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Health Care Reform Now! What Will it Take to Improve the System? 2008 NNPHI Annual Conference. George C. Halvorson Chairman and Chief Executive Officer, Kaiser Permanente May 15, 2008. Kaiser Permanente. -- 8.5 million members -- $35,000,000,000 in revenue -- 165,000 employees

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slide1

Health Care Reform Now! What Will it Take to Improve the System?2008 NNPHI Annual Conference

George C. Halvorson

Chairman and Chief Executive Officer,

Kaiser Permanente

May 15, 2008

kaiser permanente
Kaiser Permanente
  • -- 8.5 million members
  • -- $35,000,000,000 in revenue
  • -- 165,000 employees
  • -- Hospitals, pharmacies, clinics, imaging centers, etc.
slide3
Ideally, care delivery and care financing should be closely synchronized --even choreographed -- as reform efforts
slide4
Most reformers focus on one or the other -- with “financing” getting the most attention most of the time
slide6
We definitely need key elements of financing reform
  • Several approaches make sense:
  • (Universal Coverage -- Individual mandates -- Guaranteed issue -- Subsidized coverage for low income people)
slide7
We need to learn how other industrialized countries have achieved universal coverage --
  • with a focus on the relevance of key European systems to American care and coverage approaches
slide8
BUT --
  • Financing reform without care delivery reform would be a major operational and economic error
slide11
Care delivery in the U.S. is uncoordinated, unfocused, inconsistent, unmeasured, extremely inefficient, perversely incented, excessively expensive and sometimes dangerous.
slide12
Health care delivery is, however, the fastest growing and most profitable segment of the whole U.S. economy
slide13
As an industry -- as a business model -- health care is winning. It is taking everyone’s money with an amazingly low level of accountability for the product it sells.
slide16
Health care in America has over one million independent business units that live on the flow of fees generated by selling care by the piece – not by the package. Reducing the number of pieces sold reduces their earning by the million business units.
slide17
The Business Model of American health care currently generates over $2.1 trillion in total revenue
slide18

Health care is

  • full of smart people
slide19
Smart people do not kill the geese who lay lots of golden eggs.
  • Health care is awash in both golden eggs and very smart people.
slide20
We need to simply recognize the reality that the people who depend on a cash flow of fees to stay in business and serve patients will not, voluntarily, take independent steps to reduce the flow of those fees
fact one
Fact One
  • Health Care costs are not evenly distributed across the entire population:
  • 1% = 35% of costs
slide24

Cost Distribution of Care

Cost

Population

35%

1%

$300 per month average cost

Break even cost insuring one percent: $12,000 per month

slide25
50% = 3% of costs
  • 20% = 0% of costs
  • ½% = 25% of costs
  • ________________________________________________________________________________________________________________
  • Costs are not evenly distributed
slide26

U.S. Population

U.S. Care Costs

80%

10%

fact two
Fact Two
  • -- Some diseases cost a lot more than others
  • -- Acute care costs are not the key cost driver for American health care
slide28

Total Cost of Care In America

  • Chronic Care
  • 75%
  • Acute
  • Care
  • 25%

Chronic Care vs. Acute Care

slide29
Chronic care costs
  • can be impacted
  • (Rand data -- only 30% to 50% of patients receive right care now)
slide30
Diabetes is the fastest growing disease in America --
  • -- The number one cause of Kidney failure, blindness and amputations
  • -- The number one co-morbidity causing death from heart disease
  • -- Diabetics spend 32% of Medicare expenses
slide31

Rand Data

  • -- Barely 50% of American diabetics receive appropriate care -- measured by individual care protocols
  • -- Barely 10% of America’s diabetics receive the full package of needed care
slide32

Cost Drivers – Normal Inflation

Normal inflation

2008

2010

2020

  • Cost Mitigators
  • (Inflation)
slide33
Basic Inflation -- heat, light, salaries, benefits
  • Additional Pressure -- health care worker shortages (lab techs, nurses, etc.)
slide34

Basic Inflation

  • We start with a higher base and then add both normal costs of inflation (and inflation results from worker shortages)
slide35

Cost Drivers -- New technology, treatments, drugs, genetics, science

New technology, treatments, drugs, genetics,

science

Normal inflation

2008

2010

2020

  • Cost Mitigators
  • (Technology)
slide36

Number of MRI Machines

Per Million People

Source: OECD

slide37

Total Transplants

Source: OECD, BMJ

slide38
-- New drugs and new technologies do not go through a value screen of any kind in the U.S.
  • -- Manufacturers’ profitability and provider profitability are the twin driving technology business models -- not value
slide39
We have new treatments and approaches for individual patients that now exceed $1 million per patient, per year, year after year
great britain s nice
Great Britain’s NICE
  • £30,000
  • per year of life
slide42
Only the U.S. payment system uses and pays for whatever works. Only untested and unproven care is not covered
slide43

