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National Press Foundation

Why Pursue Health Reform ±

One Provider¶s View
Robert K. Smoldt
Mayo Clinic

November 14, 2007

Fundamental Issues
from a Provider¶s Perspective




Ian Morrison*

*Ian Morrison quote from Mayo Clinic/RAND

Health Reform Forum, March 6, 2007

Fundamental Issues
from a Provider¶s Perspective
Variable quality

Deaths per 100,000 population
0 50 100 150

Minnesota 70.2 Mortality Amenable

France 75 to Health Care
Japan 81
Spain 84 Deaths before age 75
Sweden 88 that are potentially
Italy 88
preventable with timely
Australia 88
Canada 92
and appropriate
Norway 97 medical care
Netherlands 97
Greece 99
Germany 106
Austria 107
New Zealand 109
Denmark 109
U.S. 114.7
Finland 115 International variation, 1998
Ireland 129
Source: Commonwealth Fund
U.K. 130 National Scorecard on U.S. Health
Portugal 132 System Performance, 2006
Fundamental Issues
from a Provider¶s Perspective
Variable quality
fragmented care

Why is coordinated,
integrated care needed?
Medicare patients with 4+ chronic
conditions are what % of total cost?
Yearly per person average
13 physicians
50 prescriptions

Sources: WSJ, Feb 8, 2006; Archives of IM, Nov 11, 2002

‰fficient Resource Use
ICU Days for Decedent in Last Six Months
% change
Region Number integrated avg
Integrated systems
Temple, TX 1.8
Rochester, MN 2.5
Salt Lake City, UT 2.1
Integrated avg 2.1 Base
U.S. 3.3 +57%
Miami 6.6 +214%
LA 6.4 +204%
Philadelphia 5.3 +152%
Houston 4.3 +105%
Source: Dartmouth Atlas of Health Care website, Sep 26, 2007
Fundamental Issues
from a Provider¶s Perspective
Variable quality
fragmented care
High cost

Is U.S. only place where health care
costs are rising?

Health spending per person in ³real terms,´

average annual % increase 1970-2002

0 1.0 2.0 3.0 4.0 5.0

U.S. 4.4%

O‰CD 4.0%

Source: ³The Health of Nations,´ ‰conomist, July 17, 2004

Variability in ‰fficiency
Leapfrog¶s Honor Roll 39 U.S. teaching
hospitals (based primarily on process
Dartmouth data on cost per Medicare
enrollee in last 6 months of life*
Most efficient hospital $15,800
Least efficient $45,600

*Dartmouth Atlas, 2006(?)

A view that health spending does yield
NY Times, August 22, 2006:
³Making Health Care the ‰ngine
that Drives the ‰conomy´
³By 2030, predicts Robert Fogel, Nobel
Laureate at the University of Chicago, about 25%
of GDP will be spent in health care µmaking it the
driving force of the economy.¶ Dr. Fogel is not
alarmed. Americans can afford it. He explains,
³At the end of the 19th century, food, clothing and
shelter accounted for 80% of the family budget.
Today it is about a third.´

A view that health spending does yield
NY Times, August 22, 2006:
³Making Health Care the ‰ngine
that Drives the ‰conomy´
Says Robert ‰. Hall 

Charles I. Jones        

³We have to spend our money on something.
So we get older and richer, which is more
valuable: a third car, yet another television, more
clothing²or an extra year
of your life?´

Mayo Clinic Health Policy Center

Influence stakeholders to implement
substantive health care reform
before 2011 that will preserve quality
and availability of health care for all

Top Issues from Symposium
Health insurance for all Americans
Baker Center ± Univ. of Tennessee

Improving effectiveness and

Harvard Kennedy Health Policy Center

Improving integration of care

RAND Corporation

Pay for value

Dartmouth ‰valuative Clinical Sciences

Individual Ownership
of Insurance for All
Provide health insurance and access to basic
health care for all Americans ± regardless
of their ability to pay
Require individual ownership of insurance
Provide sliding-scale subsidies for those in need
Create a simple mechanism (F‰HBP) to
coordinate insurance offerings
Appoint an independent health board to define
essential health care services
Allow people the option to buy more coverage

Are there models of this approach?



