as health care homes because we do oral health, we do mental health, et cetera. I call this enlightened self-interest. It’s our future survival.

I close with what causes the most sleepless nights for me, and by the way, if you need data for your study about how bad things are out there, I’ll give you all my emails and voice mails from the field. Let me tell, they’re all over me about what’s happening, about lousy policy from HHS, and for that matter, it’s true for all discretionary programs, the fantasy that there is no inflation, and so therefore there are no cost of living adjustments. Health centers got a percent adjustment in their grants last year, while their costs went up at about five, and their uninsured patient population went up at about six. So you do the math and tell me how they stay alive.

But what keeps me awake at night is the final point about the potential economic downturn’s impact on the safety net. If you’re like me and have been following the economic data, you know it’s likely to come soon, early to mid , and will have its most devastating effects on low-income and middle-income communities. That in itself may preordain the election with possibly brighter prospects for the final years of this decade but only for those who survive, and that indeed will be the biggest challenge of all.

Debra Draper: Thank you. I’m going to ask the panel to respond, but in the meantime if you have questions, if you could go ahead and prepare those and send them, or if you want to come up to the microphone, you can do that as well.

One question I have for the panel is that we’ve heard a lot about Massachusetts’ reform and that it’s pretty unique to that particular state. Are there any lessons that other states can learn from the Massachusetts experience even though they may have different characteristics and factors?

Larry Gage: Not yet. I think that there are some very interesting aspects of it that bear watching, but the issue of whether or not you can successfully impose an individual mandate particularly on lower-income individuals who are reluctant to take it on even with a small co-pay and enforce that through penalties imposed through the tax code when they may or may not pay taxes, that’s a key feature of this system. It won’t actually start functioning that way until next spring when is I guess the first penalties are supposed to be imposed. I think it’s well worth studying and well worth watching carefully, but nobody has really yet tried it on that scale. I think they are signing up people for the program in reasonable numbers. I think there’s a lot of concern about the benefit packages and the premium costs of the packages through the health care connector that they have established and whether those are actuarially sound. Again, this is not just a work in progress, it is literally work that has just started.

Daniel Hawkins: I think the biggest lessons, and didn’t we learn this years ago with Mike Dukakis, that it hell to health reform on the cheap. Essentially, the lessons learned are the costs of the individual policies was much higher than was originally anticipated. Surprise.

The safety net sits there worrying that in fact the way that they’re going to shift money from the charity care pool to the connector fund to subsidize the cost of insurance coverage is going to bleed the charity care pool at a rate much greater than there will be a remaining uninsured and uninsurable population particularly undocumented immigrants and others who just simply won’t be eligible, not just are reluctant to sign up, but simply aren’t eligible to sign up for the thing. So that may be the biggest lesson of all, and isn’t that what we’re also seeing in California in a major way? It is interesting to see at least a couple of the presidential candidates, most notably Hillary Clinton and John Edwards, to a lesser extent Barack Obama, note that in terms of sweeping up all of this DISH payment funding, Larry, and public health funding, we can sweep all of this money up and use it to pay premiums and give people a choice, at least there is a recognition now which there wasn’t in , not that I remember, that in fact there is going to be a residual population that will remain outside the system, that will need the services of the safety net, there will be benefits that will not be covered or services that will be needed that will not be covered, and you’re going to have to have a residual of public health spending other than payment of premiums or subsidy of premiums.

Larry Gage: I might just add that if you look at the demographics of the Boston metropolitan area in terms of provider demographics, the emphasis on what Dan said about primary care physician shortages, for all the wonderful health care institutions that live and are alive and well in downtown Boston, there is probably the lowest percentage of primary care physicians within the city limits of the inner city of Boston of any big city in the country. They almost don’t exist and were it not for a very robust network of health centers and Boston Medical Center and Cambridge Health Alliance, there would be no access or coverage for these populations in the inner city.

Daniel Hawkins: Let me add one point. If it weren’t for Boston Medical and its relationship with the health centers, there would be no secondary care or tertiary care, no ancillaries, no diagnostics whatsoever for the population that the health centers serve. It’s just not there.

Larry Gage: But we hope it works.

Daniel Hawkins: Amen.

Paul Ginsburg: This is a nice segue for our audience questions, and this is directed at Bob and Laurie. Did you see any innovation in specialty care delivery for the uninsured in any of the communities? And what policy changes might be helpful to alleviate some of the specialty care access problems?

