Creating a high performance health system

The United States has come to a fork in the road regarding its spending on health care – it can choose a route of fewer benefits and less affordability, or choose a route of making the system work better and more efficiently. These are the important policy choices facing both the public and private sectors, said Dr. David Blumenthal, president of The Commonwealth Fund, who delivered the 2014 Mark McKenna Health Care Management Lecture recently at the W. P. Carey School of Business.

If American health care had been more efficient in recent decades, the country could have saved more than $15 trillion — enough to retire the federal debt or put 175 million people through four years of college for free, according to Dr. David Blumenthal, president of The Commonwealth Fund and former National Coordinator for Health Information Technology in the United States Department of Health and Human Services. The opportunities lost by so much extra spending on health care are enormous, he said.

David Blumenthal

Blumenthal was the featured speaker at the 2014 Mark McKenna Health Care Management Lecture, presented by the W. P. Carey School of Business’ Health Sector Supply Chain Research Consortium. The consortium, which specializes in research on strategically managing the health care supply chain, serves members that cut across the health care supply chain including manufacturers, distributors, group purchasing organizations, hospitals, independent delivery networks and information technology companies.

The United States has come to a fork in the road regarding its spending on health care — it can choose a route of fewer benefits and less affordability, or choose a route of making the system work better and more efficiently. These are the important policy choices facing both the public and private sectors, Blumenthal said.

The Commonwealth Fund, based in New York City, is a national philanthropy engaged in independent research on health and social policy issues. It advocates for a health care system with better access, improved quality and greater efficiency.

Blumenthal told an audience of more than 100 that the country’s path should be toward creating a high-performing health system.

“If we want to get more out of our health care dollars, if we want to lift the performance of areas that are underperforming and continue progress in the areas that are performing better, if we want to be able to afford health care 10 to 20 years from now, we simply cannot continue on the path we are on,” he said.

Challenges facing U.S. health care

Blumenthal said it is important when talking about health care changes to realize what the country is changing from. The United States leads the world in spending on health care, both per capita and as a percentage of gross domestic product, yet receives less return on its investment than other countries receive. Tens of millions of Americans are uninsured or underinsured, unable to pay when they need care. And the performance of health care varies by region, with Commonwealth Fund’s annual state scorecards consistently showing that parts of the north and west do well and parts of the south do poorly.

And health care costs are rising faster than wages, creating what Blumenthal calls an unsustainable pattern. “Health care has become … an unaffordable good for people who are employed and for the employers who insure them,” he said. “This trajectory of costs compared to earnings is a prescription for progressively diminishing insurance in the United States.”

Despite massive spending, Americans live shorter lives and have poorer health than people of the same income and education levels in other developed countries, he said. “There’s something about our health system that is leaving us undercared for, or at least not getting the results that we should be getting, given what we spend,” he said.

Whether or not one agrees with the Affordable Care Act, the problems it tries to address are real and desperate, Blumenthal said.

Next steps: Help practitioners be heroes

Making health care more efficient, however, will be a difficult challenge, he said, because changes must address both the microsystems and the macrosystems of health care.

Doctors’ offices, hospital floors, emergency rooms and pharmacies are basically microsystems, or “places where groups of people do real things that touch patients and affect care,” he said. Such places pack the most emotional punch for patients and practitioners, and much research has focused on how things like reminder systems and computerized orders improve efficiency in these smaller-scale places.

Macrosystems, however, set the parameters that determine what microsystems can do, he said. How Americans pay for care, how health plans work, how hospitals and health care systems are organized and what national accrediting organizations require are all examples of macrosystems that influence the microsystems.

“I think the problem to a great degree lies in our failure to change macrosystems,” he said. “What we are asking right now is for our clinicians and our managers to come to work every day and be heroes, to fight against the prevailing incentives and the prevailing systems that frustrate them at every turn. The fact is — it’s not practical, feasible or wise to expect average people to be heroes all the time, or to be altruistic all the time. They have to be supported by systems that make it easy to do the right thing.”

New tools to modify the behavior of macrosystems are available, Blumenthal said, calling them “one of the most underappreciated aspects of the Affordable Care Act.” These include value-based purchasing, reduced payments for avoidable complications, quality reporting systems and bundled payments.

Among the tools that can boost macro systems’ performance are the electronic health records and other health information technology that Blumenthal helped spearhead as national coordinator for health information technology. From 2009 to 2011, he led federal investments in electronic health records and efforts to build an interoperable and secure nationwide health information system.

The American Recovery and Reinvestment Act of 2009, better remembered as stimulus funding designed to counter the Great Recession, paid providers and hospitals to give up paper and go digital. In five years, electronic health records have gone from a rarity to mainstream, “the kind of change you don’t see every day in industry,” Blumenthal said.

He acknowledged that evidence is mixed on whether such technology results in reduced health care costs, he said, noting that it is not a pill or treatment that in itself produces an anticipated result. Evidence is clearer, he said, that IT has made exchanging information more efficient, which has led to improved quality of care.

As polarizing as the health care act seems, Blumenthal said he has met with health care leaders in blue and red states who show “a fair amount of agreement” on new opportunities the law created. These include reforming provider payments, such as paying more to primary care physicians and basing payments on the value provided; enhancing the performance of health care markets and giving consumers/patients the information and tools they need to make good choices, now that more choices are being tossed their way.

Provisions of the Affordable Care Act have brought progress in some areas, he noted. The number of Medicare accountable care organizations is rising. Hospital-acquired infections are dropping, as are Medicare readmissions and the percentage of uninsured Americans.

When it comes to health information technology, he said, challenges remain in usability, interoperability and ultimately, turning the digital information into useful information through analytics.

“We’re going to have a revolution in what we know and can do for patients, based on the availability of digitized information and standardized information,” Blumenthal said. “All that information that was hidden in paper records in warehouses and hospital record rooms and on the shelves of physician offices is now a resource that is accessible to us, or will be soon, and that is a brand new frontier for medicine and health care.”

Co-director of the Health Sector Supply Chain Research Consortium, Eugene Schneller, professor of supply chain management at W. P. Carey, said the health care supply chain can play a big role in the changes Blumenthal described.

The supply chain accounts for 30 percent of hospital costs, so practices common in other industries, such as bar coding and the use of Six Sigma quality-improvement processes, can help, Schneller said. With increasing consolidation, however, he warned that health care organizations need to beware of reaching the point where they lose efficiencies rather than gain them.

The bottom line

Blumenthal later offered this advice to stakeholders as American health care changes:

  • For patients, practitioners and others in the microsystems: “They will face new opportunities and pressures to change the way they provide and receive care. Hopefully, these opportunities and challenges will come accompanied by rewards and support for success in making care more efficient, higher in quality and higher in value.”
  • For payers, health care systems and others in the macrosystems: “Leaders of private and public organizations that create the conditions in which microsystems work need to be aware of how important those conditions are, and how difficult change is without major changes in macrosystem policies and structures. Insurance companies cannot expect care to change fundamentally unless they change fundamentally how they pay for it.”
  • For supply chain members: “Once change starts, they should anticipate a change in the demand for their products — greater price sensitivity, more group purchasing, less interest in products that raise the overall cost of care or generate demand for care that is not truly valuable.”