David Burda: Good morning everyone. This is Dave Burda, editor of Modern Healthcare and Modern Physician magazines. It is Thursday, May 1, and visiting with us today is HHS Secretary Mike Leavitt. Mr. Secretary welcome to Modern Healthcare.
Leavitt: Thank you, Dave.
Burda: Joining us at our editorial roundtable discussion today, which we will be posting on our Web site, is Neil McLaughlin, our managing editor. How are you doing Neil?
McLaughlin: Just fine, thank you.
Burda: And Todd Sloane, our opinion page editor. Todd, good morning.
Sloane: Good morning, happy to be here.
Burda: Mr. Secretary, I thought we could start with something that happened in 2005, and maybe this is hanging on the wall of your office. Our readers voted you the most powerful person in healthcare in 2005, and that was about maybe six months after your appointment, and we wrote an editorial at that time about our readers’ selections, a selection of you, and what we said in an editorial was that unlike many past HHS secretaries, Leavitt appears to really believe in what he’s doing, and depending on your point of view that is either a good thing or a bad thing. So, three years later, if you could tell us we were right on the mark or off. Maybe that would be a good place to start.
Leavitt: History will determine whether in fact I had the impact I aspired to. I can tell you my vision of healthcare. I can report to you the progress, and I can also acknowledge that nothing happens in a system as large as healthcare in a short period of time.
I came to this role with a clear vision that the primary challenge was to take a large, rapidly growing, robust sector of the economy and begin to mold it into an economic system. It was then, and continues to be my view, that healthcare has not achieved economic-system status. There’s nothing about our sector that would qualify it as a system. It is not electronically connected. There are no methods of measuring value. People don’t know the cost of it. They don’t know the quality of it and the incentives do not contribute to the system’s success. All of those, I think, are classic definitions of an economic system.
Early in my tenure I laid out a framework. I am grateful to say that that framework appears to be adopted widely. I refer to it as the Four Cornerstones. The Four Cornerstones are: electronic medical records that are interoperable; quality measures that are standardized; cost-of-care measures that are standardized; and then incentives. Significant progress has been made on that large work plan, and I think a movement toward value-driven healthcare has developed, and I believe it’s gaining momentum. Will it in fact play out to meet my aspiration? Only time will tell, but I can say this: No ounce of energy has been wasted in the last three years and four months, nor will it in the remaining 264 days.
Burda: You mentioned quality. That is a big issue with our readership. The government is requiring hospitals to report on 30 quality measures; you propose to increase that to 72. Also, requiring hospitals to report patient-satisfaction scores in order to get their Medicare payment update. Do you envision a time when the payment is not based solely on just reporting that information but the actual scores or the performance on the quality measures, and performance on patient satisfaction?
Leavitt: I would aspire at some point in time—when we have reliable information, and a steady supply—that we would compensate providers at least in part on the basis of quality. I believe that one of the limitations of our sector is that it’s quality-indifferent. We pay the same for a facility or hospital that takes efforts to prevent readmissions, and we pay them the same as we do one that has a steady and regular record of readmissions. We reward bad quality. If a patient gets a preventable hospital-borne infection, the cost of that is substantially higher, and the revenue base of the hospital is enhanced. That’s wrong. We ought to have a system that will reward those who have taken action to prevent hospital-borne infections.
Burda: Could you give us an update on … I think you submitted a pay-for-performance proposal to Congress last December. It didn’t make it into any form of legislation. Can you update our readers on what the status of that proposal is?
Leavitt: I have steadily requested that Congress give the secretary the capacity to use Medicare’s power as a payer to begin to drive positive change. We have instigated a number of demonstration projects where we have begun to experiment with quality information with the idea of rewarding those who demonstrate through widely adopted standards that they are in fact meeting those standards.
Burda: Do you see that proposal in a legislative form anytime soon?
Leavitt: I have included some of the same type of authorities in a proposal that I have made for adoption as part of the SGR (sustainable growth rate) adjustment in June, and I believe it’s a critical part of how we begin to create a system in healthcare.
