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Where Innovation Is Tradition and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for Health Policy Research and Ethics College of Health and Human Services OU Medicine’s Leadership Development Institute Oklahoma City, OK

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Page 1: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Academic Medicine and Health Reform:

InSync or Tissue Rejection?

Len M. Nichols, Ph.D., Professor and Director

Center for Health Policy Research and Ethics

College of Health and Human Services

OU Medicine’s Leadership Development Institute

Oklahoma City, OK

July 19, 2013

Page 2: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Overview

• Key Linkages• The Fragile Promise of System Reform• Where We Are Now• The Race Against Time• Special Circumstances of Medical Education• The Collaboration and Competition We Need

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Page 3: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Linkages

Values

Health SystemEconomy

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Page 4: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Family Premium / Median Income

1996 20110

5

10

15

20

25

10.8%

20.9%

AHRQ premium, Census Income data

4

Author’s calculations, treating average employer contribution as income

Page 5: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

What is Reform REALLY About?

• Elevating population health, and stewardship

• Signaling that “Business As Usual” is over

• Changing obsolete business models

• Transparency

• Incentive Realignment5

Page 6: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Incentive Alignment Is Multi-Dimensional

Wellness & Cost Sharing

Decision Support

PaymentReform

Patient

Employer/PayerClinicians

Community

Community

Page 7: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Cost Containment Theory of PPACA• End profitability of risk selection

Change insurance business model to value seeking

• Force transparency and margin limits on insurersChannel competition into socially productive

areas

• Make FFS less attractive in Medicare• Develop incentive structures that reward cost

reduction, improve quality, and SPREAD

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Page 8: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

So we think we know what we want

• Condition specific, patient acuity adjusted, comprehensive payment, distributed among coordinated clinicians and providers

• IF we pull this off, win-win-win

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Page 9: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Problem: There is no Scotty!

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Page 10: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

This Will Not All Be Smooth Sailing

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Page 11: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Close Up of Not Smooth Sailing

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Page 12: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Where are we now?

• ACA “models” emerging in private sector, too

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Page 13: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Innovation Center Portfolio

ACO Suite:

• Shared Savings Program• Pioneer ACO Model• Advance Payment ACO Model• Accelerated and Learning

Development Sessions

Primary Care Suite• Comprehensive Primary Care Initiative

(CPCI)• Federally Qualified Health Center

Advanced Primary Care Practice Demonstration

• Multi-Payer Advanced Primary Care Practice (MAPCP) Demonstration

• Independence at Home• Medicaid Health Home State Plan

Option

Bundled Payment Suite

• Bundled Payment for Care Improvement

Dual Eligible Suite:

• State Demonstration to Integrate care for Dual Eligible Individuals

• Financial Alignment to Support State Efforts to Integrate Care

• Demonstration to Reduce Avoidable Hospitalizations of Nursing Facility Residents

• Medicaid Health Home State Plan Option

Diffusion and Scale Suite:

• Partnership for Patients• Million Hearts Campaign• Innovation Advisors Program• Care Innovations Summit

Healthcare Innovation Challenge

Rapid Cycle Evaluation and Research

Learning and Diffusion14

Page 14: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Page 15: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Where are we now?

• ACA “models” emerging in private sector, too

• Fiscal pressures cannot be overstated

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Page 16: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Allow US to Default ?

Page 17: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Page 18: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Where are we now?

• ACA “models” emerging in private sector, too

• Fiscal pressures cannot be overstated

• Insurance reform implementation “bumpy”

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Page 19: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Page 20: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

20Scott Walker finds an alternative to Medicaid: Obamacare

Page 21: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Two states say 2014 Obamacare insurance costs on low side

California Active Purchaser Premiums

Page 22: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Page 23: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where are we now?

