California Medical Association Fifth Annual Leadership Academy
Creating the Future of Health Care
La Quinta, CA
November 16-18, 2001

Dee Hock, Founder and CEO Emeritus, VISA International, and Founder, The Chaordic Commons:

“Only with the evolution of a self-organizing, Chaordic, transcendent organization in which all parties have an appropriate voice in governance –in which the whole does not control the parts and the parts do not control the whole — in which competition and cooperation are harmoniously blended — in which public and private entities are seamlessly related –can order emerge and a universal, effective, low-cost system of health evolve. Such a governance structure could be put in place within two years, could extend nationwide within five and expand globally within a few more.”

“It is far too late and things are far too bad for pessimism.”

http://www.chaordic.org/

USA Today
November 16, 2001

USA TODAY commentary writers Ted Halstead and Michael Lind make the claim that the war on terrorism calls for shifting the responsibility for health insurance to the individual and that a single universal plan should be avoided (”Lack of health care for all creates U.S. security risk,” The Forum, Monday).

Their organization, the New America Foundation, supports the crafting of new public-policy solutions for our social ills. Shifting health-insurance purchasing from the employer to the employee might be new, but relying on the fragmented, inefficient and ineffective health-plan marketplace is a stale solution that should be discarded.

Private market approaches have failed to control costs and have fallen short of improving coverage. Even worse, current trends are to shift more of the costs on to patients, exposing them to even greater financial risk.

We already have excess capacity in our health-care system. But access to health care is impaired due to financial barriers and will only grow worse.

If we were to eliminate the egregious waste of the private plans, the financial resources currently directed to health care would be enough to pay for comprehensive care for everyone.

Publicly funded universal health insurance would solve the problems that have been compounded by perverse incentives in the market. Everyone would have health-care coverage, and costs would be contained by a public system that would require value for our health care investment.

Don R. McCanne, M.D. President-elect, Physicians for a National Health Program

AMNews
November 19, 2001
by Markian Hawryluk

The Centers for Medicare & Medicaid Services announced Nov. 1 that the conversion factor used to calculate payments to physicians would decline by 5.4%.

Unlike payments for hospitals or other providers for which Medicare’s annual updates allow some government discretion, physician payment is updated based on a set formula. In essence, CMS must simply input the numbers and arrive at an answer.

Unlike payments for hospitals or other providers for which Medicare’s annual updates allow some government discretion, physician payment is updated based on a set formula. In essence, CMS must simply input the numbers and arrive at an answer.

The self-correcting nature of the formula is primarily responsible for the impending reduction. The formula updates payments on the basis of estimated changes in physician costs. But the update only equals the estimated change if actual spending is equal to a target — the sustainable growth rate.

The target is based on four things: gross domestic product, enrollment in the traditional Medicare program, input prices, and spending due to new laws or regulations. If actual spending misses the target, the next year’s update must be raised or lowered to bring spending in line. This year, revisions to previous year estimates of GDP, increases in physician spending and the economic slowdown have all added up to a large negative update.

http://www.ama-assn.org/sci-pubs/amnews/pick_01/gvl11119.htm

Comment: Medicare has led the way in slowing the rate of inflation in health care, using fee controls designed to reflect the real costs of delivering care. Private managed care health plans followed with measures that excessively squeezed profits and drove many physician groups into bankruptcy. Medicare’s formula was designed to assure adequate compensation for physicians while still providing value for the taxpayer. Private health plans were strictly bottom line oriented, ignoring the threat to the fiscal stability of the medical profession.

Although Medicare’s efforts were more noble, they didn’t quite get it right. Although a 5.4 % decrease doesn’t look like much, it can be disastrous. Keep in mind that overhead expenses are relatively fixed for solo and small group medical practices. The percentage change affects primarily the net income of the physicians. Thus a 5.4 % decrease in fees may translate into a 10 % or 15 % decrease in take-home pay. If similar adjustments were to occur in consecutive years (unlikely but not impossible), the implications are obvious. Using physicians’ net income as the ultimate adjustment for the “sustainable growth rate” places on physicians too much of the burden of health care inflation control.