McLaughlin: One general question: When your predecessor, Tommy Thompson, was leaving office, he said to some surprise that he had been concerned about the food supply, terrorism, avian flu, oversight of drug safety, and regretted that Congress had not given HHS the authority to negotiate lower drug prices. So I guess my general question is: Is there anything on your mind you have not told us about?
Leavitt: Actually, I have laid out a series of 12 subjects on which I intend to opine extensively between now and the end of the term. The first one I gave at the World Healthcare Congress last week on value-driven healthcare. On Wednesday or Tuesday of this week I delivered an address I called “Medicare Drifting Toward Disaster” that was very much in the realm of my greatest fears and worries, and some suggestions on how it could be resolved. I will be writing on what I believe our country should do on providing access to all Americans. I will be talking about personalized healthcare. I have a speech I want to give on electronic medical records, and the vision that I believe we laid the foundation for. So I don’t intend to leave any thought unexpressed.
I also, as you may know, write a blog, and I found that to be a good vehicle for me to say what’s on my mind. I write it myself. I turn it over to my colleagues to make certain that the grammar is correct and the punctuation is all right, but aside from that, people are getting my pure thoughts. And by the way, I might add I would appreciate readership of the blog and comments. There have been several situations now in the last year where I have been informed quite well by responders, and it has affected my priorities, my opinions and the way I do my job. I found it to be a very effective tool as a public servant.
Burda: Is that on the HHS Web site?
Leavitt: You can get to it easily by going to the HHS Web site. It’s on the front page, and it has been a … I have no idea what a good blog gets, but I mean I am getting several thousand hits.
Burda: Is somebody measuring your hits?
Leavitt: Oh yes, I take quite a bit of interest in that actually, and it’s fairly modest, a couple thousand a week, but it’s worth doing, and I have certainly had thoughtful comments. Not very many comments that I would consider inappropriate.
Burda: Have most people agreed with your positions or disagreed?
Leavitt: Well, quite a bit of disagreement, which I value, and I try to respond to. Sometimes the people are kind to me, sometimes they’re not. One guy said that, ‘Don’t you have something better to do than write a blog?’ It’s done in hotel rooms and on airplanes, but it’s been a good way for me to think through the kind of thing that you are talking about. Interestingly enough, those who prepare remarks for me now at the department always go to my blog, and I always see my own blog showing up in my speeches.
Sloane: You mentioned information technology, and obviously the president’s goal of 2014—for the end of paper-based records—is now only six years away. It is kind of like President Kennedy’s call for the landing on the moon within 10 years, but part of that involved massive government spending on that project. It seems like in a couple of areas that things are going much slower than anticipated originally—the standards for inoperability, but more obviously the adoption level, particularly among physician offices. As you look forward in your leaving office, what is going to be the real driver of getting us to an electronic medical record across the country?
Leavitt: I have spent a lot of time thinking about this, and obviously working to develop strategies to enhance it. I do think there will be a series of keys. We have to figure a way to change the macroeconomics of the way we reimburse so that the small physician practice shares in the benefit. Right now, small physicians understandably say, “Why do I put this investment in when it is the insurance companies and the consumer that gets the benefit?” Next month I will choose 12 communities from what I expect will be a multiple of applications from communities. We will choose a hundred small group practices, in other words a total of 1,200, and we will begin paying them more on their Medicare patients if they have an electronic medical record that qualifies us on the pathway of interoperability. The second year will pay them more if they report basic quality measures using that system. The third, fourth and fifth year we will pay them more if they can demonstrate that they met the standard.
So there are 1,200 practices, but what we’ll learn more importantly is how can we change the macroeconomics to help the small to medium-size practitioner into the market. I think we will also begin to see additional value signals that will begin to send not just at Medicare and Medicaid, but throughout the healthcare sector. Do you remember when the banks put ATMs in and they had a hard time getting people to use them? They put people in the lobbies, and they would show how to use it. They would give you toaster ovens if you would use it so many times, and then there was a point where they said, we can’t afford to do this anymore, and if you want to be … if you’re not willing to work with us in the most efficient way, then we need to have you pay part of the cost. I believe there will be a point where we do the same thing with electronic medical records where we will say to the medical family, “We can’t afford to reimburse you at the highest possible rate unless you are able to deal with us in the most efficient way.”