Cost Drivers -- Inefficient, uncoordinated, unlinked care

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

  • Cost Mitigators
  • (Inefficiency)
slide44
-- Co-morbidities drive most costs
  • -- Care linkage deficiencies abound
  • (Care coordination is sporadic and unfunded)
  • -- 10,000 fees for units of care
  • -- No reward for outcomes or results
slide46

Cost Drivers -- Perversely incented caregivers/ zero performance data

Perversely incented caregivers/zero performance data

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

  • Cost Mitigators
  • (Perverse Incentives)
slide48
Asthma Crisis Revenue Reality:
  • $200 to be proactive
  • $10,000 to treat
  • $0 to prevent
slide49
Many Treat
  • Few Prevent
slide50

Cost Drivers – Aging Population

Perversely incented caregivers/zero performance data

Aging population

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

  • Cost Mitigators
  • (Aging)
population over 65
Population Over 65

(in millions)

Source: U.S. Census Bureau

slide53

Cost Drivers

  • Cost Mitigators: So what can we do?
  • We can’t stop aging, inflation, new technology, and provider financial motivations

Perversely incented caregivers/zero performance data

Aging population

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

slide55
Opportunities exist that are sufficient to offset the health care cost drivers.
  • We have to make some smart choices and wise decisions about available cost mitigators.
slide56

Cost Drivers

Perversely incented caregivers/zero performance data

Aging population

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

Focus on chronic conditions

  • (Chronic Focus)
  • Cost Mitigators – Focus on Chronic Conditions
slide58
We need to start with focus -- we can’t fix everything at once. We can fix some things that costs a lot of money.
slide59

Medicare Diabetes Expense

  • 68%

Cost of care for Diabetic patients

  • 32%

As a Portion of Total

Medicare Costs

slide60
Five conditions drive over 50% of all costs
  • (CHF, Asthma, Diabetes, Coronary Artery Disease, Depression)
slide62

Percent of American Diabetics

Receiving “Right” Care

92%

8%

slide63
We should determine as a matter of national public policy that we should and will focus our efforts on improving care for a specific and defined set of conditions
slide64
-- Then --
  • We should do what needs to be done and can be done to significantly improve care delivery for patients with those conditions
slide65

Cost Drivers

Perversely incented caregivers/zero performance data

Aging population

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

Focus on chronic conditions

High-leverage targeted care re-engineering

  • Cost Mitigators -- High-leverage targeted care re-engineering
  • (Care re-engineering)
slide67
We will not get to reform or care coordination on the current path by doing a million, tiny, local, uncoordinated quality improvement projects -- all “one off,” none transferable
slide68
The delivery system will redesign important parts of itself when those goals are set and someone is paid to achieve them
slide69
Process engineering and
  • re-engineering are relevant only when processes have goals
slide71
Care coordination will be a tool that gets used very effectively when there is a specific outcome that can best be achieved by using that tool
care support registries
Care Support Registries
  • For 5 percent of the population this tool could functionally synchronize and coordinate care, massively improve care, and relatively quickly reduce the cost of care
slide74

This will be a major change

  • Process engineering is almost completely unused in health care today. There is a lot of very low hanging fruit.
slide75

Hospital Safety Results

Hospital Composite of Surgery Infection Control: 2005 - 2007

A

B

C

D

E

F

G

H

I

J

K

L

M

N

O

slide76
Nurses spend 26 percent of their time on direct patient care
  • Nurses spend much more time on paperwork than they do on patients
that central point can be
That central point can be
  • A caregiver
  • A team of caregivers
  • A care coordinator
  • A virtual care coordinator
slide81
That is our opportunity.
  • We should be able to cut kidney failures in half with best care.
potential wins for process improvement
Potential Wins for Process Improvement
  • Congestive heart failure - Down 50 to 90%
  • Mammogram reading accuracy - Up 50%
  • Asthma crisis admissions - Down 50 to 90%
slide83

Cost Drivers

Perversely incented caregivers/zero performance data

Aging population

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

Focus on chronic conditions

High-leverage targeted care re-engineering

Benefit redesign

  • Cost Mitigators – Benefit redesign
  • (Benefit Redesign)
rule one
Rule One
  • Benefit design should support the care improvement plan – not hinder it or make it unaffordable
rule two
Rule Two
  • Benefit design should support real consumer choices and caregiver competition
slide86
Benefit design has been clumsy and even inept. Current benefit plans either insulate consumers from the costs of care -- or disincent patients from receiving high leverage care.
slide87

Cost Drivers

Perversely incented caregivers/zero performance data

Aging population

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

Focus on chronic conditions

High-leverage targeted care re-engineering

Benefit redesign

Value based provider competition

  • Cost Mitigators – Value based provider competition
  • (Provider Competition)
slide88
What happens when providers compete on price?

