The Civic Caucus
8301 Creekside Circle #920,
Bloomington, MN 55437 January 27, 2012
Notes of the Discussion
Verne Johnson (chair), David Broden,
Janis Clay, Paul Gilje, Jim Hetland (phone), Sallie Kemper, Randy Johnson,
Ted Kolderie, Dan Loritz, Walt McClure, Tim McDonald, Kim Ritten, Clarence
discussion: Sue Knudson, vice
president for informatics at HealthPartners, describes how that company
has used its integrated structure as both payer and provider to create a
measurement technique that gives an incentive to health care providers to
provide better relative quality at lower costs. She discusses the
opportunities and challenges of Minnesota's implementing such a structure
- Health care expenditures comprise the
largest and the fastest growing part of the state budget. This past year
that portion of the state general fund classified as Health and Human
Services (HHS), the majority of which is related to health care services
and care for the elderly, was the only substantial portion of the state
budget that increased. With no change in the structure of its programs or
services, HHS projects its funding needs to grow at an annual rate of
approximately 8 percent, enough to hold all other areas of general fund
spending increases- including K-12, higher education, and transportation -
Against this troubling financing backdrop,
Minnesota has emerged as a potential leader in health care policy. Many
Minnesota health care organizations- such as Minnesota Community
Measurement, HealthPartners, and Mayo Clinic - are nationally leading
innovators in their fields.
In 2008 Governor Pawlenty signed into a law a
series of health care reforms developed with cooperation of health care
providers, other interested groups, and a Democratic Legislature. The
reforms sought to improve the quality of health care in the state and
lower its cost by, in part, evaluating and making public the health care
outcomes and relative costs of providers.
A Civic Caucus interview about the reforms with
then-Commissioner of Health Sanne Magnan may be found on the caucus
Implementation of the 2008 reforms is presently
under way. Scott Leitz, Assistant Commissioner in the Department of Human
Services, will visit with the Civic Caucus on February 24 to provide an
Meanwhile information on quality and cost is
being gathered in the non-governmental sector. Minnesota Community
Measurement (MNCM), a non-profit, has developed methods to assess the
quality of services, which methods are both open for public review and
continually vetted and improved. Another non-governmental organization has
made progress in the assessment of the cost of care among providers. Days
after this interview, an assessment system led by Bloomington-based
HealthPartners to determine the cost of care became the first such system
to be endorsed by the National Quality Forum following a lengthy process
of review. Like MNCM's outcomes assessment information, HealthPartners'
cost of care and resource use assessment system is open to public view and
Meanwhile Governor Dayton and the
Republican-controlled Legislature are deadlocked on the topic of creating
a state health exchange, the first stage of implementation of the 2009
federal health reforms.
The Civic Caucus became interested in health
care because of the significant cost burden it places on individuals,
businesses and the state. The Caucus is highlighting efforts where
Minnesota might be a leader in health care system reform. Today's speaker
will be the first of a series of speakers on this topic over the coming
B. Welcome and
introductions - Sue Knudson is vice
president of health informatics for HealthPartners, the largest
consumer-governed nonprofit health care organization in the nation. She
has more than 20 years of health care experience, including informatics
and operational leadership roles.
The term "informatics" refers to the application
of information and computer science to health care issues. It deals with
the acquisition, storage, retrieval, and use of information in health
For more than 10 years Knudson has lead an
informatics team that has developed population-based total cost of care
measures and consulting services to help medical groups improve resource
use and lower total cost while at the same time improving the quality of
care and patient experience.
In 2011, Knudson was appointed to the
Measurement's Measurement and Reporting Committee charged with reviewing
and making recommendations on data measurement and reporting policies and
with testing ideas and strategies related to health data collection.
Since 2006, Knudson has been responsible for
HealthPartners' strategic information and decision support capabilities.
In that role she strives to ensure HealthPartners' status as an innovative
leader in consumer health information, provider payment, product design,
employer reporting, health improvement, medical management and care
Knudson holds a master of arts degree in health
and human services administration from St. Mary's University in Minnesota
and a bachelor of business administration degree from the University of
- During the course of the discussion the
following points were discussed:
Background on HealthPartners
HealthPartners, headquartered in Bloomington, is
an integrated care and financing organization, meaning that it provides
both health care services and health plan services.
The company employs 12,000 people and has
1,360,000 members in its health plans. Health plan members include
individuals and organizations in Minnesota and surrounding states.
The HealthPartners branded medical clinics,
which range broadly in size and scope of services, serve 500,000 patients
at 35 locations; the clinics employ 800 physicians covering 35 medical and
surgical specialties. The HealthPartners clinics accept patients from
HealthPartners medical plans as well as patients covered by other payers.
Some HealthPartners health plan members are served by clinics not directly
managed by HealthPartners but under contract in the HealthPartners
network. HealthPartners dental clinics employ 60 dentists at 20 locations.
HealthPartners owns and operates four hospitals,
including Regions (454-bed, level 1 trauma), Lakeview (97-bed acute care),
Hudson (25-bed critical access), and Westfields (25-bed critical access).