Robert Hurley: I think I have already delivered my sort of dismal assessment of it. I don’t think we did see very much. I think there are a few of our communities that do have these Project Access initiatives where there are volunteer physicians who have agreed to participate to take a couple of patients a month or whatever the ratio may be. We have observed that over the last two or three rounds. These still tend to be very tokenistic, and in terms of capacity, the ability to really make a difference I think is doubtful.

The only other thing that comes to mind, I think there are some large health centers that have been able to bring on board some common specialties. I know the one in Phoenix that we visited actually has obstetricians. I think the FQHC system in Indianapolis now has -- in some cases are employees of the health system to try to give coverage in the hospital again because of the high levels of births that they are responsible for among their patients. So those are illustrative, but I don’t think that we saw anything beyond that. Laurie, maybe you have some recollection.

Laurie Felland: No, I would agree with that. In some communities there are programs that try to manage care for uninsured people like Health Advantage in Indianapolis and that is really built around using a pool of DISH funds or charity care funds to provide a sort of virtual managed care product for uninsured people that also involves specialty care, and those in some communities have been around for a while, in addition to the volunteer programs that really haven’t grown that much, so there aren’t any silver bullets and I would emphasize what others have said, that outpatient providers are so reliant and dependent on the safety net hospitals and the specialists there to treat their patients.

Robert Hurley: Let me just make one point about this too. We think of these as being the uninsured, but the Medicaid population is virtually in the same situation with the exception of Arizona where actually there is parity between Medicare and Medicaid payments for the physicians. In every other case there’s such a huge difference in terms of what Medicaid is willing to pay specialists, simply they are inaccessible to the population.

Daniel Hawkins: Let me just add one quick point, and it’s this. Health centers have responded to this fact especially in communities where there’s not a good public hospital or relationship with one that enables vertical alignment. They have banded together to try to bring on specialists. The problem we’re having right now is that HHS is very reluctant to allow health centers to do it, and without HHS approval, the health center can’t get the coverage under the Federal Claims Act, we have health centers that are bringing on surgeons who have adult day health care centers who are actually staffing out and operating nursing homes, et cetera, and HHS has been very reluctant to grant approvals of this. It affects FDCA coverage, it affects whether they get the FQHC, the Federally Qualified Health Center, reimbursement under Medicare and Medicaid, it affects eligible for VFC and B, you can do down the line, if it’s not considered part of the approved health centers project. There has to be a rational way to do this, it can’t just be willy- nilly, but it can’t just be hell no either.

Health centers where they are located and for their Medicaid and uninsured patients because it’s the only way it’s financially feasible for them to do it, may be in many communities banding together as the only way to create this continuum of care.

Debra Draper: This is a question to Dan as a follow-up to one of your comments. What policy changes specifically will move students into primary care training programs?

Daniel Hawkins: There are the Title VII and Title VIII programs, the Health Professions and Training Programs, but they are so small that I think not much can be done there. The question is with respect to GME financing, I don’t have an answer but let’s have a dialogue, is there any chance that GME financing could be targeted or some incentive could be provided in there for residency training in primary care. It’s the only way that we’re going to turn around the situation. It’s the old follow the money situation.

The second thing is, my kids would say it really sucks, with respect to how we’re doing on workforce diversity. We don’t have a workforce that looks like this room, much less one that looks like the population that health centers serve in America, not a physician population, not a nonphysician provider population. We have to do a better job of achieving diversity in the workforce.

The third thing is stimulating service in underserved areas. I believe those ought to be the three goals, reverse the decline in primary care, increase the diversity, and stimulate service in underserved areas. The programs like National Health Service Corps and the Title VII and Title VIII programs can do a little bit, but the big kahuna, the magilla, is GME financing, and I would love to engage with anybody in a dialogue about how we do it. I don’t proclaim to have the answers. It’s just obvious that if we don’t change, nothing is going to change, it’s only going to get worse.

Larry Gage: This is an area where there has been considerable debate in Washington going back several years on the Medicare side about lifting these now artificially low caps. I don’t think it’s entirely true that you put the blame on the medical students when they’re deciding what residencies to take on or just acting out of economic self-interest because they have quarter of a million dollars in student loans which you could forgive some of in order to entice people into primary care specialties, but it’s the teaching hospitals themselves, that when they want to allocate their residency caps they want to be training surgeons and specialists, that’s what they do for a living, and so you do need to have some relief from those caps. There is actually an exception under Medicare policy for expanding residencies that are aimed at rural primary care and family practice and you can broaden that exception or you can just completely change Medicare policy. Of course, the Bush administration in proposing to eliminate all medical education payment from the Medicaid program, that’s one of the proposed rules subject to the -year moratorium that I mentioned, is going in exactly the wrong direction, but what else is new?