$2,500 $2,000 $1,500 $1,000 $500

$250

slide89
The eye surgery process was reengineered, from top to bottom--
  • New Staffing
  • New Chairs
  • New Laser
  • New Pain Killer
  • New Process
outcomes variation
Outcomes Variation:
  • -- Stage three breast cancer detection rates -- 50%
  • -- Breast cancer surgery mortality rate -- 60%
  • -- Coronary artery bypass mortality rate -- 1,000%
  • -- Cystic fibrosis life expectancy -- 20 years
slide91

Cost Drivers

Perversely incented caregivers/zero performance data

Aging population

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

Focus on chronic conditions

High-leverage targeted care re-engineering

Benefit redesign

Value based provider competition

Health reform as a viable business model

  • Cost Mitigators – Health reform as a viable business model
  • (Health Reform as a Business Model)
slide94
American health care could be transformed fairly quickly if a number of high leverage buyers chose to strategically use their market leverage
slide95
Health care reform needs to be a “product” -- purchased and paid for by high leverage buyers in a well designed, sophisticated and carefully targeted purchasing strategy
slide96
Health care purchasers have great leverage relative to getting health plans to reform key elements of care
slide97
We need vendors who survive and thrive by reforming care delivery and producing targeted care delivery outcomes
iv specifications what should buyers insist on from the vendors
“IV” Specifications -- What Should Buyers Insist on from the Vendors?
  • PHR’s (Electronic health records for all)
  • Disease management
  • Targeted conditions
  • Computerized care registries
  • Targeted outcomes success
slide99

Consumer Wins

  • -- Virtual second opinions
  • -- Provider price competition
slide100

Cost Drivers and Mitigators

  • For American Health Care

Perversely incented caregivers/zero performance data

Aging population

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

Focus on chronic conditions

High leverage targeted care re-engineering

Benefit redesign

Value based provider competition

Better health

Health reform as a viable business model

  • (Better Health)
  • Cost Mitigators – Better health
slide101
Health is the Key Goal Prevention needs to be part of the total package, even though prevention is often not “low hanging fruit.”
slide105
Public Health Basic Steps
  • Walking
  • No transfats
  • Limited/labeled saturated fats
  • Huge smoking tax
slide107
If we are going to save Medicare, effective levels of prevention are absolutely essential
diabetes
Diabetes
  • Walking 30 minutes a day, 5 days a week cuts the likelihood of becoming diabetic by 40%
slide109
We need to stop hoping for magic solutions and silver bullets and we need to stop thinking that the current cost drivers are inevitable, invincible, insurmountable, and inherent to the economics of American care
slide110

Affordable health care costs:

  • The “mitigators” have the power to offset the “drivers.”
cost impact
Cost Impact?
  • Re-engineering 10-30%
  • Chronic conditions 10-30%
  • Unit price competition 5-20%
  • Health impact 10-30%
  • Informed care choices 5-20%
slide112

Cost Drivers and Mitigators

  • For American Health Care

Perversely incented caregivers/zero performance data

Aging population

Inefficient, uncoordinated, unlinked care

New technology, new treatments, new drugs, genetics,

new science

Normal inflation

2008

2010

2020

Focus on chronic conditions

High leverage targeted care re-engineering

Benefit redesign

Value based provider competition

Better health

Health reform as a viable business model

slide113
We need enlightened health care policy -- starting with our major employers -- who need to become high leverage, high power, highly focused, purchasers of care reform
we need
We Need
  • Focus
  • Tools
  • Health
slide115
Tools:
  • Benefit redesign
  • Public messaging
  • Care tracking (PHRs/EMRs)
  • Electronic Data Bases
  • “Mandatory” care registries and well
  • designed care linkages
slide116
At Kaiser Permanente --
  • We are on a pathway to
  • model best care:
slide117

Our Pathway

  • -- Consistent best care
  • -- Computer supported care
  • -- Linked caregivers
  • -- Focused on high cost, high
  • need, high opportunity patients
  • -- Targeted toward improved
  • health
slide118
Great…
  • -- Connectivity
  • -- Consistency
  • -- Research data
slide119
We have spent nearly
  • four billion dollars
  • putting major portions of
  • that tool kit in place
our tool kit
Our Tool Kit
  • EMR
  • Care Registries
  • Archimedes
  • Real Time Care Data
  • E-Visits, secure messaging
research
Research
  • Databases
  • Real Time
  • DNA
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