Private health plans have wreaked financial havoc without containing costs. They have to go. Universal insurance holds the promise of containing costs through global budgets and negotiation of provider rates. Although the formulas used by Medicare are rational, they create excessive instability of physician income. Negotiation must be added to the process. But allowing physician negotiation in our fragmented system could threaten further disruption of delivery of health care services (beyond that of contract terminations and bankruptcies). On the other hand, a universal program of public insurance should strive for equity in rate setting by adding negotiation to the process. Physicians would be protected from excessive decreases during unfavorable years, and the taxpayers would be protected from excessive physician compensation in more favorable years.

Does anyone in America oppose equity, or fairness, in the funding and delivery of health care? Then why aren’t we moving ahead with reform that would establish equity?

eHealth Institute
November 14-16, 2001 Aptos, CA

Convened by the nonprofit eHealth Institute, the Developers’ Summit is the only national meeting that is solely focused on issues of importance to eHealth application developers.

Objectives: The eHealth Developers’ Summit seeks to catalyze the sustainable development, adoption, and dissemination of effective eHealth tools by leveraging the collective expertise and vision of the most respected eHealth developers in the world. The Summit will:

1. Identify solutions for sustainable development and implementation of effective eHealth applications; 2. Enhance communication and collaboration among developers and other stakeholders; and 3. Provide a unique networking opportunity that fosters business relationships and collaborations among developers from commercial entities, academia, government and the nonprofit sector.

Invitation Only Attendance is by invitation only and limited to about 100 people. Invitees are chosen on the basis of their direct involvement in eHealth development and their potential impact on the field. Institutions that will be represented at the Summit include technology and health-related corporations, small businesses, academic institutions, health care organizations, investors, foundations, non-profit organizations, government agencies, and health care purchasers and payers.

Access a Detailed agenda for the meeting: Log in to the eHealth Summit 2001 Participants Only Site Provide your Email Address & Password

Participant directory: Log in to the eHealth Summit 2001 Participants Only Site Provide your Email Address & Password

http://www.ehealthinstitute.org/summit/index.cfm

Comment: eHealth Institute is a private, charitable organization with a mission of seeking to “explore ways to use emerging information and communication technologies to improve the health and well being of all people, including the underserved.”

Inevitably, information technology will play a very major role in the future of our health care system. The industry is rapidly developing innovations that will bring us significant improvements in efficiency, error reduction, communication, quality enhancement, and other benefits of health care applications. The problem is that the private sector is designing systems that will maximize their access to the $1.4 trillion dedicated to health care today. If you believe that private health plans have been draining funds that should go to patient care, just wait until you see what this industry has in mind.

A very important summit on this topic is now being held, as the excerpts from the announcement above indicate. The secrecy of both the agenda and the list of invited-only attendees brings back unpleasant memories of the secret sessions during the planning of the failed Clinton health care reform proposal.

It is essential that such summits be held. But it is also essential that eHealth be developed in an environment that encourages value while enhancing our health care system, rather than an environment that is designed to develop methods of diverting funds away from patient care. It is essential that public policies in health care information technology be developed immediately, and that the NIH be enlisted to supervise the development of the technology in the public domain. Only with that approach can we be assured that we will be receiving value for our investment.

Those who believe that a public process will stifle technological development must also accept the belief that this industry will walk away from their rightful share of a $1.4 trillion health care budget. They will see to it that they get their share, and the public will see to it that we receive value.

eHealth Institute
November 14-16, 2001 Aptos, CA

Convened by the nonprofit eHealth Institute, the Developers’ Summit is the only national meeting that is solely focused on issues of importance to eHealth application developers.

Objectives: The eHealth Developers’ Summit seeks to catalyze the sustainable development, adoption, and dissemination of effective eHealth tools by leveraging the collective expertise and vision of the most respected eHealth developers in the world. The Summit will:

1. Identify solutions for sustainable development and implementation of effective eHealth applications; 2. Enhance communication and collaboration among developers and other stakeholders; and 3. Provide a unique networking opportunity that fosters business relationships and collaborations among developers from commercial entities, academia, government and the nonprofit sector.

