Remarks to America’s Physician Groups
John A. Kitzhaber, M.D.
San Diego, California
April 20, 2018
When I started practicing emergency medicine in the small rural community of Roseburg, Oregon, I was 27 years old and just four months out of my internship and, quite honestly, a bit intimidated by my new responsibility. Although that was almost 45 years ago I still remember two things quite clearly. First, I remember how vulnerable the people were who came to me for medical care. They were sick or injured, frightened and asking for help. They didn’t know me and yet had put their trust and, in some cases, their very lives in my hands.
The second thing I remember was that often—especially in the ER in the early 1970s—the golden hour was long gone before a seriously injured person made it to the hospital. And on those occasions when, in spite of all the technology I had at my disposal, I was unable to save a life, I walked across the hall. The hall ran between big double doors of the ER and a small room with a few chairs and a sofa where the friends and family of those who had been brought in by ambulance waited.
Walking across the hall was an almost ritual acknowledgement of failure; and it always felt like a long hopeless journey to cross the thirty feet of tiled floor carrying nothing but bad news and compassion to tell someone that their husband or father or daughter—who had come to me for help— was gone. I am sure there as those here today who have faced this situation; who remember the sense of humility and helplessness involved.
And while this poignant intersection of compassion and human mortality is difficult, it is the very compassion and humility and caring involved that drew most us into medicine in the first place. Today, the system in which you are practicing is increasingly stripping that compassion away. I still remember when we had time to build the kind of personal relationships with our patients that often contributed as much to their health and well-being as the medical treatments we prescribed.
Today, you often spend as much time looking at a computer screen as at your patient; checking boxes on the EMR—which, in many ways, is more about billing than health—and serving a huge corporate industry in which health care is treated as an economic commodity; and people with insurance coverage are viewed as market share. The result is a vast three trillion-dollar enterprise—that still excludes millions of people—producing embarrassingly poor population health outcomes, while sucking investment out of education, housing, early learning and other social determinants that have a far greater impact on the health of the community.
The changing landscape of medical practice in this increasingly impersonal system has led to frustration, burnout and a sense of powerlessness. Yet, I believe you have far more power than you may think—and that’s what I want to talk to you about today: about our current system and the opportunity you have to help alter its current trajectory toward one more aligned with compassion, caring and the goal of improving the health of our nation.
First, we’re going to explore the divisive national debate over health care, and look at why it can never be resolved as long as it focuses only on how to pay for the existing delivery system; in short redesigning the care model has to be at the center of a lasting, meaningful solution.
Then, we’re going to look at the care model you helped pioneer and have been practicing for years—a model based on capitation and accountability—and demonstrate how extending it nationally can bring cost under control and expand access to quality care for all Americans. And we’ll use the work we have been doing in Oregon as an example of what is possible. And, finally we’re going get a better understanding why we need to act on this quickly; and the factors that are narrowing the window of opportunity within which to craft a thoughtful solution.
So, let’s start with the national picture, and the contentious congressional debate over the Affordable Care Act, which offers an illustration of both the problem and your potential role in a solution. Since the ACA was passed in 2010, congressional Republicans have been animated—almost obsessed—with repealing it, viewing Obamacare as perhaps the worst evil ever visited upon the American people. The Democrats, on the other hand, act as though this legislation was the perfect product of some kind of immaculate conception. There is not much room for a productive conversation between these diametrically opposed viewpoints, which are driven as much by partisan politics as by a serious effort to find a solution. Indeed, the debate has been presented as a false choice between continuing to pay for an inefficient, hyperinflationary system; or to deprive millions of Americans access to health care.
This is not a new debate. The problem of access, cost and quality in our health care system has been a chronic and divisive issue for almost fifty years— simmering and festering just below the surface until it periodically explodes onto the national political stage, as it did in 1993 with President Clinton’s Health Security Act; and again, fifteen years later with the passage of the ACA in 2010.
Unfortunately, this has always been approached as a partisan issue, which doesn’t help our effort to find a solution, but the real problem is the fact that neither side assumes any fundamental change in the current delivery model: we either pay for it we don’t. Framing the issue in this way dramatically narrows the solution space to an argument over cost versus access; and as long as that is the nexus of the debate we will never solve this problem.