Hudson and Westfields are located in Wisconsin.
THE PROBLEM: Health care providers have insufficient incentives to
improve quality and contain cost.
A participant in the discussion added that, in
fact, the incentives are reversed, and reward cost-increasing behavior,
resulting in growth of both public and private health care spending that
vastly outpaces inflation today and has been doing so for many years. In
Minnesota, state health care costs are projected to grow at an annual rate
of approximately 8 percent, enough to hold all other areas of general fund
spending increases- including K-12, higher education, and transportation -
Without incentives for productive behavior
(better quality for lower cost) like those that exist in most
well-functioning industries, health care has developed substantial
variance in effectiveness and efficiency of providers without a way for
ordinary consumers to distinguish the good performers from the poor
THE GOAL: Improve health care quality while slowing growth in costs.
Because incentives are not designed today to
reward efficiency, the health care system is far less cost-effective than
it could be and costs much more than it has to. It is a market, but a
mal-formed one and therefore not operating as most people would intend.
THE STRATEGY:Reform the health care market - put in place the components that enable
people to buy better care at lower cost.
Component one: Know the quality and cost of care.
As an organization HealthPartners supports the
publication of cost and outcomes data because it believes all stakeholders
will gain from such knowledge. Its strategic goal is to deliver the best
health outcomes and experience to members and patients at the most
affordable cost. As a health plan, it supports the contracted medical
groups in their network with information and data to achieve the same
"We don't view measures of health data as a
competitive advantage; we view our ability as a plan and a delivery system
to improve outcomes and our results as a competitive advantage. People
ask, 'why publish this information; isn't it proprietary?' No, that is not
the point. It's what you do with that information that is important."
Since HealthPartners is an integrated care and
financing organization (both payer and provider) it has a strong incentive
to keep cost of care down.
Historically, a friction in health care has
resulted from the fee-for-service model, because this model results in
perverse incentives. For those hospitals and clinics that are not also
providing the health care insurance plan, their financial incentives are
to increase revenue through increasing services. And all innovations in
technology, care, and management will be geared to serve these incentives.
HealthPartners is realigning these incentives using total cost of care
measures to complement quality and experience measures. The organization
will align benefit designs for consumers and payment reforms for
providers, all supported with transparency of results, to inform
decision-making and selection.
"As an integrated care business we see the need
to know both outcomes and cost and to have providers who are knowledgeable
about this relationship. We complement outcome and experience measures
with cost and resource measures."
To assess health outcomes HealthPartners uses
all the measures of health services in the community available from
Minnesota Community Measurement, a non-profit collaboration among medical
groups, clinics, physicians, hospitals, health plans, employers, consumer
representatives and quality improvement organizations to develop ways to
assess the quality of services. To read more about MNCM click on:
HealthPartners also uses data for assessing its
customers' experience, including satisfaction with the access of care,
communication, and quality, as well as issues of safety. MNCM is working
on developing measures for patient experience components as well.
In measuring cost HealthPartners is leading
nationally with the development of a total cost of care index and a
resource use index for full patient populations. It has developed a total
cost index (TCI), resource use index (RUI), patient management
risk-adjustment metrics, and high cost risk-adjustment metrics among
others. The information can be segmented by condition and other common
"Our measurement scheme is designed to help
understand what the cost drivers are and to isolate them in such a way
that they can be targeted."
Component two: reform payment and benefit
An efficient health care system depends on
knowing which heath care provider produces the highest quality care at the
lowest cost. Without this information consumers can't know who among all
providers is "best."
Yet once the consumer knows that information and
acts on it, payment reform must also occur to result in an effective
reduction of overall health costs.
HealthPartners provides incentives for consumers
to choose providers based on value with a tiered system that places
providers into four categories - high quality/low cost; high quality/high
cost; low quality/low cost; low quality/high cost - and uses correlated
member cost sharing approaches like copayments to encourage consumers to
choose the better value where providers are both high quality and low
"You cannot be high quality and high cost and be
in our preferential (i.e., low copayment) tier- you must be both high
quality and low cost."
This information is available in a
consumer-friendly format on the HealthPartners website, including detailed
information on particular health conditions.
HealthPartners got ahead of the industry on this
approach, working on it for eight years before it became accepted by the
industry mainstream. Since 2009, as a plan it has had shared savings
agreements in place incentivizing contracted medical groups in their plan
network to do the same. Over 80% of commercial health care costs in the
HealthPartners network are associated with these agreements.
The results have been significant:
HealthPartners has found that its costs are four percent better than the
national average, eight percent better than the regional average, and 15
percent better than the state average.
"Nationally, the inverse relationship between
Medicare and commercial payment may contribute to the greater difference
within Minnesota than nationally. We have lower per capita Medicare
reimbursement rates versus other states; this is potentially a cost-shift
to the commercially insured."
New national endorsement of cost-measurement standards achieved.