Now a very good example of that is e-prescribing. E-prescribing software and standards are in place. It is in place in almost every pharmacy now, and many doctor’s offices. I have asked Congress to give me the authority to begin moving to the next step on e-prescribing to say to physicians if you want to be reimbursed at the highest level then you need to use e-prescribing. I think we’ll see a series of things like that happen.
A third area will be in the area of consumer demand. A major event occurred when we started seeing Google and Microsoft and WebMD and others moving into the personal health record space. The way I believe that system will work is I have a Gmail account; I use this not as a matter of endorsement but simply as a matter of example. If I sign up for a Ghealth account, I will add my doctor, and my pharmacy, and my second pharmacy, and my hospital, and my rehab and my specialty provider, just like I would e-mail accounts to my Ghealth account, and then it will go out to my small physician practice, and ask to import my records back to my account.
Well, the first time that happens and I find that my provider doesn’t have that capability, I’m going to say to my provider, "I don’t want to have to populate this account myself. When are you going to get electronic medical records?" Well, that will begin to add, I think, some impetus to this. I believe the existence of standards, which we are moving rapidly on by the way—we now have a process you are probably aware of, CCHIT, which is the Certification Commission on Health Information Technology. It certifies different systems. Three years ago, we had no standards, we had no way of certifying. Now we have a way of … we are on the fast track of getting standards … maybe fast track is an exaggeration, but we are moving rapidly to get standards, and we have standards in a number of different areas, and we are certifying … we now have 75% of the systems that are being offered in the market have achieved certification, and an important thing happened this year. When the 2006 certification was in the market in 2007 those who had a 2006 certification came back for a 2007 because the market advantaged those that were 2007. So the market started to catch on to this, and we are starting to see the kind of progress that we’ll make. The president’s goal of having a majority of Americans having access I believe will be met, and likely exceeded.
Now one other point I want to make, and I think it’s important to your readers, one of the political issues that has not yet matured that I think will is the question of who owns health information. What is the relationship of the consumer to his or her own information? Shouldn’t I be able to ask my doctor or my hospital for that information in a way that’s convenient for me to receive it. Under HIPAA (the Health Insurance Portability and Accountability Act of 1996), I can ask for my records, but I have to pay for it and I get it on paper on their timeline. At some point we have to begin to wrestle with that issue. I personally believe that the consumer has ownership in their own health record as does the practitioner and facility. They can have it for their own practice purposes, but it’s my view that they should not have the ability to move it to anyone else without my permission. Those are the kinds of things we have to work through in order to see the full flower of the vision that I and other people have.
Burda: There have been a number of high-profile privacy breaches. Has that issue or those events slowed the adoption or have things stayed on a steady track?
Leavitt: We are all wrestling this issue, not just in health, but none of us want our bank records to be breached. I worry about my e-mail. We all worry about the things that are private to us. We have to … this is a cultural, societal, generational worry that we have to work through. We obviously have to resolve it in healthcare, but could I … you know I’ve read about these high-profile breaches, and they are unsatisfactory, and no one can condone it. It does occur to me, however, that if you've got the paper record of a celebrity lying around in a hospital, who knows how many times that was peeked at. At least we know when someone has begun to look into a place that they hadn’t. I would argue that an electronic medical record may be far more secure than a paper record that sits at the bedside or at the nurses’ station with lots of people walking by to take a look at it.
McLaughlin: On a related subject, the Office for Civil Rights at HHS has investigated what we believe to be thousands of privacy complaints, and though some have been referred to the Justice Department for possible criminal enforcement, none has led to a civil monetary penalty or fine, so could you tell us what you foresee in the way of enforcement?