Why? Because cost is the elephant in the room. Think about it. Health care is the only economic sector that produces goods and services that most of its customers cannot afford, yet all of who will eventually need often literally as a matter of life and death. The only way an economic “market” works under the circumstances is if the cost of care is heavily subsidized which is why, for the past fifty years the health care debate has been focused on the revenue side; that is, figuring out how to pay for that subsidy either through public or private insurance. That was really the central issue being debated by congress last year, although it was not framed with this much clarity.
Republicans believe that the cost of health care is far too high and financially unsustainable over time—and they are right. Democrats believe that any reduction in health care spending will result in reduced benefits and fewer people having access to coverage – and, given the nature of the current delivery system, they too are right. Neither side is seriously looking at the care model itself, which means as physicians we are forced into the untenable position of having to turn away patients in desperate need of care, or shoulder the costs ourselves.
The Republican approach is not to control cost of health care but rather to simply stop paying for it; while the Democratic position accepts the cost of health care without question and focuses on ever increasing payment for a system that produces poor population health outcomes and compromise the ability to invest in the social determinants of health. Which ultimately means we can’t care for our patients in the way we know they need to live healthy lives.
For example, a central goal of the effort to repeal the ACA was to reduce the cost of Medicaid to the federal government, which is not the same as reducing the total cost of care. The Republican proposals simply shifted the costs to states and providers—to doctors and hospitals—and, ultimately, to individuals who simply cannot afford it. Shifting unaffordable costs is not going to solve this problem. We have to look at the care model itself to create real change in this broken system.
Fortunately, there is a path through and beyond this partisan gridlock to a sustainable solution; and that path is embedded in the pioneering work many America’s Physician Groups members have done around organizing and practicing capitated, accountable care. The story of Oregon’s Coordinated Care Organizations (CCOs), which I am going to share with you this afternoon, both validates and offers additional insight into the power of this approach and the growing importance of APG’s continuing leadership over the months ahead. It demonstrates that a new care model, built on the foundation you have put in place, can bring cost under control while dramatically expanding access to quality care.
It is a good story, one that has many authors, but it was ultimately made possible by the leadership of Oregon’s physicians and physician groups—who were willing to assume risk and accountability in a new, coordinated, patient-centered delivery model operating on a global budget that grows at a fixed rate. And although the CCO model was used to transform care for those enrolled in the Oregon Health Plan (Oregon’s Medicaid program), the lessons learned are equally applicable to both Medicare and to the private commercial market.
We need to provide compassionate and effective health care for people who need it—period. And that care should not depend on the kind of health insurance coverage a person carries. In other words, the central issue is not who pays, but, rather, what we are paying for and how that relates to health. So, the lesson from the CCO model address a core need across our entire health care system: providing the care that each person needs to live as healthy and productive a life as possible. Here is how it came about.
The creation of Oregon’s Coordinated Care Organizations was, in many ways, an unlikely event given the fiscal and political challenges facing the state at the time. When the Oregon legislature convened in January 2011 the state was in the depths of the Great Recession; unemployment was high and the state faced a $3 billion revenue shortfall. This was one of the largest per capita budget deficits in the nation; and included revenue shortfall of over $1 billion in the Medicaid program. The state was deeply polarized and the Democrats held only a slim majority in the State Senate, while the House of Representatives was evenly split 30:30 between Democrats and Republicans.
Despite this challenging political environment, we were still able to get broad bipartisan support to transform the Medicaid care model, demonstrating that the cost per enrollee could be reduced without reducing enrollment, benefits, quality or outcomes. The incentive for this transformation was the $1.2 billion revenue shortfall in the Medicaid budget.
Now, one of the things we learned is that if you keep paying for the existing system, there is no incentive to change it. But with this huge budget shortfall, it became clear that continuing to cover all those eligible for Medicaid, in the absence of any replacement revenue, would lead to a nearly 40 percent cut in provider reimbursement. And it was simply unacceptable to balance the budget by dropping hundreds of thousands of Oregonians from coverage. So, we looked for a middle path.
By front-end loading of the resources we did have into the first year of Oregon’s two-year biennial budget, we reduced the size of the reimbursement cut to 11 percent, which seemed manageable. But this still left a $240 million Medicaid budget shortfall in the second year of the biennium (with the federal match, it was a $600 million shortfall). We proposed to fill this budget hole with savings realized from transforming the Medicaid care model to get more value for each dollar spent.