There have been no standardized measures to
determine the cost of care or resource use, nor a way to determine their
underlying drivers. So HealthPartners has been developing one, which it
has submitted to national vetting. The National Quality Forum reviews and
endorses national measures. In January 2011 the Forum issued for the first
time a call for measures of health care cost and resource use. A year
later, the measures that HealthPartners developed were recommended for
endorsement, and on January 31, 2012 (four days after this interview) the
Forum endorsed HealthPartners Total Cost of Care and Total Resource Use
The vetting process was public and thorough,
Knudson said. Her team has been working with the National Quality Forum
for months on a very comprehensive review. The HealthPartners team spent
the first three months documenting the process and creating a website
detailing cost measurement methods. Those methods were then vetted in
depth by a Forum steering committee, made up half by health care providers
around the country and half by other stakeholders. Following public and
member comment and member vote, the measurement methods moved on to the
Forum's Consensus Standards Approval Committee. Knudson said that to
qualify for consensus within the Forum, HealthPartners had to prove the
significance of its methodology through a scientific literature review and
show the methodology to be both scientifically rigorous and ultimately
applicable in real world situations.
"We thought it would be a long shot that a
regional integrated care and financing organization would be able to
achieve national acceptance of its methodology," but a few days after this
interview the endorsement was confirmed.
At present HealthPartners is the only
organization to have received this endorsement at the population level,
Knudson said. The Forum may put out another call for health measurement
approaches in future. If the consortium approves other methods over the
years it would look to eventually blend or select best in class.
Minnesota health care resources are plentiful.
Minnesota is in a unique position in the country
for health reform because of its community assets.
Minnesota Community Measurement (MNCM), a
non-profit collaboration developing ways to assess the quality of
services, is one important asset. MNCM is convening a community wide
group, including the Minnesota Hospital Association, Minnesota Medical
Association, provider groups, health plans and purchasers. The group is
evaluating methods to measure total cost of care, including consideration
of the HealthPartners measurement methodology.
Comparison made with state's efforts.
While HealthPartners and associated groups are
leading market-reform in the private market as detailed above, the state
of Minnesota is seeking to lead on a regional level.
Knudson said that her HealthPartners team has
actively supported the state's work on outcome and cost assessment,
including serving on working groups reviewing the measurement methods.
However, she believes that in the state's effort there is duplication of
capability with what MNCM already has in place. MNCM currently has quality
measures; it is adding experience measures and it also has the
infrastructure and process for statewide collaboration to add the total
cost of care and resource use measures.
"When the state started the work to build the
measurement approach to support the reforms, we offered a collaborative
approach, as an alternative to creating an all-claims database and hiring
data measurement vendors. The state went with the vendors and now four
years later we don't yet have satisfactory results from those vendors."
Since the data is being treated as proprietary, she added, it makes review
of their methods for accuracy virtually impossible, affecting confidence
in the measurement results.
The week of this interview there was a hearing
at the Legislature to discuss the flawed results. The timeline for their
publication has been delayed by a year. Health care providers are
concerned that the proprietary methods used in the state's study are too
challenging to verify, as called for by the legislation. Some legislators
are calling for repeal of the enabling legislation out of frustration with
"There are many measures we have in the public
domain now. There is an opportunity for standardization of quality and
experience measures around MNCM and building on that existing community
asset with the expansion to cost measures using the standards set by the
National Quality Forum," Knudson said. "We can maximize the resources
already in place and not re-invent what has already been developed."
HealthPartners aligns incentives to consumers to
choose better value. HealthPartners uses co-pays and other benefit designs
to direct customer payments so that better hospitals receive more patients
while those hospitals with higher relative costs, lower quality, or both
lose customers - to the point where they are forced to improve quality and
cost in order to compete. The principal payment incentive built into the
state's 2008 reforms is centered on the use of bonus payments to the best
providers. Knudson believes there may also be a provision calling for the
bottom providers to be removed from the network.
In addition to having quality and cost
information, for the strategy to work at the state level reform of the
insurance market is necessary so that health plans adopt the incentive
mechanism. This area has become politically controversial because it
implies coordination with the federal reforms through state implementation
of the federal mandate on exchanges. However, it is not necessarily the
case that states must follow the federal government; instead a reformed
insurance market may be part of a state-led strategy of market reform.
- "HealthPartners has worked on the
system within our integrated network," Knudson said in closing, "but we
need help from the policymakers now for this to implement more broadly and
benefit the whole state.
"We are seeing a big paradigm shift going on
among providers. This community has leadership that recognizes more than
the rest of the country that our present health care system is
unsustainable and reform must be done. We have an opportunity to lead the
The Civic Caucus
is a non-partisan,
tax-exempt educational organization. The Core participants
include persons of varying political persuasions, reflecting years of leadership in politics and
business. Click here
to see a short personal background of each.
Verne C. Johnson, chair; David Broden, Marianne Curry,
Paul Gilje, Jim Hetland, Marina Lyon,
Joe Mansky, John Mooty, Jim Olson,
and Wayne Popham