Change incentives to address the core problems.
McClure outlined the nature of the state's
strategy to bring about healthcare system reform. First, he defined what
he means by "system reform." In this context, "system reform" means
changing the structure of a system in such a way as to correct its
inherent incentives that perversely reward problem behaviors. In health
care, quality and cost are symptoms of an underlying condition: bad
incentives. He argues that an effective reform strategy needs to cure this
underlying cause of unfavorable results; it must restructure the system to
replace the bad incentives with proper incentives.
The incentives in the health care system today
are very bad. They reward cost regardless of quality, McClure said. Under
today's system, efficient providers that get better patient health results
with fewer, more efficiently produced services earn less on each patient,
yet gain not a single additional patient for their pains. No one, not
patients, not even providers, knows who these high quality, efficient
providers are because we don't keep score.
McClure contends that if all providers were to
practice a style of medicine that is reflective of the best providers,
then Minnesota would have overall better quality of care with 20-30
percent fewer providers. The question is, how we can get the system's
incentives right to make that happen?
Informed Consumer Choice can change consumer behavior.
There is a strategy to accomplish this end that
evolved in Minnesota. The basic notion began with Dr. Paul Ellwood in the
1970's. Ellwood realized that incentives are critical to the behavior of a
market and the performance of a system. He was running a rehab hospital,
and realized the faster he got people rehabbed and back to work, the less
money he made. So he had an idea to create the HMO, the Health Maintenance
Organization. McClure was part of Ellwood's team that worked on the HMO
strategy at Ellwood's Minnesota-based policy studies organization,
Interstudy. This Interstudy team drafted much of the federal HMO
By 1980 Interstudy found that, with some
heartening exceptions, HMO's generally had made no dent in healthcare
costs. McClure left in 1981 to form the Center for Policy Studies (CPS)
and continue work on this problem. His CPS team found that the HMO
strategy was targeted at the wrong level. The healthcare organization
itself is the wrong focus - it doesn't do any good, McClure said, to be an
efficient HMO if you don't get additional patients, that is, increased
volume and hence adequate revenue for all your efforts at achieving
quality and efficiency. The correct focus became clear. "It was the
system's incentives that had to be changed."
To change the incentives affecting providers CSC
came up with a strategy: Measure quality and cost of care, then use
pricing incentives in insurance plans to encourage people to choose those
health care providers that are better for less.
McClure gave the strategy a name, originally
Buy Right, and more recently, Informed Consumer Choice. With
Informed Consumer Choice, assessors get information on healthcare
providers' quality and cost; that information is then given to consumers,
and incentives are built into their health insurance plans to encourage
consumers to choose providers with better quality care for less cost. Not
just better care, but better care for less.
Measuring healthcare quality and cost is key to the strategy.
If you wish to substantially contain cost,
assessing health care quality is the first, if perhaps not obvious, place
to start in any healthcare system reform strategy. The only way to have an
understanding of healthcare quality is to have someone measure it, and
McClure likened this to baseball: you have no idea who is a good hitter by
going to a game; a hitter might be lucky that day or unlucky - you know
only his past record of success because someone measures and tells you his
batting average. When you go to a doctor, what you want to know - what we
mean by quality - is the doctor's batting average, the quantification of
his/her success in getting good health results for comparably sick
patients compared with other providers. The measure of provider quality is
a measure of both patient health results and patient satisfaction, McClure
said, not the quality of services per se. A provider's batting average on
health outcomes and patient satisfaction for comparably sick patients are
what tell us whether this particular provider's care is "better" (i.e.
higher quality) than others.
The second component critical to this strategy
is to assess the efficiency of each provider, i.e., the efficiency of each
provider's contribution to the total cost of care (not just the cost of
each service but the number and type of services used) to achieve the
health outcomes for a given population. This is a formidable technical
task since any particular patient may have seen multiple providers for a
given health result, but adequate statistical methods are now available.
McClure pointed out that studies indicate that
the variance among providers in death and complication rates for
comparably sick patients varies almost two-fold, as does cost, and the two
are largely unrelated. Indeed, it is not uncommon that those healthcare
providers with the worst outcomes actually cost the most. Unfortunately,
the healthcare consumer today scarcely knows that such poor quality
providers exist and certainly is unaware of who they are. This is the
perverse situation that Informed Consumer Choice is designed to remedy.
Minnesota has an opportunity to lead the country.
Despite popular focus on the federal
government's role, medical care is essentially a local product, McClure
said, created by local people. And our state abounds with strong local
resources in this field. Few people know just how good and efficient
Minnesota's healthcare system really is, but the fact is well documented
if not well publicized.
To illustrate, the Commonwealth Fund, a
nationally eminent foundation, ranks regions on comprehensive healthcare
measures in its report "Rising to the Challenge". The top four regions in
its healthcare ranking are: 1) Saint Paul, 2) Des Moines, 3) Rochester,
and 4) Minneapolis. The nationally eminent Institute for Healthcare
Improvement in its book "The Triple Aim" reports Medicare costs per elder
in Minnesota run about 30 percent lower than the national average despite
our outstanding quality, and it further reports that Minnesota's
HealthPartners is among the nation's foremost innovators in quality and
efficiency and runs 10 percent less cost per elder than the state average.