This transformation would be brought about through new Coordinated Care Organizations, local networks of providers who would be accountable for managing the cost, quality, and health outcomes of a defined population. In June 2011, the legislation was, which directed the development of a new care model to replace the existing system of autonomous medical care organizations, mental health organizations and dental care organizations that were providing services to those on Medicaid. It is worth noting that this bill passed the House by vote of 57-1 and the Senate by 22-7, demonstrating that health care reform does not have to be a divisive and partisan issue.
It is also important to recognize that from the very beginning, this effort was not a top-down directive for change, but, rather, a framework for accountability, with the details to be filled in through a partnership between local providers and the community. And it was this sense of local ownership and by-in—as much as anything else— that formed the underpinnings of the success that was to follow. I do not believe this transformational change could have happened without it. That is why the legislation which established criteria for the formation of a CCO provided only a broad framework, leaving the details to local providers and the community.
This framework included:
- The capacity to meet certain minimal financial, reserve and risk management requirements;
- A local governance structure with representation from health care providers, Medicaid recipients and community members. This structure included community advisory Council (CAC) to ensure that the health needs of the community were being met;
- A global budget indexed to a sustainable rate of growth. The budget was comprised of per capita payments to cover the cost of physical, behavioral and oral health, as well as the cost of operating the CCO;
- The assumption of financial risk and accountability for managing all the services covered by the global budget;
- Meeting rigorous metrics around access, improved health outcomes, quality and patient satisfaction;
- The integration of behavioral oral and physical health; and
- Improved care coordination and efficiency
Finally, each CCO was required to have a written “Transformation Plan” that spelled out in detail how each organization would: integrate and coordinate care; develop Patient-Centered Primary Care Homes; and develop a quality improvement plan focused on eliminating racial, ethnic and linguistic disparities in access, quality of care, experience of care, and outcomes.
This legislation became law in March, 2012 and the first CCOs began to form later that year. As we had hoped, each CCO evolved organically, reflecting the unique characteristics of the community in which it was formed. Most represent fairly well-defined geographic areas, but they are all quite different.
At one end of the spectrum is Health Share of Oregon—our largest CCO with 370,000 members— serving three counties in the Portland metropolitan area and including four health plans, three county mental health organizations, nine dental care organizations and numerous provider groups. At the other end of the spectrum is Eastern Oregon CCO, serving 45,000 members scattered across twelve counties comprising nearly half the geographical area of the state. It formed from a fully capitated health plan and a mental health organization, in partnership with a commercial insurance company. Because of its enormous geographic area, the Eastern Oregon CCO also formed twelve community advisory committees to ensure representation from its widely distributed population.
As the CCOs were being formed, however, it was becoming clear that even if these new organizations were able to realize significant cost savings by changing the care model—which we believed they would— this transformation could not happen fast enough to address the $240 million revenue shortfall, while upholding our commitment to provide quality health care to all those eligible.
So, in May 2012, I went to Washington D.C. and convinced the Obama administration to support our efforts in two ways. The first was to grant Oregon the Section 1115 waivers needed to use the CCO care model to deliver care in our Medicaid program. In this waiver, the CCO’s were also provided flexibility in the use of federal funds to tailor the allocation of their global budgets in ways that improved the health of their members and communities. For example, a CCO could use federal funds to purchase a window air conditioner in the summer for elderly woman with congestive heart failure so that the temperature in her apartment did not get so high that her condition grew worse and require hospitalization.
Second, we secured a federal investment of $1.9 billion over the next five years in exchange for commitments around cost reduction and quality. These commitments included a two-percentage point reduction in the Medicaid cost trend by the end of the second year of the waiver (from 5.4% to 3.4% per person per month) with no reduction in benefit or eligibility; while meeting strong metrics around quality, health outcomes and patient satisfaction.
Now, let’s pause for a moment to recognize that committing to holding Medicaid cost inflation to no more that 3.4% per member per month was, in effect, a per capita growth cap—one of the main points of contention in last year’s debate over the ACA; and a classic example of the impasse created when the solution space is limited to the binary choice of funding or not funding the current care model.
