Many would agree with Edward G. Murphy, MD, president and CEO of Roanoke-based Carilion Health System, that there's a lot of interest in making the transition to accountable care. But is the healthcare industry actually ready to make that transition?

First, healthcare providers need to be accountable for outcomes. "Nothing new about that. Most doctors would agree that's the case," he said. Murphy, spoke earlier this week at a forum on challenges to the delivery system sponsored by the Washington-based New America Health Policy Program.

Next, is service. "We're allegedly a service industry," he said. "It's actually hard to tell sometimes if you actually 'go' to the doctor. But, at least people would understand the notion that there's supposed to be a responsible service."

But it's the third and final item—efficiency—that may take some greater understanding. "Outside the tradition of medicine is efficiency," he said. "It's important for us to understand that providing tests, rendering treatments, doing admissions to the hospital, or providing surgical care that are costly, potentially dangerous, and don't have any realistic chance of helping patients [are] every bit the mistake as a medication error, missing the diagnosis, or prescribing the wrong medication."

"It's going to require a significant transition—and transitions are messy places," Murphy said. "And this is a large transition by comparison to anything we've done in the past." Murphy cited five "impediments" that he thought stand in the way of better accountability and efficiency.

1) The payment system. "We talk about the sort of the tradition I grew up with—with doctors. Everybody thinks about [television doctor] Marcus Welby—and [that] you're there to care for patients. The reality is: that's not true," Murphy said. "We're driven by the payment system, and the payment system is organized around transactions."

In healthcare, it centers around billing codes. "We get paid for doing stuff to you—and not for taking care of you. There's a lot of things that we'd like to do . . . [but they] don't fit well into billing codes," he said. "And if you can't fit it into a billing code, it's very difficult to justify doing it. We're paid for doing more—whether it's valuable or not."

The "real perverse incentive" is that healthcare providers are penalized for savings. "If we avoid doing something which is unnecessary, that's lost revenue to the system when the expense is still remaining. It's very difficult to get from under that trap," he said.

In addition, the current payment system "is well suited for acute and episodic care, which is the first half of the 20th Century," he added. "The real public health imperative of the 21st Century is complex, chronic diseases, which is longitudinal care management. Episodic transactions do not lend themselves well to effective treatment of medical care of chronic conditions."

2) Organizational structure. "A good bit of advice I received some time ago from someone much more learned than I was that all systems are perfectly aligned to get the results that they get," he said. "Our healthcare delivery system today is perfectly aligned to get the results we get: It's fragmented, it's episodic, and it's designed to maximize the payment system, which is designed around transactions."

Today, healthcare economists argue that "all we have to do is change the financial incentives and then magically, it will be like pixie dust and magically everybody will start doing stuff the next day," he said. "There's no evidence for that."

"As a matter of fact, there's evidence to the contrary. I would argue that the problem of the experiment of the movement to managed care of the 1990s was all about changing the financial system and the financial incentives—without changing the delivery system to take advantage of the new incentives or deliver" what was desired, he said.

3) The culture of medicine. While it's "enveloped" in the previous two items, it still comes down to two things: autonomy and independence, Murphy said.

"Effective management of patients with chronic diseases is all about teamwork and consensus. Avoiding that which is unnecessary is all about teamwork and consensus," he said. "We hate that."

"Engineers will tell you that in engineering, fragmentation and variation are the enemies of quality and efficiency. It's as every bit as true in medicine as it is in engineering but we reject it because we're all about our independence—and we guard it jealously."

It lends itself well to a sports metaphor, Murphy said. "We're all about tennis, and well-practice medicine is baseball. And not only are we all about tennis . . . too many doctors in the profession are John McEnroe."

4) No burning platform. "We're a profession that is highly resistant to change," Murphy said. "The problem is it's still credible for us today...to maintain the status quo. And as long as we think that—it doesn't matter whether we are right or wrong—as long as we believe it, we'll act on that belief."

An example is implementation of the sustainable growth rate formula in Medicare that would lead to in effect a reduction in physician payments for services this year. This is not likely to happen because they "keep fixing it and rolling it over," he said. "Right now, we're looking down the barrel of a 21% reduction for physician fee services. Nobody believes it's going to happen, including me. They're going to fix it."