Invitation Only Attendance is by invitation only and limited to about 100 people. Invitees are chosen on the basis of their direct involvement in eHealth development and their potential impact on the field. Institutions that will be represented at the Summit include technology and health-related corporations, small businesses, academic institutions, health care organizations, investors, foundations, non-profit organizations, government agencies, and health care purchasers and payers.

Access a Detailed agenda for the meeting: Log in to the eHealth Summit 2001 Participants Only Site Provide your Email Address & Password

Participant directory: Log in to the eHealth Summit 2001 Participants Only Site Provide your Email Address & Password

http://www.ehealthinstitute.org/summit/index.cfm

Comment: eHealth Institute is a private, charitable organization with a mission of seeking to “explore ways to use emerging information and communication technologies to improve the health and well being of all people, including the underserved.”

Inevitably, information technology will play a very major role in the future of our health care system. The industry is rapidly developing innovations that will bring us significant improvements in efficiency, error reduction, communication, quality enhancement, and other benefits of health care applications. The problem is that the private sector is designing systems that will maximize their access to the $1.4 trillion dedicated to health care today. If you believe that private health plans have been draining funds that should go to patient care, just wait until you see what this industry has in mind.

A very important summit on this topic is now being held, as the excerpts from the announcement above indicate. The secrecy of both the agenda and the list of invited-only attendees brings back unpleasant memories of the secret sessions during the planning of the failed Clinton health care reform proposal.

It is essential that such summits be held. But it is also essential that eHealth be developed in an environment that encourages value while enhancing our health care system, rather than an environment that is designed to develop methods of diverting funds away from patient care. It is essential that public policies in health care information technology be developed immediately, and that the NIH be enlisted to supervise the development of the technology in the public domain. Only with that approach can we be assured that we will be receiving value for our investment.

Those who believe that a public process will stifle technological development must also accept the belief that this industry will walk away from their rightful share of a $1.4 trillion health care budget. They will see to it that they get their share, and the public will see to it that we receive value.

HEALTH AFFAIRS
Web Exclusive
November 13, 2001
by Robert J. Blendon, et al

“In contrast to health problems, health care issues have become less salient to the public. This is likely to lead to decreased support for government action on health care issues that were being debated by the Congress before September 11. These include Medicare reform, a Medicare prescription drug benefit, patients’ rights legislation, and coverage for the uninsured.

“How long these opinion changes last and what direction they take in the future depend upon three critical yet unknown factors: the occurrence and severity of new domestic terrorist attacks; the duration and success of the war in Afghanistan; and the duration and depth of the economic recession.”

http://www.healthaffairs.org/

HEALTH AFFAIRS
Web Exclusive
November 13, 2001
by Robert J. Blendon, et al

“In contrast to health problems, health care issues have become less salient to the public. This is likely to lead to decreased support for government action on health care issues that were being debated by the Congress before September 11. These include Medicare reform, a Medicare prescription drug benefit, patients’ rights legislation, and coverage for the uninsured.

“How long these opinion changes last and what direction they take in the future depend upon three critical yet unknown factors: the occurrence and severity of new domestic terrorist attacks; the duration and success of the war in Afghanistan; and the duration and depth of the economic recession.”

http://www.healthaffairs.org/

Dear Health Care Activists,

Most Members of Congress do not have a clear picture of how being uninsured and underinsured impacts the family or individual. This is a major problem. They think that an uninsured individual can receive their health care in an emergency room or a community clinic. Until members of Congress start receiving phone calls and letters from constituents who are angry and sick and tired of the American health care system, this is going to be a long and protracted struggle. We have to bring the pain and misery of this health care system into the Congress now! We need more stories like the one from Carol Gross; Cong. Conyers will put them on his web-site.