• ACA “models” emerging in private sector, too

• Fiscal pressures cannot be overstated

• Insurance implementation “bumpy”

• Health cost growth slowing

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Page 24: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Total Health Spending Growth

1990 2000 2007 2008 2009 2010 20110

2

4

6

8

10

12

NHEMCRMCD

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Page 25: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Relative Health Spending Growth

1990 2000 2007 2008 2009 2010 2011

-4

-2

0

2

4

6

8

10

12

NHE/popGDP/popMCR/beneMCD/bene

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Page 26: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

The Race Against Time

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Page 27: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

The Budget World is Skeptical

• ACO takeup disappointing relative to hype• CABG demo in 1990s not implemented• PGP demo results mixed on cost• ACE results not out yet• AQC results promising; elsewhere…? • PCMH evidence to date

PCPCC vs. Mathematica Policy Research/AHRQ

• CMS data woes continue to plague participants

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Page 28: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Two Roads to Fiscal Balance

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CUTSRE-ALIGNINCENTIVES

Page 29: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

So What are we really talking about?

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$/N

Time

Healthier populationLower UseLower PricesHigher quality

Unsusta

inable

cost

growth

2012

Page 30: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Targets of Spending Reductions• Poor care delivery

Unnecessary services $210B 8% of NHEInefficient delivery $130B 5%Missed prevention $ 55B 2%

• Excessive Admin Costs $190B 8%• Prices $105B 4%• Fraud $ 73B 3%• TOTAL $765B 31%

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D. Cutler, Senate Budget Testimony, citing IOM

Expls. 1/2

Page 31: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

31

Break

Page 32: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Un-Coordinated Care => Juicy Margins

• Care Transitions

• Poly-pharmacy management

• Integrating behavioral and acute care

• Managing those with multiple chronic conditions

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Page 33: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

High Prices => Juicy Margins• Insurers

GI+MCR + MLR and Admin simplification

• PhRMA

• Advamed

• Specialists and HospitalsCardiology, orthopedics, radiology, etc.

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Page 34: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Private Price Variation Large

• Physician prices vary 3:1

• Hospital prices vary 6:1

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MEDPAC 2011 analysis of 2008 Thompson-Reuters Market ScanData.

Page 35: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Page 36: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Page 37: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Hospital Charge Variation

Breathing Chest pain Heart Failure Lower joint Pneumonia0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

37SOURCE: CMS MEDPAR charge data, 2011.

Page 38: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

“Theory” of payment reform

• Changing the way we pay will so change behavior that total costs will fall AND SOME MDs (plus SOME hospitals) will gain**(Compared to what? Which baseline?)

• AND this outcome will be sustained from new incentive structure

• When is this possible, and when not?

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Page 39: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Sustainable Payment Reform

Intervention

Better Performance

Savings cover cost of

intervention

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$$$

Page 40: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Pre-requisites for shared savings-based payment reform to work

• ALL must focus on Total Cost of Care• Savings must more than cover intervention• Payers must share some of the cost savings

Cost could be foregone revenueCost could be new services that must be added

• Current Baseline temporary reference point

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Page 41: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Challenges• Status Quo is very, very good to some• Micro math ≠ macro math

Reduced admissions => need fewer beds / popMore PC => need fewer specialists / pop

• We have less time than we’d like• Total spend and total cost of care are only cost

metrics that matter, only payers have “total” dataAND financial + clinically relevant data are NOT

linked for most providers and payers now

• Agreements on respective roles, shares not present41

Page 42: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Roles Once Clear, Distinct

PC

SPEC

H

Plan

42

Page 43: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Roles Now Evolving, Melding

PC

SPEC

H

Plan

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Page 44: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Fundamental Fact of Capitalism

• Risk bearors keep margins they can protect

• All others are wage / piece rate employees

• THEREFORE: your choices are:Earned shared savings, OR Declining FFS prices and/or declining covered

access

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Page 45: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Why transitions are possible but complex

• Actuarial expertise moves from insurers to providers

• Care coordination and financial alignment templates are public goods

• Education and research and last resort uncompensated care are public goods, tooWho Is Willing to Pay for Them Today?