As you recall, all of the various Republican proposals to repeal and replace Obamacare included some form of per capita growth cap to control cost in the Medicaid program. The Democrats, not surprisingly, opposed such caps, fearing that the cap would not keep up with the actual cost of health care, leaving the states short and forcing a reduction in enrollment. And, if such per capita caps were applied to current Medicaid delivery model, they would be right. The crucial difference, however, is that the Oregon per capita growth cap of 3.4% per member per month, required a fundamental change in the care model in order to maintain enrollment, benefits, quality, and outcomes.
In other words, the $1.9 billion federal investment was not granted to simply prop up the current delivery model during the revenue shortfall of the Great Recession. Instead, it was made to create a glide path for making the transition from the current system to our new care model—with the federal investment gradually declining as the cost savings from the new care model began to accrue. And, as we shall see, that is exactly what happened.
Once the waivers had been secured, the Oregon Health Authority appointed the “Metrics and Scoring Committee,” which was charged with developing the outcome and quality metrics required by the waiver. By the end of 2012, the committee had developed seventeen quality outcome “incentive” metrics for which CCO’s were financially accountable. Examples of incentive metrics include.
- Maternal and early childhood care
- Enrollment in patients in primary care homes
- Emergency department utilization
- Reducing avoidable hospital admissions
- Improving behavioral and physical health coordination
- Patient experience
For each measure, the Metrics and Scoring Committee developed both a “baseline” and a “benchmark.” They baseline data was gathered from the CCO predecessor organizations and showed where we had historically been doing on each measure in 2011. The benchmark was a target towards which the CCOs would work to improve quality. For example:
Metric: The percent of pregnant women receiving a prenatal care visit in the first trimester of pregnancy
- Benchmark: 69.4%
Metric: The percent of people enrolled in a recognized patient center primary care home
- Benchmark: 100%
Metric: the rate of visits to the ED
- Baseline: 61 per 1000 member months
- Benchmark: 44.4 per thousand member months
If a CCO makes progress toward a benchmark—for example, by reducing ED utilization—it is awarded funds from a quality incentive pool, created at the beginning of each year by withholding a portion of the global budget. At the end of the year, these resources are paid back to the CCOs based on their performance against the metrics. The goal was to increase the amount of the incentive pool each year to gradually shift payment from volume to quality.
Oregon’s first five-year CCO waiver ended in July of last year. During that time, the state successfully operated within the constraints of the per capita growth cap, enrolled over 385,000 more people under the ACA Medicaid expansion, and all the CCOs met the outcome and quality metrics stipulated under the waiver. We have paid back the initial federal investment and realized a cumulative total funds savings of over $1 billion; a delta which is projected to reach $8.6 billion in savings over a decade.
As I said, it’s a good story—one made possible by the leadership and willingness of providers to assume accountability for the cost, quality, and health outcomes of a defined population, in exchange for broad flexibility in designing the care model in partnership with the local community.
But there are still a few more chapters yet to be written; including the one where we offer a bipartisan solution to the debate over the future of the U.S. health care system, built on the pioneering work you have doing around capitated, accountable care. This chapter cannot be written without your help. I am not suggesting that the Oregon CCO model is the solution—it is just an example of what is possible when we focus on changing the care model. What I am suggesting, however, is that there is no solution unless the delivery system begins to assume financial risk and accountability for outcomes within the framework of a fixed budget—and that is exactly what you do.
It should be clear to anyone who is paying attention, that our current trajectory is simply not sustainable. And the only way to change the politics is to change the debate by demonstrating that there is a way to both reduce cost and expand access—which is what a capitated, accountable model allows us to do. To illustrate this point, let’s do a brief comparison between first Senate Republican version of “repeal and replace”—the Better Health Reconciliation Act (BCRA)—and Oregon’s CCO model.
Had BCRA become law, states would have lost revenue in two major ways. First, the federal Medicaid match rate for the expansion population would have been reduced from 90% down to the rate that was in place before the passage of the Affordable Care Act (63 % in Oregon’s case, around 50% here in California). Second, a per capita spending cap would slow the rate of growth of the Medicaid program. According to the Congressional Budget Office the Republican proposal would have resulted in a projected ten-year cumulative reduction in Medicaid spending of around $770 billion.
Now let’s look at our work in Oregon. Because the CCOs reduced the Medicaid trend rate by 2% between 2012 and 2017, we realized a net $1 billion cumulative total fund savings over those five years; a delta which is expected to produce $8.6 billion in cumulative savings over ten years.