I know what it is like to be uninsured—- I used to raise money from friends, relatives, co-workers,and strangers whenever my medical equipment for sleep apnea broke down during the night. Blue Cross Blue Shield would not cover my equipment costs and various medical procedures for sleep apnea because it was a pre-existing condition, or it was experimental surgery. I have been kicked out of hospitals, once one day after major knee surgery because I did not have health insurance. I was often denied treatment for sleep apnea and prostate problems because I had unpaid medical bills. I owe over $80,000 in medical bills. My credit is shot–I cannot buy a car, a cell phone, or an apartment without somebody giving me a loan. My mother who is 72, has no money, because it went to all of my medical bills since I was 18 years old. She is totally stressed out because of her financial situation. This is the reality of our health care system!!

There are millions of Americans, especially senior citizens, who have chronic illnesses or are handicapped, and cannot afford quality treatment. There are millions that cannot afford private health insurance, and want decent coverage. We must organize these individuals and families. This can be done only if there is a grassroots organization with affiliates across the country, who can organize these folks into a strong and vocal movement for universal health care.

Sincerely,

Joel Segal Legislative Assistant Rep. John Conyers, Chair, Congressional Universal Health Care Task Force

“Please keep on advocating for a national health plan. My husband and I both worked and paid for health insurance for many years and never really accessed those benefits until he became very ill with early-onset Parkinson’s disease. Now, in order for him to be able to move, eat and speak, it takes up to $1500 a month in medications. We now live on one instead of two paychecks. It has become increasingly difficult for us to cover his medical costs even with having two private policies and Medicare. We are far more fortunate than some because I also am a working professional. Our out-of-pocket costs for medical services take nearly one-half of our annual income. If things keep on getting worse we will have to just become poor enough that we quit even trying to pay our own way. It seems that only the poor and the rich have any secure health benefits, and almost everyone can be touched by a health care crisis without out any real safety net of protection, no matter how long they’ve contributed. When they actually need the services they may no longer be available to them. The truth about health care is shocking.”

Comment: Medicare and two private policies. And yet out-of-pocket medical expenses are nearly half of Mr. & Mrs. Gross’ annual income. What has happened to the security of health care coverage?

The fact that we are tolerating the exclusion of 40 million from health care coverage is a national disgrace. But the explosion in under-insurance now threatens access to care for most of the rest of us. Private health plans are rapidly shifting more and more of the burden to the beneficiaries. The deficiencies in coverage under Medicare have long been recognized, creating a market for private Medigap and Medicare + Choice options. But these too are becoming less effective in covering out-of-pocket expenses.

The effort to gain coverage for the uninsured is only part of the battle. There is urgency in reversing the trend to “empower” patients by making care unaffordable, a market “solution” that can negatively impact all of us. Mrs. Gross is right. Only the wealthy, who are able to fund all of their needs, and the poor, who have access to under-funded public programs, can be assured that there will be no financial barriers to care. Those of the rest of us that are healthy may be complacent, but, in spite of our coverage, we may be one major illness or injury away from a serious financial hardship

For a nation that prides itself on its ingenuity, it is astounding that we accept this shameful state of our health care system that is deteriorating further before us. It does not require a genius economist to recognize that the $1.4 trillion we spend on health care is enough to provide comprehensive care for everyone. Why do we stubbornly continue to support our ineffective, wasteful, fragmented system of private health plans when a public program of universal health insurance would solve our problems? Mr. & Mrs. Gross and all of the rest of us deserve much more value for our health care investment than we currently are receiving.

And I especially want to thank Carol Gross for agreeing to share their story with us. I pray that she will inspire us to act.

Don

American Medical News
November 12, 2001
by Cheryl Jackson, AMNews staff

Would you like to know, right when they walk in the door, if patients can pay you?

TransUnion LLC, a consumer credit information service headquartered in Chicago, and Englewood, Colo.-based Quovadx Inc., a software company, last month began offering ExpressCheck.

The system provides credit scores, which hospitals and doctors can use to determine payment arrangements. It follows the lead of Atlanta-based Equifax Inc., which last year began offering a similar product.