If they didn't fix it, there'd be imperative for people to think about doing something different. "Fixing it enables the status quo, and they'll fix it as sure as I'm standing here," he said.

"It's difficult to get people to drive changes in how they deliver care day in and day out—because the history they've lived with," he said. "Every time they got up to the precipice of needing to make a change, the government always fixes it and made it OK to stay the way it was."

5) Healthcare insurance company resistance. Murphy, who works with many insurance companies, says "they are all over the map." Some are "highly compatible, sympathetic, and consistent in the direction we are trying to move in." Others are "highly resistant."

"But the reason I need health insurers to work with me—to figure out how to practice medicine differently—is that I need their data," he said. "Even if you've got a very effective, very high quality electronic medical record, which we do, we can only have data on stuff that occurs within our confines."

When patients go elsewhere for healthcare, the insurance companies will know about it because there is a bill attached to it—"but we don't know about it," he said. "And, you can't manage what you don't know. The data have to be real time."

While hospital quality in selected categories showed some improvement from the previous year, it still is not where it should be—with waste also remaining a major problem, according to the results of the latest 2009 hospital survey released on Tuesday by the Leapfrog Group, a nonprofit organization representing major private and public purchasers of healthcare benefits.

"This tells us that 10 years after [Leapfrog] got started, we're still seeing nowhere near the progress we ought to be seeing"—despite the fact the "we are the most expensive health system in the world by far," said Leapfrog CEO Leah Binder, who presented the findings at the World Health Care Congress Tuesday.

For 2009, 1,244 hospitals in 45 states completed the voluntary Leapfrog Hospital Survey. Individual hospital results can be viewed and compared at www.leagfroggroup.org/cp.

One of the somewhat more promising measures was related to hospitals meeting Leapfrog's quality standard related to pneumonia treatment. In 2009, 57% of surveyed hospitals met the standard—up from 34% in 2008. But even though the pneumonia rate is good, "it's not where we as a country should be," Binder said. "Good could be even better."

For other categories, 53.5% met Leapfrog's quality standard for heart bypass surgery—compared to only 43% in 2008. Similarly, this year, 44% of hospitals met Leapfrog's quality standard for heart angioplasty, compared to only 35% last year. For heart attack, 33% met the standard in 2009, compared with 26% a year earlier.

"Waste" also emerges as a problem in the Leapfrog Survey, despite arguments in the healthcare reform debate to make more efforts to "bend the cost curve." In 2009, a 56% difference existed, for instance, between the highest and lowest performing hospitals in terms of resource use for heart bypass surgery.

For heart angioplasty, there was a 79% difference between the highest and lowest performers. To gauge waste, Leapfrog's resource use measure is based on risk adjusted mean length of stay compared to readmission rates. Length of stay is a strong determinant of cost.

The variations in waste among hospitals performing the same type of surgery highlight the opportunities that exist for significantly cutting the costs of care, Binder said.

As the country moves forward with insurance reform, Binder said that employers and other large purchasers of care should become "more assertive in demanding hospitals reduce this waste and improve their Leapfrog performance."

Also, in 2009, less than half of hospitals in the survey met Leapfrog's outcome, volume, and process standards for six other high risk procedures and conditions. Research has suggested that following nationally endorsed and evidence based guidelines for these procedures and conditions is known to save lives, Leapfrog suggested.

These procedures, with the percentage of reporting hospitals that fully meet Leapfrog's standard in 2009, are:

• Aortic valve replacement-11.8%
• Abdominal aortic aneurism repair-36.1%
• Pancreatic resection-33.5%
• Esophageal resection-31.5%
• Weight loss (bariatric) surgery-36.6%
• High risk deliveries-29.9%

Research indicates that a patient's risk of dying can be reduced by approximately two to four times—depending on the high risk procedure—if care is obtained from a hospital that meets Leapfrog standards, Binder said. In particular, more than 3,000 deaths could be avoided each year if Leapfrog standards were implemented in hospitals that electively performed these procedures, she said.

Leapfrog's purchaser members use survey results to inform their employees and purchasing strategies. She said "it's going to be very important as we move forward with healthcare insurance reform" that purchasers challenge hospitals if standards are not being met.