Debra Draper: We’re just going to do one final question and then Paul is going to wrap up. This is for Dan and Larry. What impact to retail clinics have on access to services for the underinsured or uninsured? Can they play a positive role and be a part of the medical home continuum with community health centers?

Larry Gage: I assume by retail clinics you mean the ones that are embedded in Target?

Debra Draper: I assume that’s what they were referring to.

Larry Gage: It’s interesting, those have been around for a lot longer than people think they have. In fact, American Express and I think it was the Zayre’s chain teamed up about years ago for about a year to see if they could embed these retail clinics in Zayre Department Stores. I don’t even think Zayre Department Stores exist anymore, correct me I’m wrong, and people would pay with their American Express cards. Of course, they realized that most of the people who would need those services didn’t have American Express cards, so they sort of lost interest.

It certainly isn’t an answer, but in areas where there is inadequate access to primary care facilities of all kinds, far be it for me to suggest that you want to crack down on anybody who’s trying to provide some access. I think there are questions of who are they competing with and what quality of care they provide and so forth, and I’m being told that I’m talking too long.

Daniel Hawkins: The only thing I was going to say is it’s an ironic thing, but this is not a policy development, it’s a market phenomenon, and it is proof positive that our health care system really stinks at making health care convenient to today’s population. And it’s strictly business. When I talk to them about can we link together and serve the same communities together, they say, no, we’re business. You want to talk business? We’ll talk. You want to talk policy, we don’t do that. So we’re going to try. We certainly worry that nurse practitioners out there are going to see patients who need a physician consult or need a physician referral. We have suggested to our members that they ought to reach out to the retail clinics and say how about we collaborate? Many of the folks you’re seeing at Wal-Mart or CVS in fact are our patients. We would be happy to collaborate with you and offer you consultation and referral arrangements, because I don’t see them going away, and it shouldn’t be a competition, we should try to make it a collaboration.

Debra Draper: Thank you. Please join me in thanking our panel members. You did a great job.

(Applause)

Paul Ginsburg: I’d like to close by thanking -- who did a great job of orchestrating this conference, and Tad Lee and other HSC staff. I thank the Robert Wood Johnson Foundation again for the support of this meeting. And please fill out the evaluation forms. We’re researchers. We analyze them. We would a higher response rate, if you could. Thank you very much.

(Whereupon, at : p.m., the PROCEEDINGS were adjourned.)

Panelist Bios

ROBERT BERENSON, M.D. - Urban Institute and Senior HSC Consulting Researcher

Robert Berenson, M.D., is a senior fellow at the Urban Institute and an expert on health care policy, particularly Medicare, with experience practicing medicine, serving in senior positions in two presidential administrations, and helping organize and manage a successful preferred provider organization. From 1998-2000, he was in charge of Medicare payment policy and managed care contracting at the Health Care Financing Administration (now the Centers for Medicare and Medicaid Services.) He served as an assistant director of the domestic policy staff in the Carter Administration. He was also national program director of IMPACS-Improving Malpractice Prevention and Compensation Systems-a grant program funded by the Robert Wood Johnson Foundation, from 1994-1998. A board-certified internist who practiced for 12 years in a Washington, D.C., group practice, Berenson is a fellow of the American College of Physicians and a graduate of the Mount Sinai School of Medicine.

CARMELA COYLE - Senior Vice President for Policy, American Hospital Association

Carmela Coyle is senior vice president for policy in the American Hospital Association’s Washington, D.C., office. As a member of AHA’s executive management team, Coyle is responsible for the development of the AHA’s policy positions on behalf of the hospital and health system field. She manages AHA’s staff team responsible for analysis of legislation and regulation, policy issues, data collection and trend analysis. Coyle is also a national media spokesperson for the AHA and represents the organization in various health care and other forums. She has been with AHA for 18 years, joining the organization after spending six years as an analyst for the Congressional Budget Office in Washington, D.C. Carmela received her undergraduate degree in economics (and Spanish literature) from Carleton College and completed the course work toward her doctoral in health policy at the University of Michigan as a fellow of the Pew Charitable Trusts.

JON B. CHRISTIANSON, Ph.D. - University of Minnesota and Senior HSC Consulting Researcher

Jon B. Christianson is an economist with extensive research and teaching experience in the financing and delivery of medical care. He has published widely in the areas of health insurance and managed care, employer healthcare purchasing, rural health care, mental health care, and care process improvement. He also has collaborated with health care providers in a variety of practice settings to evaluate new treatment approaches. He received a Ph.D. degree from the University of Wisconsin-Madison and currently is on the faculty of the School of Public Health at the University of Minnesota, where he is the James A. Hamilton Chair in Health Policy and Management. Christianson serves on a number of different editorial boards and scientific advisory panels.