Leavitt: I think the practice has been clearly to work for voluntary compliance and to change behavior, and in some 6,000 cases that has occurred, and what we do at HHS, of course, is refer them to the Justice Department. The Justice Department then determines if the breach was sufficient to bring criminal indictment. I understand that there has been some, but they haven’t come to the point of actually getting convictions. I can’t speak to the convictions; I can say that we will continue to work toward compliance. We also need to work through it with respect to the issues that I talked about earlier, and that is, how do we give consumers control of their own health records, and how do we deal with breaches of that.
Burda: Shift gears a little bit, and if we could talk about physician-owned specialty hospitals—that if you follow Modern Healthcare, a day rarely goes by when we don’t have coverage of that issue, with acute-care hospitals on one side, the physician lobby on the other. A few years ago, you guys had an 18-month moratorium on Medicare certification of these. They were lifted. What is your current thinking now looking back on that, and seeing what’s happened since the moratorium? Should physicians be allowed to operate their own specialty and general acute-care hospitals?
Leavitt: Well that’s an issue that is going to continue to play out. The administration has taken a position that we should … having a market is a good thing. I am not unsympathetic to the fact that if one is taking the most-profitable cases and putting it into a specialty facility that it makes it difficult for the general hospital to operate. This is a quite classic economic issue about how markets work. I personally have a tendency to see us have a more rigorous market, but I am not at all unsympathetic with the other issue. So our position is as it has been. The Congress imposed this 18-month moratorium, and we have not had a change of position on it since.
Burda: If a piece of legislation made it to the White House that would ban or restrict physician ownership, do you think President Bush would veto it?
Leavitt: I have learned not to speculate on things like that.
Sloane: You’ve been looking forward on the Medicare issue as well as Medicaid. It looks like the House has overridden the Medicaid regulations; it doesn’t look like there is any major changes to Medicare this year as everybody looks forward to the presidential election. You want to change or you would like to see the country change these programs and the payment system behind them. What would an ideal payment system look like? And actually I would like to add to that, how would that change the organization of the healthcare system as we have it now?
Leavitt: Well let me say I am deeply worried about Medicare. I am a trustee of the Medicare Trust Fund. I went to the March 26th annual meeting, which will likely be my last. I was asked to sign the report, which I did, but not without saying to my fellow trustees, I don’t feel good about the degree to which this warning is being understood, and I asked for the minutes to be held open so I could put additional thoughts in, and the thoughts that I expressed the day before yesterday will be part of that meeting. We don’t have time in this podcast to deal sufficiently with my concerns, though I would be delighted to do another one if you are inclined because I think this is so important. I think Medicare structurally has three fundamental problems, aside from its actuarial unsoundness.
The first I call it “silo syndrome.” Everything is paid for separately. You can’t possibly expect to get any kind of efficiency or coordination, and we have all kinds of bad things that happen as a result, not to mention dramatic amounts of overpayment.
The second I call quality indifference. We pay the best provider the same as we do the worst. The third is chronic more. Everything is oriented to pay more. Every incentive.
A combination of those three things are not just driving Medicare, but they are driving the entire healthcare system or sector. I have come to believe that Medicare and the overall healthcare sector have a symbiotic relationship. You cannot reform or improve healthcare unless you can reform and improve Medicare. Why? Because the entire system of healthcare is directly linked to Medicare’s quite unfortunate price-fixing scheme. Everybody’s adopted it; consequently every hospital, every doctor’s office; every insurance company uses the same system. Now the good news there is if you could change Medicare, the rest of it would change as well. The bad news is it is very, very hard to change Medicare.
Now if you were to ask me what are the changes I would like to see made in Medicare, I would point to a couple. The first is I would make it value-oriented. I would want value to replace volume as the primary or best-rewarded virtue. Second, I would like to see the rest of Medicare operate a lot more like Medicare Part D. Medicare Part D has been a wild success. There were those who were skeptical about it, and there are things about it that I think can be improved, but in the course of three years we have 90% of those who are eligible in the program. Every approval rating you see is 85%-plus, and the price is 40% below what the original estimates were. Why? Because it provides information about cost and quality, and consumers have a choice, and when they have choice that’s informed by good information they drive quality up and cost down. Now if the rest of Medicare began to function like that—if the pricing structure were organized as such—we would see a dramatic transformation in Medicare.