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Page 46: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

The Time Has Come…

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"The time has come," the Walrus said, "To talk of many things: Of shoes—and ships—and sealing-wax— Of cabbages—and kings— And why the sea is boiling hot— And whether pigs have wings." —Through the Looking-Glass

Page 47: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Page 48: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Page 49: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

The Time Has Come…• Juicy Margins are hard to protect in transparent

and competitive world• Original BCBS community rating unraveled

because employers refused to pay big margins on their workers, for-profit insurers arose, ERISA followed soon enough

• Cost-shift = high minded margin protection• ME margins are particularly hard to protect

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Page 50: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Why ME margins hard to protect

• Opaque so long => credibility gap• High FPP and AHC prices hide noble goals

Tertiary, experimental, uncompensated careResearchTeaching

• Caught in larger public budget debate:Are these goals efficiently priced?Who should pay? Taxpayers or privately insured?Relative income realities

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Page 51: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

So What Is To Be Done?• Get your accounting acts together• PROVE your public goods’ value

To yourselvesTo private payersTo public financiersTo local communities

• Build sustainable business modelsExpand awareness of TCC, value in communitiesBe ever mindful of local ability to payForce rigorous “make or buy” ROI calculus

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Page 52: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Deliver Value

• Care quality and care improvement (GWOS)• TEACH care coordination in teams

Science of care delivery + translational research may be as or more important than basic/clinical for next 10 years

• Develop and GIVE AWAY coordination protocols• Develop and GIVE AWAY incentive contracts

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Page 53: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

ADD to your Mission Statement

• Stewardship(If you think this is not your problem, it will be, sooner)

• Consider sobering facts: Since 1960, US has seen72 % growth in population278% growth in N of MDs (4 x)1,500% growth in clinical faculty (21 x)

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Page 54: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Every Stakeholder is Scared

• Insurers• Drug and Device Companies• Hospitals• Specialists• PCPs• Nurses• Software vendors

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Page 55: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Scale of Coming Global Cap Cuts

2013 20230

102030405060708090

MLRLabsPhRMAHospSPECPCP

55

Page 56: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Health Service Payment Modalities

2013 20230%

10%20%30%40%50%60%70%80%90%

100%

P4PbundlesFFS

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Page 57: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Atavistic Competition is Always Possible

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Page 58: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

In general, when is Collaboration wise?

• When economies of scale from necessary investment are large relative to any one player

• When no one knows exactly how to improve • When incentives have to be fundamentally

changed to support necessary improvements• When basic level of trust exists, or can be

cobbled together and maintained with incentives and DATA

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Page 59: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

What do Clinicians Need for Collaboration to be Feasible ?

• DATA

• Technical assistance, learning pathways

• Templates for quality measurement, incentive contracts

• Risk-sharing partners, algorithms

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Page 60: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

If health plans won’t share data….

• Convince employers to make them

• Convince consumers/legislators/exchanges to make them

• Explain to patients what’s at stake

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Page 61: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Stuff to collaborate on

• Analytic database construction (HIE + APCD)• Quality measures• Payment STRUCTURE• Diagnostic and treatment protocols• Risk sharing contract parameters

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Page 62: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Stuff to compete on

• Patient Experience and (risk adjusted) Outcomes

• Overall cost

• Quality execution

• Continuous learning

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Page 63: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Equilibrium?

Academic Medicine

Public Goods

Non-Mission Providers

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Page 64: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

What if we don’t share cost of Public Goods…• We won’t get enough of them

Arthur and the Vikings

• We WILL be sorryToo little research and uncompensated care

• The people will someday wonder why…

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Page 65: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

What if this all pay reform doesn’t work?

• Independent Payment Advisory Board (IPAB)

• Price controls

• Raise taxes

• Reduce coverage subsidies, repeal law

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Page 66: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Hard Things I’m Asking You to Do• Collaborate more to compete smarter• Develop community-wide payment models• Pursue stewardship, not just short-run self-interest• Treat successful models as public goods• Amend PPACA: malpractice reform and claims

adjudication standardization, make Medicare partner• Don’t forget why we’re asking you to do this

Incentive realignment is only humane way to fiscal sanity

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Page 67: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition

Stuff to Remember

• Patients trust you

• Plans need you

• Why you went to medical school

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Page 68: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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Page 69: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

Where Innovation Is Tradition69

Page 70: Where Innovation Is Tradition Academic Medicine and Health Reform: InSync or Tissue Rejection? Len M. Nichols, Ph.D., Professor and Director Center for

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