HELEN DARLING - President, National Business Group on Health

Helen Darling is president of the National Business Group on Health, a national non-profit, membership organization representing large employers’’ perspective on national health policy issues. Its 283 members, including 62 of the Fortune 100 in 2007, purchase health and disability benefits for more than 50 million employees, retirees and dependents. As president of the Business Group, she was named in 2003, 2004, 2005, 2006 and 2007 as one of "100 Most Powerful People in Health Care" in the United States by Modern Healthcare. Previously, Darling served as practice leader at Watson Wyatt Worldwide, and she directed the purchasing of health and disability benefits at Xerox Corp. Before joining Xerox, Darling was a principal at William W. Mercer. Earlier in her career, Darling was an adviser to Sen. David Durenberger, the ranking Republican on the Health Subcommittee of the Senate Finance Committee. Darling received her master’s and bachelor’s degrees from the University of Memphis.

DEBRA A. DRAPER, Ph.D., M.S.H.A - HSC Director of Site Visits

Debra A. Draper is the associate director of the Center for Studying Health System Change (HSC). Before joining HSC, Draper was an assistant director with the health care team at the U.S. Government Accountability Office (GAO). Prior to GAO, she was a senior researcher at Mathematica Policy Research, Inc., and a consulting researcher for HSC’s site visits. Previously, Draper was a health care consultant and a hospital administrator. Her research focuses on private health insurance markets, managed care, Medicaid, Medicare, prescription drugs and other health policy issues. Draper has published widely on these topics in peer-reviewed journals, including Health Affairs, Health Care Financing Review and the Journal of Health Care Finance. She serves as a peer reviewer for several journals, including Health Affairs, and is a member of AcademyHealth. Draper received her doctorate in health services organizations and research from the Medical College of Virginia, Virginia Commonwealth University, where she also earned a master’s degree in health administration

LAURIE E. FELLAND, M.S. - HSC Health Researcher

Laurie E. Felland is a health researcher at the Center for Studying Health System Change (HSC). She has more than eight years of experience conducting qualitative health services research, primarily through her work on HSC’s Community Tracking Study (CTS) site visits. Her areas of focus include safety net providers, public insurance programs and public health. Previously, she was a policy analyst at the Massachusetts Division of Health Care Finance and Policy and a redesign analyst at Regions Hospital in St. Paul. Felland received a bachelor’s degree in economics from Carleton College and a master’s degree in health policy and management from the Harvard School of Public Health.

DONALD W. FISHER, Ph.D., C.A.E. - President and CEO, American Medical Group Association

Donald W. Fisher, Ph.D., is the president and CEO of the American Medical Group Association (AMGA), a trade association that represents medical groups, including some of the nation’s largest, most influential integrated health care delivery systems. Fisher has been CEO of the organization since October 1980. Under his leadership, AMGA has become the premier voice for medical groups in the U.S., with its membership currently responsible for delivering health care to more than 50 million Americans. AMGA advocates for the multispecialty group practice mode of health care delivery, the patients they serve, through innovation and information sharing, benchmarking, and continuously striving to improve patient care.

LARRY GAGE, J.D. - President, National Association of Public Hospitals and Health Systems

Larry Gage is a partner in the Washington, D.C., office of the law firm of Powell Goldstein LLP, where he directs the firm’s national health care practice. In 33 years of practice, he has carved out a unique role in public sector and non-profit health law and policy. Gage’s government experience includes serving as Deputy Assistant Secretary for Health Legislation in the U.S. Department of Health and Human Services and as staff counsel to the U.S. Senate Labor and Human Resources Committee. In 1981, Gage founded the National Association of Public Hospitals and Health Systems (NAPH) and he has served as president of that organization for more than 25 years. In 1992, he was a cofounder of the American International Health Alliance, which has created more than 130 international health industry partnerships in the former Soviet Union, Central and Eastern Europe, Africa and elsewhere. In August 2007, Gage was named one of "The 100 Most Powerful People in Healthcare" by Modern Healthcare, and in June 2006, Gage was honored as one of "The 100 Most Influential Lawyers in America" by the National Law Journal. He received his B.A. cum laude from Harvard College in 1968 and his law degree from Columbia University in 1972.