TransUnion’s pitch: Hospitals and physicians will need to use such systems more often as patients become responsible for bigger shares of their medical bills.

Physicians and hospitals feeling the pressure from lower reimbursement rates have started honing in on billing inefficiencies. Managed care has reduced revenues, and in response to rising premiums, employers have pushed more of the costs on to workers, who are facing bigger deductibles and co-payments.

Having the credit history upfront can help a physician practice or a hospital in developing adequate payment plans, Smith said (Neal Smith, national sales manager for TransUnion). If a patient’s credit history is poor, for example, the facility might insist on payment upfront for an elective procedure.

Brenda St. Pe-Bruno, vice president of sales for Equifax:

“Physicians every day are starting to come to us for access. The large physician groups are very interested. Even your onesies and twosies doctors’ offices are interested in using it.”

http://www.ama-assn.org/sci-pubs/amnews/pick_01/bisc1112.htm

Comment: As the numbers of uninsured continue to increase, the leadership of the American Medical Association is supporting defined contribution approaches that include medical savings accounts, tax credits, and greater cost sharing to empower the patient as a health care shopper. These policies are impairing access for the insured by making out-of-pocket expenses unaffordable. Underinsurance is growing at an even greater rate than the growth of the uninsured. It is heartbreaking for physicians with traditional values to see the profession responding today by adopting rapid credit checks that will protect the physician from the uninsured and underinsured. Isn’t it time for the AMA leadership to begin supporting policies that will protect patients from health care debts that impair access to care? A comprehensive program of universal health insurance would serve us all just fine, physicians and patients alike.

Amicore Press Release
October 10, 2001

“New York, October 10, 2001 – Pfizer, IBM and Microsoft today announced the launch of Amicore, a newly formed independent software and services company providing workflow and connectivity solutions to office-based physicians. Amicore’s focus will be to reduce the administrative workload and paperwork for physicians, allowing them to dedicate more time toward their mission of providing quality patient care.”

David Lubinski, Public Sector and Healthcare general manager, Enterprise Sales and Industry Group at Microsoft:

“Microsoft is committed to helping the healthcare industry and its providers reduce paperwork and streamline the practice of medicine. The Microsoft® .Net technology platform will enable physicians to practice medicine any time, any place, on any device.”

http://www.amicore.com/press.html

Comment: Heads up! This may be the most important development in health care of this decade. But there has been virtual silence from the health policy community since this press release of a month ago. Why should we be concerned?

The current model of using private health plans to allocate our abundant health care resources has been a miserable failure. The health plans have been riddled with administrative waste, have failed to assure equitable access to care, and have failed to contain runaway health care costs. Because they have created instability in the health care delivery system, major changes are absolutely inevitable. Health plans as we know them are history.

Current functions of health plans include risk pooling, administration and management (managed care), and information management. What will happen to these roles?

Health plans already are abandoning risk pooling as they pass risk on to their beneficiaries, thereby compounding issues of access due to lack of affordability. Risk pooling works well in the public sector, as has been proven by the Medicare program, and it is inevitable that most, if not all, risk pooling will end up in the public sector. Health plans will be relieved of their risk pooling function.

The private health plans have been egregiously wasteful in the administration of their programs, diverting tremendous resources away from patient care and into their own industry. Managed care’s greatest success has been in controlling fees through contracting. But that is a function that has been very effectively applied by the public sector, as witness the Medicare program. Other effective managed care tools also can be utilized by public programs with appropriate enabling legislation. In the future, health plans will be relieved of their role in managing care.

But information management holds the promise of improving efficiency, improving quality, reducing error, identifying and improving best practices resulting in better outcomes, improving both controlled access and confidentiality of patient information, and endless other applications that will make our great health care delivery system even better and more efficient. This was the new promise of health plans. But when they were flush with funds, they failed to deliver on this promise, preferring instead to concentrate on a simpler business model of improving profits. They now have one option left. They can metamorphose into information management vendors, or they can step aside while others fulfill this role.