‰ffectiveness and ‰fficiency
Increase quality and patient satisfaction.
Decrease medical errors, costs and waste.
Develop a common definition of value
Measure and display outcomes, patient
satisfaction scores and costs as a whole
Create a trusted mechanism to synthesize
scientific, clinical and medical information
Reward consumers for choosing high-quality
health plans and providers
Hold all sectors accountable for reducing
waste and inefficiencies
Improving Integration
Patient care services must be coordinated across
people, functions, activities, sites and time
to increase value
Center care around the needs of the patient
Form coordinated systems to deliver effective
and appropriate care to patients
Develop incentives to encourage teamwork
Increase support for health care delivery science
Provide accurate information so patients can
make informed decisions

Mayo/Dartmouth Forum
Principles for Payment Reform
Payment systems should be designed to
provide patients with no less than the care
they need and no more than fully
informed, cost-conscious patients would
Pay providers based on value ±
measurable outcomes, safety and service
compared to the cost over time

Mayo/Dartmouth Forum
Provider scores on the ³importance of continuing
development of the payment approach´
Score (10 = very important)
0 2 4 6 8 10

Present Medicare P4P based on

process delivered by individual provider
FFS with shared savings 5.6

Overall capitation 5.8

FFS with outcomes reward 5.9

Mini-capitation 7.5

Shared decision making 7.6

Chronic disease coordinator

(medical home)

Dr. Len M. Nichols
(New America Foundation) testimony to U.S.
Committee of the Budget, June 26, 2007








Hypothetical example of problem
with line item pricing emphasis
Coronary MD MD Cost of B
Angioplasty Team A Team B as % of A
Fee $7,200 $6,500 -10%
ICU days 0.5 1.2
Cost per episode $18,000 $21,000 +17%
No. per 1 million 2,500 4,400
Cost per 1 million $45.0 M $92.4 M +105%

Total Cost =
Price x Use Rate

Price Controls: Grayson¶s Maxim


()  &    

C. Jackson Grayson Jr.
Chair, U.S. Price Commission (1971-1973)

Source: *   +
  , 29 Mar 1993
Annual Rates of Increase in Physician Fees
and ‰xpenditures/Fee-for-Service Beneficiary
7.4 7.4

6 Fees
4 .4 expenditures/
Annual fee-for-service
percent beneficiary

1997- 001 001- 005

Source: Letter to Medicare Payment Advisory Commission

from Herb B. Kuhn, Director, Center for Medicare Management, CMS 4/7/06
as referenced by Dr. Stuart Guterman, The Commonwealth Fund
Price Controls: Grayson¶s Maxim




*   %-

./0  !!



C. Jackson Grayson Jr.
Chair, U.S. Price Commission (1971-1973)

Source: *   +
  , 29 Mar 1993
Patient/Public Input ± Focus Groups

Six sessions in Atlanta, Cincinnati,

and Los Angeles with chronic
disease patients
Reviewed cornerstones of MCHPC
recommendations without identifying
them with Mayo Clinic: Insurance
for all, coordinated care, value

Public Views Overall
Cornerstones accepted when explained
but are not self evident
When changing delivery system,
concerned about major shifts
Recommend a phased approach ± try
new things, see if work, then put in play
more broadly
People are dissatisfied with U.S. health
system, BUT are happy with their providers
Change could make things worse
for them

Nine city tour to collect letters and film

and record ³woman/man on the street´
Mayo organized, but other partners:
American Hospital Association
American Medical Group Association
Kaiser Permanente

Mayo Clinic National Symposium
on Health Care Reform

 umm —Œ


Brief review of forum principles

Review/analyze major health reform proposals
from presidential candidates
Identify/prioritize actions that different sectors
can take to contribute to positive health care
Begin creating an action plan for change