PAUL B. GINSBURG, Ph.D. - HSC President

Paul Ginsburg, a nationally known economist and health policy expert, is president of HSC, a nonpartisan policy research organization in Washington, D.C., funded principally by the Robert Wood Johnson Foundation. Ginsburg is a noted speaker and commentator on changes taking place in the health care system. His recent research topics have included cost trends and drivers, Medicare physician and hospital payment policy, consumer-directed health care, the future of employer-based health insurance, and competition in health care. In 2007, for the fifth time, Ginsburg was named by Modern Healthcare as one of "The 100 Most Powerful People in Healthcare." He received the first annual Health Services Research Impact Award from AcademyHealth, the professional association for health policy researchers and analysts. He is a founding member of the National Academy of Social Insurance, a public trustee of the American Academy of Ophthalmology and served two elected terms on the board of AcademyHealth. Before founding HSC, Ginsburg was the executive director of the Physician Payment Review Commission (PPRC), created by Congress to provide nonpartisan advice about Medicare and Medicaid payment issues. Under his leadership, the PPRC developed the Medicare physician payment reform proposal that was enacted by Congress in 1989. Ginsburg previously worked for the RAND Corp. and the Congressional Budget Office. He earned his doctorate in economics from Harvard University.

DANIEL R. HAWKINS, Jr. - Senior Vice President for Policy and Programs, National Association of Community Health Centers

Dan Hawkins is senior vice president for policy and programs at the National Association of Community Health Centers, Inc. (NACHC), where for the past 26 years he has provided NACHC’s membership with federal and state health-related policy development, policy research, analysis, information, and advocacy, as well as operational training and technical assistance services. During his tenure at NACHC, federal support for health centers has grown from $350 million to almost $2 billion annually, and the number of people served by health centers has grown from 5 million to 16 million. Prior to joining NACHC, Hawkins served as a VISTA volunteer, executive director of a migrant and community health center located in south Texas, and as an assistant to Health and Human Services Secretary Joseph Califano during the Carter Administration. He has written numerous articles and monographs on health care and health center issues and has provided testimony before several Congressional Committees. Dan teaches a course in health policy at the George Washington University School of Public Health and Health Services, has lectured on health policy topics at Harvard, Johns Hopkins, Georgetown, Brandeis, and other universities, and has been interviewed frequently by major newspapers and radio/television networks. He has been named one of America’s most influential health policy makers.

ROBERT E. HURLEY, Ph.D. - Virginia Commonwealth University and Senior HSC Consulting Researcher

Robert E. Hurley is a faculty member in the Department of Health Administration at Virginia Commonwealth University. He has been conducting health services issues for the past two decades, with a particular focus on public-sector initiatives and reform strategies. His research has been supported by several federal and state government agencies and by a number of private foundations. He has served on a variety of editorial boards, including Health Affairs, Milbank Quarterly and Medical Care Research and Review. Hurley has been a consultant to a number of public and private organizations and since 1999 has been a senior consulting researcher with the Center for Studying Health System Change. He received his Ph.D. from the University of North Carolina-Chapel Hill School of Public Health.

KAREN IGNAGNI - President and CEO, America’s Health Insurance Plans

Karen Ignagni is president and chief executive officer of the America’s Health Insurance Plans (AHIP), the trade association representing members that provide health care, long-term care, dental and disability benefits to more than 200 million Americans. AHIP was formed in late 2003 as a result of a merger between the American Association of Health Plans (AAHP) and Health Insurance Association of America (HIAA). Ignagni led AAHP and, since joining the organization in 1993, she has won many accolades for her leadership. Ignagni regularly testifies before Congress on key federal legislation. In recent years, she has appeared before Senate and House committees on matters ranging from health plans’ role in homeland security to Medicare reform to patient protection issues. Prior to joining AAHP, Ignagni directed the AFL-CIO’s Department of Employee Benefits. In the 1980s, she was a professional staff member on the U.S. Senate Labor and Human Resources Committee, preceded by work at the Committee for National Health Insurance and the U.S. Department of Health and Human Services. Ignagni holds an M.B.A. from Loyola University and an undergraduate degree from Providence College.

HOANGMAI H. PHAM, M.D., M.P.H. - HSC Senior Health Researcher

Hoangmai Pham is a senior health researcher at HSC, where she coordinates the Community Tracking Study Physician Survey. Her research focuses on the organization of care delivery, payment policy, quality performance and improvement, trends in physician and hospital markets, and health disparities. She has a particular interest in the Medicare program and is involved in Medicare quality-of-care program and policy design work with Mathematica Policy Research. Pham was a Robert Wood Johnson Clinical Scholar at Johns Hopkins, where she received her M.P.H. She previously worked on health services issues for the Population Council in Vietnam. She practices general internal medicine at a safety net clinic and received her M.D. from Temple University and her bachelor’s from Harvard