Both are must reading for anyone concerned with health care delivery and
Expansion of access to care, as the Affordable
Care Act has set in motion, must also be accompanied by careful attention
to cost. The country learned from Medicare and recently from
Massachusetts' experience that in the present healthcare system if you
expand coverage without first having an adequate cost containment
strategy, you are pouring gasoline on a fire and costs will run away
However, Minnesota is now going at this problem
in an entirely opposite fashion: Change the incentives to reward both
improvements in quality and lower cost before the exchanges are
formed, and then universal access will not break the bank. In fact
universal access can then positively further proper system reform and help
steadily reduce cost.
"Regardless of what the federal actors do or
anyone else does, we are doing this the Minnesota way. We don't need to
wait for the federal government; we don't need to wait for anybody. We can
just go ahead, starting with our commercial and public assistance health
insurance sectors. The Feds are begging states to lead the way. No other
state is in so advanced a position to do that."
Minnesota health reform precedents lead the way.
In 2007, then-Governor Pawlenty worked with
legislators to introduce a health exchange bill. It did not pass, but from
this effort came a task force. Pawlenty was hoping to decrease health care
cost by 20 percent in five years. That was a short time frame - perhaps
too short even if the strategy were fully in place - but the goal of a 20
percent reduction is eventually more than possible, McClure said.
The Pawlenty task force made four
recommendations to the legislature:
- Launch aggressive public health measures.
- Assess provider quality and cost and inform consumers of the
- Reward those providers that are better for less.*
- Provide universal coverage.
(* McClure noted a missing component is
disincentives penalizing those that aren't better for less).
In the 2008 legislative session, the first and
last recommendations were dropped by the legislature as too expensive, but
the second and third were enacted with strong bipartisan support. "We are
the first state in the country to legislate a market-based,
consumer-choice-driven system as state policy," McClure said.
Minnesota can lead the nation, he said, but
there are two important tasks facing the state right now: First, getting
assessment right, and second, reforming the insurance market to ban
Quality and cost assessment movements led from Minnesota.
That quality and cost assessment are now in
place in Minnesota is an amazing fact, McClure said. When his team started
on assessment in the 1980's the idea that someone would be looking over a
physician's shoulder was considered communism. Physicians were convinced
of their right to autonomy.
However, by 2008 Minnesota's private and
voluntary sector had accomplished a sea change in this culture with 85
percent of providers in the state participating in having their outcomes
measured. Over the course of 20 years, the world's experts in assessing
health care outcomes have emerged here in Minnesota.
In 1992 HealthPartners, Park-Nicollet, and Mayo
Clinic set up the non-profit Institute for Clinical Systems Improvement (ICSI)
to go through the literature and develop evidence-based clinical
protocols. Representatives of employers, providers and health plans were
included on the board. Participating providers who assessed their outcomes
by these protocols were assured confidentiality, and more and more began
participating voluntarily. These providers learned that while some were
ahead on this illness or that, all were far from where they wished to be,
and measurement led to notable steady improvement on outcomes by all.
In 1996 HealthPartners began publicly reporting
these outcomes not only for its own provider group but all provider groups
participating in its network. It was believed that making outcomes public
would seriously motivate all these providers to improve outcomes, and so
it proved. This is the first time outcomes by provider group were made
public, and providers found the world did not collapse as a result.
Indeed, participating providers gained respect while those not
publicly reporting outcomes were viewed as perhaps hiding quality
Eventually, in 2004, the three big health plans
(HealthPartners, the Blues, and Medica, set up and financed an independent
non-profit, Minnesota Community Measurement (MNCM), to assess and publicly
report on a uniform basis the comparative outcomes of all providers
covered under these plans. The other Minnesota-based health plans soon
joined. This greatly expanded the number of provider groups being publicly
assessed. The MNCM board was broadened to include a balance of
representatives from employers, labor and government, as well as providers
and plans, with none dominant. While not all providers are comfortable
with public assessment, the majority were by now sufficiently accustomed
to realize how a powerful a tool and incentive it was to improve their
quality. And few wished to appear to be hiding their quality from
patients, employers and other providers. By 2008 more than 85 percent of
Minnesota provider groups were participating in MNCM's public assessment.
"While the development of excellent assessment
methods, receiving endorsement around the country, was amazing, the more
epic change was the transformation in physician culture where doctors were
now seeing the demonstrable value of public assessment to improving their
quality of care," McClure said. This was truly a sea change here that was
not happening in the rest of the country.