That leads us to today’s quote. Microsoft, IBM and Pfizer did not become the companies they are by simply concentrating on the bottom line. They have been astute at recognizing products and services that not only have broad appeal, their products and services have become essential in today’s world. Just imagine the role of health care information technology once it has matured. To say that it will be essential to our health care delivery system is a world class understatement! If you think Bill Gates is wealthy now….

Why hasn’t the health care system moved into the IT (information technology) age? There are plenty of application service providers with their networks of providers and vendors. But their IT packages have been too expensive. There has been a reluctance to move beyond simple business office management and claims management, partly because of the high cost, and partly because of the fear of rapid obsolescence and concern about the failure to adequately integrate with other IT applications that will be necessary to realize the full potential of IT in health care.

Does IT in health care have to be expensive? When you look at the low cost of today’s very powerful home computers, and the low cost of the software and the negligible costs of accessing the Internet, you realize that much can be done at very little expense. The market should be able to provide the computer power needed for an integrated technology system with only a negligible drain on our health care resources. The anticipated value should be much greater than the costs.

The actual costs of developing software than can process medical records is very low. The high charges result from the proprietary interests that continue to profit from ownership and licensing of the software. The public sector could contract for development of the required software, not only for medical records but for all health care IT applications, and then move that software into the public domain. The costs would be a minute fraction of what the industry has in mind. And the public would be receiving great value for its extremely modest investment.

Information management services probably should be provided by vendors in the private sector at contracted rates that provide value for the public dollar. This would be analogous to the entities that currently provide claims processing for the Medicare program. There is plenty of opportunity for the IT industry to establish successful business models that also will create value for all of us, but without repeating the model of the health plans that were designed to suck the resources out of the health care system.

In the future we will most likely continue with our existing private and public health care delivery system, but we will move our risk pools into the public sector, and we will serve the system with a modern, integrated, information technology system.

The policy issue? The health care information technology system probably should be developed and serviced by the private sector, but the funding and policies should be established by the public sector, assuring value for our public dollars, and assuring that the information technology resources will have a mission of improving health care for everyone, instead of a mission of enhancing personal megawealth.

From “Networking Health,” by the Committee on Enhancing the Internet for Health Applications: Technical Requirements and Implementation Strategies, National Research Council (National Academy Press):

“A Final Word”

“The recommendations offered above are intended to set the nation on a course that will ensure that technology, organizational practices, and public policies converge in ways that will lead to broader deployment of Internet-based systems in health applications.”

Final comment: There is extreme urgency in establishing the public policies that need to be in place as the technology and health care organizational practices converge.

For those that are asleep, THERE IS EXTREME URGENCY IN ESTABLISHING THE PUBLIC POLICIES THAT NEED TO BE IN PLACE AS THE TECHNOLOGY AND HEALTH CARE ORGANIZATIONAL PRACTICES CONVERGE.

Modern Healthcare
November 5, 2001
Washington Report
by Jonathan Gardner

“To help lure investors to healthcare, the Bush administration wants to make providing Medicare services a stable and moderately profitable business. The trouble is, it’s Congress, not the administration, that turns Medicare’s financial spigot on and off.

“Thomas Scully, administrator of the Centers for Medicare and Medicaid Services, says the boom-bust cycle in Medicare payments scares Wall Street away from the healthcare sector.

“So now he’s proposing a different approach to give investors in the stock and bond markets more confidence in investing in healthcare providers and companies.”

Bill Reiland, a principal with Morgan Stanley Dean Witter who runs high-yield healthcare research:

“`He (Scully) probably has a good intention and has a good objective, and I’m sure healthcare providers around the country rise up and cheer when he says that. The important question is, in five years will the administration have the same objectives? You don’t know. You might not have the same administration.”

http://www.modernhealthcare.com/currentissue/topten.php3?refid=7998&db=mh99up&published=20011105

Comment: Let us pray.

Sorry. I had intended to avoid political comments, believing that we all need to work together. But when Thomas Scully is more worried about the health of the health plans than he is about the health of the people of this nation, it is political.