VOICES OF REFORM: Collaboration Key to Affordable, Safe Health Care for All

Gary S. Kaplan, MD is the Chairman and CEO of the Virginia Mason Medical Center in Seattle, Washington. In recent years, Dr. Kaplan has worked with local employers to control health care costs, while improving value. Dr. Kaplan is a founding member of Health CEOs for Health Reform and a leader in payment reform policy. Today, Dr. Kaplan shares Virginia Mason's story and why he believes every American can have access to high-value care at lower prices.

Collaboration Key to Affordable, Safe Health Care for All

By Gary S. Kaplan, MD

The numbers are staggering. Nearly half the $2.6 trillion in the U.S. health-care system is waste. Take a moment to let that sink in. More than a trillion dollars—that's 12 zeroes behind the 1—adds no value for patients and sometimes even causes harm.

At Virginia Mason Medical Center, we don't claim to have all the answers to this dilemma. But we have seen what's possible and are anxious to share our experience in improving care and reducing cost. It isn't going to be easy, but the result we think is achievable makes it all worthwhile: quality, affordable health care for all Americans.

Virginia Mason's focus on quality, access and affordability of health care began in earnest more than seven years ago when our board and executive team began to realize how much of all health-care expenditures did not add value for patients. A big part of the problem, our leadership determined, was that health-care processes were not, in reality, designed around patients receiving care but rather built for physicians, nurses and the care-delivery team.

With this shift in thinking, VM leaders traveled to Japan to study the legendary Toyota Production System. We returned committed to creating waste-free, patient-centered care. Since then, we have successfully adapted Toyota's methods to patient care. Along the way, we have become an international leader in creating systems that enable health-care providers to achieve previously unattainable levels of safety, effectiveness and efficiency.

Employers' Challenge Marks Turning Point

An important point in our journey came in 2004 when employers issued VM a straightforward challenge to reduce the cost of health care. We responded by inviting several employers and their health plan, Aetna, to work with us to redesign health-care delivery systems—based on methods we learned from Toyota—and restructure dysfunctional reimbursement methods. This marked the beginning of our marketplace collaboratives, which have turned out to be an invaluable tool during the past five years.

The hallmark of marketplace collaboratives is working with groups of stakeholders to deconstruct—then reconstruct—the delivery of health care, again using processes gleaned from Toyota's methods and content derived from evidence-based medicine. Cost-accounting methods also are used to compare reimbursement with the true cost to deliver care.

Bringing employers, providers and health plans together in a transparent, innovative environment of mutual accountability isn't easy at first—but it is well worth the effort. We are able to tackle medical conditions of high cost to employers with a sharp focus on reducing variation in quality and access that drives much of medicine's expense. Costs to purchasers begin to decrease within months after each collaborative's first meeting, while quality and patient satisfaction improve significantly.

Our first marketplace collaboratives centered on back pain and migraine. They introduced a number of breakthrough innovations to ensure reliability in quality and cost, provide real-time performance information for employers, and align reimbursement and value. Among the innovations were:

• Mistake-proofing to ensure imaging for back pain and migraine is value-added
• Real-time measurement of patient satisfaction and appointment access
• A method for measuring absenteeism and presenteeism
• A gain-sharing model based on better outcomes and reduced cost for back pain
• Introduction of product specifications as performance standards for providers

Encouraged by these initial successes, we formalized the marketplace-collaborative model with the launching of our Center for Health Care Solutions at Virginia Mason in 2007.

Paying for Value

Designing a product that facilitates payment for value is one of the important goals of any collaborative. Typically, doctors are paid for the quantity of care they provide, not the quality of care they deliver. They are paid well for tests and procedures regardless of value. When doctors substitute low-margin, high-value care for high-margin, low-value care, they incur an immediate financial penalty. Ironically, doctors often receive much less reimbursement or no payment at all when they provide simple, value-added care.

However, direct cost of care represents a fraction of the burden of overall medical expenses. Our marketplace collaboratives seek to reduce the indirect costs of health care that do not show up on a medical bill. For many conditions, the cost of employees missing work due to illness or showing up for work when they shouldn't is much greater than the direct cost of care. For employees who are ill, delayed access to care is also a driver of indirect cost.

Focusing only on direct care ignores what often is the greatest opportunity to lower health-care costs for employers. Our model is geared toward patients' rapid return to best possible function, and includes paying attention to both direct and indirect costs.

As a result, cost to purchasers has decreased dramatically, while outcomes and patient satisfaction have improved significantly. Reducing the cost of providing health care and partnering with employers and health plans in this effort can mean better financial performance for doctors, even as unnecessary care is eliminated.

Based on our experience, we believe easy access to a system of reliable, evidence-based care produces much better outcomes at a fraction of the cost of conventional high-variation care. We are beginning to experiment with payment systems that align reimbursement with value and believe this is possible on a much larger scale.

In our view, applying reliable systems to health-care delivery and aligning health-care financing with value would permit all Americans to benefit from high-quality care at an affordable price. It starts with changing our mindset and committing to a shared agenda that requires reform in both care delivery and payment systems.

It won't be easy, but to quote Robert F. Kennedy, "All of us might wish at times that we lived in a more tranquil world, but we don't. And if our times are difficult and perplexing, so are they challenging and filled with opportunity."

Gary S. Kaplan, MD, is Chairman and CEO of Virginia Mason Health System in Seattle.