At the time of the 2008 legislation there was
only technology for measuring quality - not yet cost. While MNCM did not
measure cost, the legislation required the state to measure quality and
cost both. So the State set out to do this through the Department of
Health, which contracted with Mathematica, a consulting firm with
expertise in data collection and statistical analysis. The Department and
Mathematica worked admirably hard and produced a preliminary report in
2012. However, the results had shortcomings recognized by both providers
and the State, and the Department and its contractor have gone back to
work on their methods. It is uncertain when, and if, the State's current
methods for measuring cost and quality will be perfected. This has created
a potential delay, as there is insufficient confidence in the State's
method of quality and cost assessment.
This year, however, there is a new and promising
development. The National Quality Forum (NQF), an eminent national
organization, which rigorously tests and endorses measures of provider
quality, has for the first time endorsed a method to measure provider cost
and efficiency. The method was developed and submitted to NQF by
Minnesota's own HealthPartners. "NQF sent it through the technical
wringer," McClure said, "and all the various experts took their shots at
it. It is the only provider cost assessment method that has been publicly
vetted like this. It's public, it's open, it's free, and available for
MNCM is now working to add this NQF-endorsed
cost assessment method to their quality measures, working with providers
to let them see the merits of the method, just as they have with all their
quality measures. "Perhaps the most important lesson we've learned from
the impressive accomplishments of ICSI and MNCM,' McClure said, "is that
you don't slam-dunk physicians. They are smart independent thinkers and
need to review, understand, and be persuaded of the merits. If you have
that process, if you know how to work with doctors in a respectful way and
bring them along, you get buy-in from doctors."
Next steps for Minnesota outlined.
There are three demanding tasks facing Minnesota
to complete system reform underway. If meshed together properly and done
well, in one to three years Minnesota could have the nation's first health
care system restructured to reward high quality care and coverage and
declining cost escalation.
Presently, McClure said, four different parties
are laboring mightily on various parts of these three tasks: the
Department of Health, the Department of Human Services, the Department of
Commerce, and the private non-profit organization Minnesota Community
A key factor for those laboring on these tasks
is to see themselves as part of a team, and their task as part of a larger
strategy. The goal is not each piece in isolation, but all of them
The three tasks he described are:
Task 1. Decide on the methods for assessing
providers, and decide on the arrangements for who should best perform such
Task 2.Arrive at simplified reports, readily
understandable by consumers, on the value (quality and efficiency) of
providers, and decide how these can best be distributed and freely
available to consumers. Then, encourage or require appropriate incentives
in health plans for consumers to choose efficient providers through
consumer-directed payments (payments follow the consumer), not through
bonus-payments to providers that do well. The bonus payments, McClure
said, are currently in statute but have not been shown to work in any
scientific studies. The strongest incentive on health care providers, he
said - like that on schools - is the gain or loss of patients based upon
Task 3.Correct the unsound insurance market,
either by legislation or by appropriate design of the new State health
insurance exchange to reflect the new incentives.
"The State's success and credibility do not
depend on the success or failure of Provider Peer Grouping," he said,
"they depend on accomplishing the goal of implementing system reform
soundly and expeditiously."
In 2008 there was no accurate, rigorous cost
assessment metric, he added, and so the state moved ahead as best it
could, contracting with a consultancy to come up with a cost metric. Now
with the National Quality Forum endorsed metric there is such an
accredited cost measure, and it could be paired with the provider quality
assessment of an organization like Community Measurement.
If the Department does decide to go with the
MNCM quality measures coupled with the new NQF cost metric, it needs to
decide the best arrangements to operate it. One option would be to perform
the assessment itself, as it is attempting now with PPG.
A second option would be to take advantage of
MNCM's experience, provider acceptance, and proven track record, and
rather than duplicate their activity, designate them as the assessor
agency at the pleasure of the Department. McClure recommended the second
option as more effective.
The health exchange can be an important tool to complete system reform.
At present health plans can, and many do,
compete in highly undesirable ways, McClure said. A health insurance
exchange can help with the second major part of the strategy - insurance
The most flagrant and easily understood adverse
practice, McClure explained, is cherry-picking, that is, keeping premiums
low by excluding coverage to employer groups and individuals who are sick,
or segregating them into prohibitively expensive policies. But there are,
he asserted, many other undesirable competitive practices that can and
should be eliminated by proper regulation.
McClure proposed that cost competition among
health plans should be limited to just five legitimate objectives, and all
other means forbidden by appropriate law and rules. Those five legitimate
objectives should be:
- Assuring financial protection
- Encouraging healthy behavior and preventive care among members
- Incenting members to use providers who are better for less.
- Achieving administrative cost efficiency
- Realizing consumer satisfaction
An ideal place to begin such regulation of
health plans is Minnesota's new health insurance exchange. The State is
presently designing a so-called "exchange" specified under the new federal
Affordable Care Act. But as Governor Pawlenty recognized, such an exchange
seems a smart idea for Minnesota independent of any federal mandate. By
writing the rules for the kind of plans that can be offered through the
exchange, undesired competitive practices can be prohibited, and
competition on the five legitimate goals can be fostered.
If the exchange doesn't construct effective
rules the legislature can move to write the rules for all the insurance in