Now the third thing that must change—and this is not something that the healthcare sector can do much about, this is a hard problem that Congress has to wrestle with—and that’s the generational mismatch that currently exists in the payment. When Medicare was formed, no one anticipated that we would see the demographic shift that we have seen in the last 20 years, but as you look out into the future, currently Medicare has four people paying for every one beneficiary. In 20 years, which will happen fast, we will have just a little over two, and in that same time we will see Medicare grow at about five times the rate of the gross domestic product, so put those two together, and go out 20 years, and what you have is a nation that is first of all having its entire federal budget dominated by healthcare. You have a generation of earners of which more than 40% of their income is going to healthcare, most of which is going to the healthcare of other people, primarily those who are not in the workforce. It is not a scenario that will work; it will implode.
Burda: Maybe that’s a great segue into the reform plans being proposed by the three remaining presidential candidates, and as you look at those, which one has the best chance of addressing these concerns that you’ve outlined, and which ones will make it worse?
Leavitt: Well, I haven’t spent a lot of time dissecting the presidential candidates’ access proposals. What I will say is that in the year this has been happening, I haven’t heard anyone step up and talk about Medicare solvency, and I don’t know of a more important issue, and I might add, it’s at the heart of our capacity to continue to be prosperous as a nation, and the next president whether it is in … whoever it is, I assume that they are thinking they will serve two terms. They’ll have to deal with Medicare solvency before the end of their term because the way the current trend is we will see the Hospital Trust Fund insolvent by 2019. If you look at the budget cycle you’ll have to be dealing with it. This is a very serious problem, and I would invite your listeners and readers to focus on it, and with your permission I’ll submit remarks from this thing I have a … a speech I gave, not that I am promoting my speeches, but it’s a concise way in which to give you my full thoughts on it.
McLaughlin: You spoke highly of the Part D program. Would your reform of Medicare track that way—turn it over to private insurers to administer the program?
Leavitt: We have currently what we call Medicare Advantage. Medicare Advantage essentially is a means by which private insurers are able to provide Medicare benefits. If we were to make Medicare Advantage and Medicare generally more like Part D, what we would have are insurers who would be competing for the lowest price and the best package of benefits. To the degree that we have been able to do that in Medicare, people are very pleased with it. We now have 20% of Medicare that is being provided by Medicare Advantage plans, and people feel like they get more benefit; they are able to get a doctor easier; they don’t have the problem of access to physicians. So I think that giving people information where they can grade the quality and the cost of those who are providing Medicare does the same thing—it drives the cost down and the quality up. I think that would be a very powerful transforming force in Medicare.
Burda: One of the things on the near horizon for our readers is the policy that restricts or bars payment for eight “never events.” I think that takes effect on Oct. 1, and we get questions from our readers about if an event like that happens, does Medicare not pay for the entire hospital stay, or does Medicare just not pay for the cost associated with the incident? The other issue they’re asking us to tell them more about is whether if they do file a claim for one of those eight events, would that be considered a false claim that would lead to some sort of legal action or compliance issues? So if you can give our readers some sort of guidance or clarification on those two that would be very helpful.
Leavitt: Dave, I wish I could be granular enough to answer those questions. I can’t, but I can certainly arrange for someone from CMS who will be actually handling that to do it. I don’t know the answer to your question. I do know the principle that Medicare/Medicaid/healthcare generally ought not to be rewarding what turns out to be in most cases or in many cases where there is a preventable infection, poor quality, that we ought not to reward it, and in the past that’s been what happened. If you get an infection, the bill goes up $100,000, $200,000—it’s $200,000 to the revenue line of the hospital—and that doesn’t provide the right incentives. And I might add you can expect more of that from us. There will be other events that we believe are never events that we intend to have.