These two charts look similar, but reflect two very different approaches. The CBO chart reflects a reduction in Medicaid spending under BCRA from simply cutting payment to states—a huge cost shift which would have resulted in a dramatic reduction in enrollment. The Oregon chart, on the other hand, reflects cost savings to the federal and state governments by implementing a new care model to reduce the cost trend, while maintaining enrollment and benefits; and meeting rigorous metrics around quality, outcomes and patient satisfaction.
ECONorthwest, an Oregon economic consulting firm, recently conducted modeling to determine the implications of applying key elements of Oregon’s approach nationally. This work assumed a two percent reduction in the average annual per capita growth in the Medicaid from 5.1% to 3.1% per member per month; and a $24 billion federal investment in the first few years of implementation to help states transition to a more efficient, cost-effective, and outcome-based delivery model; and the requirement to meet quality and outcome metrics. The findings project a net ten-year savings of approximately $740 billion, split between the federal and state governments. If long term care expenses were included in this care model, the savings would be far greater—not to mention the implications of extending it to Medicare and the commercial market.
It is important to understand that we are not talking about a precipitous reduction in what we are currently spending on health care, but, rather, reducing the rate of growth to a sustainable level so that, overtime, it will begin to make the delivery system fiscally sustainable and open up a delta of savings that can be reinvested back into the community to address social determinants of health.
So, we have clearly demonstrated that there is a viable alternative to the false choice between managing cost and expanding access. This critically important because continuing to frame the debate around this false choice creates a zero-sum environment; a politics of scarcity in which there must always be a winner and a loser—leading to paralysis and partisan gridlock.
If we want a long term, sustainable solution we need to change the focus from the simplistic question of whether or not to fund the current system; to the much more interesting and productive question of how we can implement a care model that not only meets Republican objectives to reduce the cost; and Democratic objectives to expand access. And there is no one more qualified to do so than those of you here in this room. With strong leadership from those who are willing to assume risk and accountability, there is a pathway to move beyond the partisan gridlock of the last fifty years to a more patient-centered, value based model that produces better health outcomes without sacrificing access or quality.
There is also an urgency around exercising that leadership because the window of opportunity within which to craft a thoughtful, effective solution is rapidly narrowing. There are two reasons for this: first is our staggering national debt; and, second, is the growing backlash to last year’s efforts to repeal ACA, which will create another political distraction, drawing attention away from the need to change the care model. So, let’s take a few minutes to explore the need for immediate action, and then look at a few steps you might take.
Remember, that in Oregon, the incentive to redesign the care model came from the Great Recession and the revenue shortfall, which put fiscal pressure on the delivery system. Last year’s congressional efforts to repeal the ACA would have done the same thing: put fiscal pressure on the delivery system. And although those efforts were unsuccessful, pressure to constrain the cost of health care will only increase because Medicaid and Medicare have become the primary driver of the national debt, which, for the first time in our history, now exceeds $20 trillion.
We don’t hear much discussion about the relationship between our national debt and health care, but we ignore it at our own peril. Do you have any idea how much a trillion is? Well, it’s a lot more than you can possibly imagine, so here is little calculation you can do at home to get a sense of just how big this number is. A million seconds ago was last week (about 22 days ago). A billion seconds ago was 1985. A trillion seconds ago was 30,000 B.C. That is a staggering number and our national debt in now $20 trillion even as the population ages, putting more demand and cost on our health care system.
And here’s the thing. Our unwillingness as a society to squarely confront and address the profound flaws in our current delivery model—not the least of which is cost— means that we will continue to fund it by borrowing from the future and, in the process, leave our children and grandchildren with a staggering burden of debt. And even then, we are just delaying the day of reckoning because this kind of fiscal irresponsibility cannot go on forever. As economist Herbert Stein expressed in what has become known as “Stein’s Law:” “If something cannot go on forever, it will stop;” or, “Trends that can’t continue, won’t.” Or, as we used to say in the ER, “All bleeding stops.”
It is only a matter of time before Congress will have to get control of the total cost of care as a matter of fiscal stability and national security. At that point, the political focus will be to avoid defaulting on the national debt rather than on putting in place a rational policy around access, cost and quality. And if the only option on the table is to defund the existing delivery system, we will see huge cost shifting, a dramatic loss of access and the unraveling of an industry that accounts for nearly twenty percent of our economy.