Sloane: There is a growing movement among health policy people behind this concept of "medical homes." Arranging not only practitioners and a group around primary care, but also perhaps arranging payment in terms of a sort of bundled payment-per-episode of care. I think there’s a demonstration project that you guys are doing, but just maybe talk about do you really see that as a viable development?
Leavitt: We do. We think it is a big part of the future of healthcare. It folds into so many of the things we have talked about. Electronic medical records, having all the patient’s records in one place where a physician or various parts of the medical provider family can view them when appropriate. Last year, Medicare paid for 255,000 knee-replacement operations. We know what goes into a knee-replacement operation in terms of facilities, personnel, supplies, services and yet we continue to have it billed from lots of different places; it’s silo-centric as I talked about earlier. So we do intend to move toward a system where we can begin to bundle into episode-cost-of-care, where we’ll expect there to be some kind of coordination among the providers.
If someone said to us “We’ll provide a knee replacement” … I do not know what they cost, but let’s just say $13,000, and the medical-supply house provided a pair of crutches for $475, the rest of the parties involved in the packaging of that single episode for $13,000 would say to the medical supplier, “Not in this group. We can’t afford that. You’re costing us money because we’ve guaranteed the price,” and there would be not only coordination, but there would be some kind of incentive to keep that together and to find better ways to do it.
We also think it is a way in which a consumer, a beneficiary, can begin to hold the system accountable if we are looking at the way that team assembled. If suddenly there was a problem with an anesthesiologist who was not performing well, and the patient satisfaction was low or there were problems, then it’s likely that the team of physicians and hospitals who were dealing with that would begin to say, “I don’t think we necessarily want to have that as part of our team”—there would be quality that would be built into that, and so we do see that concept of medical home, and beginning to measure episodes, as an important part of the future.
Burda: Very good. Mr. Secretary, we’re pretty close to the end here so why don’t we just turn the mike over to you, and leave our readers with some final thoughts about what they may expect during the remainder of your tenure, and what you are going to be doing afterwards.
Leavitt: Well, I’ll continue where we started, which is what is the vision and why is it important?
I was in Singapore the week before last. When I was born in 1951, the United States used 4% of its gross domestic product on healthcare. When my son was born 25 years later it was eight, and when my grandson was born two years ago it had doubled again to 16. Well, when I went to Singapore a week before last, I met with a health minister who told me we spent 4% of our gross domestic product on healthcare, and they do not have Medicare, they have a compulsory savings system where there citizens save, and they have got a social network set up if people who are poor, and so forth, but I thought to myself, if you were global capital and you were looking for a place in which you could invest, and you had a choice between two investments—one in a place where 4% of their gross was spent on healthcare, and they had no liability going into the future -- and the other was a place that spent 16% of its gross on healthcare and they have trillions of dollars of future liability, I’d probably then say, “Well, what’s the difference in the outcomes?” And if I found out then that the one that spent 4% had a higher life expectancy or longevity, I’d start to say that looks like a pretty easy decision to me.
This is not just an imperative about having the best possible care, which is the first issue, but it’s also an economic imperative. We cannot continue in a global market. We’ve got to do this better. We’ve got to begin to figure a way that we eliminate the silo-centricity of our system, that we become a system that differentiates on the basis of value or quality, and one that has created incentives for higher quality and lower cost. It’s not just about making certain that patients are well cared for; it’s about making certain that we have the capacity to continue our economic equation as a country. It requires change, and change is not easy.
In a global market, though, there will be change. So you can fight it, and fail, or you can accept it, and survive, or better yet you can lead it and prosper, and I believe that’s the challenge of the 21st century, is to continue the leadership of the United States in the world. But this is our generation’s challenge. If we don’t solve this problem, we will not continue to prosper as a nation.
Burda: Very good. Mr. Secretary, on behalf of the readers of Modern Healthcare, we appreciate you being here with us this morning. Thank you.
Leavitt: Thank you.