Getting ahead of this by changing the care model will be made more difficult by the backlash to last year’s effort to repeal the ACA: a growing momentum, both nationally and here in California, toward a single payer system. There is much to recommend this approach from an access standpoint, but the without fundamentally changing the delivery model, a single payer approach is just another way to pay for the current system. Unfortunately, however, all of the major single payer proposals—including Senator Bernie Sanders” Medicare for All; and the Healthy California Act, endorsed by Lt. Governor Gavin Newson—essentially expand access to the existing care model. The cost is staggering.
A single payer system that provides more access to the current delivery model will inflate the national debt at the federal level; and will undermine the ability to invest in education, childhood development and the other social determinants of health at the state level. This political backlash simply swings the pendulum to the other extreme, missing a sustainable solution along the way. The Republicans want to dramatically cut health care spending, regardless of the human consequences; while Democrats want to dramatically expand access, regardless of the budgetary consequences.
Neither of these approaches will lead to a healthier nation; or help heal our polarized society that has been divided by this issue for far too long. We need an alternative that can actually bring us together, which is why you should not underestimate the importance of the pioneering work you have been doing. You have demonstrated the basic framework of a path forward and you need to up your game and continue to lead the way.
What does that look like? First, there is a critical educational component, letting people know that there is an alternative to the false choice between cost and access. You can make that case to colleagues in your own medical practice, to the leadership of your local hospital, to your county medical society and your state medical association.
You can also help change the focus of the debate from where we want to go; to how we’re going to get there. The Roman Senator Seneca once said, “No wind is the right way and if you don’t know what port you’re sailing four. Agreement on the destination can be a powerful unifying force among people who don’t think they have anything in common. Some of you may remember John Kennedy’s speech to Congress in 1961 in which he challenged the nation put a man on the moon by the end of the decade. He didn’t give us a roadmap, he gave us a destination; and, in doing so, he galvanized the creativity and energy and passion of the nation in common cause.
You can help do the same thing. We know the destination because you practice a version of it every day: we need capitation, we need financial risk and accountability for outcomes and quality, we need care coordination and we need the flexibility to use our own creativity and energy and passion to help shape the care model in our own community. You are already a part of this; now it is just stepping into leadership and helping to propagate it in your most accessible sphere. It is when we think about this globally— about the whole system at one— that we feed overwhelmed and powerless; but there are meaningful steps you can take closer to home.
Certainly, there would be value in finding areas within your own states where you could do “demonstration projects” under either Section 1115 or Section 1332 waivers; offering innovative strategies based on this care model. Last year I did some work along these lines for “Accountable Communities of Health” Washington state—regional efforts looking at practice transformation, care coordination and value-based purchasing.
I am not suggesting any of this will be easy. And certainly, you will encounter resistance from some quarters if you step up and lead on this issue. You will not get everyone on board. But we don’t need everyone. As American Anthropologist Margaret Mead famously said: “Never doubt that a small group of thoughtful and committed citizens can change the world; indeed, it’s the only thing that ever has.”
It will take courage to speak out and courage to embrace, rather than resist, the growing fiscal pressure that is coming to bear on our current delivery system; the courage to view it not as a threat, but as an opportunity. I think you are up to the task. And you are better positioned than almost anyone else to make the case that this is not— and should not be — a partisan issue.
You know, during the many years I practiced in the ER, I can’t remember a single instance when I checked someone’s party registration before treating them; or noticed whether Democrats bleed differently than Republicans; or found that cardiovascular disease or cancer respected partisanship and political ideology. In this divided nation of ours, the one thing that we indisputably hold in common—and that should draw us together—is our shared mortality. All of us will grow older, all of us will, at some point, need medical care to help maintain our health. All of us will cling to life and to the lives of our loved ones.
Let’s remember that—and hold it in our hearts—as we move forward to craft a solution that works for all of us; as Americans and as fellow human beings. I am asking you today to join me on this journey, with the full knowledge that it is not going to be easy and it’s not going to happen overnight. But I promise you, it will be immensely rewarding because it is the right thing to do.
Some of us—people my age for example, who helped create our current system—may not live to see this all the way through, but as the father of a young son, I know it is the contributions to the future we make along the way that will ultimately matter the most.