While healthcare reform is fresh in everyone's mind, it might be helpful to step back and "ignore what is going on in Washington—to ignore the healthcare reform bill, to ignore all the fuss about it," Paul Levy, president and CEO of Beth Israel Deaconess Medical Center, Boston, told 2,500 attendees at the annual Society of Hospital Medicine meeting on Friday.

Now is the time, instead, "to focus on the underlying values that you each have individually and that you have collectively as to why you became doctors in the first place," he said. "You became doctors because you are intensely caring people, intensely well-intentioned people, who want to alleviate human suffering caused by disease. That is the most noble calling in the world," he added.

"If you find yourself distracted by administrative and other matters, and by the politics of it, I'm afraid it will get you frustrated and just angry. If instead, you focus on why you were there in the first place—and frame all the issues you're working on in terms of those underlying values," he said. These are the same values shared by "the nurses, the respiratory therapists, and everyone else in the hospital."

"We're so lucky to work in this environment," he said. "We're surrounded by nice, well-intentioned people. If we focus of that, do the things we're really good at, be not afraid of being transparent with regard to the results—and in fact viewing transparency as an adjunct to the entire process and a way to holding ourselves accountable to the standard that we believe in, I think we'll be intensely successful."

The good is if we do that, "we're also going to be successful as our little portion of society—in terms of providing higher quality care and bending that cost curve because that's where the real savings are going to occur: when we do our job better and better, we drive waste out of the system," he said. "It's as simple as that and as hard as that."

Almost a year ago, the California Public Employees' Retirement System (CalPERS) approved a pilot program—essentially an accountable care organization (ACO)—for state retirees in the Sacramento area that planned to reduce costs while improving healthcare quality and service.

The ACO, which began operations on Jan. 1 with more than 41,000 members, now has three months under its belt. And in that time it has provided insights and lessons on what challenges ACOs could face in the post-healthcare reform landscape.

CalPERS, the nation's second largest public purchaser of healthcare services, agreed to proceed with the initiative led by Blue Shield of California, Hill Physicians Medical Group, and Catholic Healthcare West, which operates the local Mercy hospitals in a three-county area around California's state capital.

The idea was that CalPERS members in the Sacramento area, for a reduced premium, could use this "virtual integrated model" in which each of the three entities will share patient data and coordinate patient care.

The idea was that this ACO also would serve as a demonstration to see if it was possible to take unnecessary costs out of the healthcare system by using shared savings as an incentive. Beginning in January, all three organizations agreed with CalPERS to maintain healthcare costs for the ACO at rates at or below 2009 levels in the Sacramento area.

If they deliver care in 2010 at rates less than 2009 levels, they will keep that difference—sharing in the savings; however, if costs climb above 2009 levels, they would be responsible for paying the difference.

Here's what they've learned from these three months.

While the pilot ACO is up and running, it has run into challenges along the way—some anticipated, others unexpected surprises, according to Juan Davila, senior vice president of network management with Blue Shield of California.

One of the larger difficulties occurred in the area of health information technology (IT) and transferring data among the entities. "Part of it is all of us have a different platforms. Ours [Blue Shield] is ancient. Connectivity to that platform is actually very difficult," Davila says.

Making sure they had connectivity and access to the same data "actually proved to be much harder than we thought," he adds. "While we had to bring people in, we're now we're at a point where much of [the data] is able to be seen by everyone."

Efforts are now being made to revamp all of their systems. "There's certainly a ways to go . . . but I'm optimistic that in the next couple of years, we'll be in a much better spot."

However, merging different healthcare cultures and enhancing communications among the organizations proved to be easier than initially anticipated. "It's kind of ironic. I expected IT to be easy but it hasn't been. I expected the kind of change management of the culture in hospitals to be harder, but it's proven to not be as bad as I expected," Davila says.

"The key has been that all three organizations—"from top level down to mid-level management"—have been there to help drive solutions. Subteams—ranging from clinical to financial—continually meet to address problems and find answers. "The neat thing is that's going quite well," he says.

In terms of providing quality care while holding down costs, Davila says it appears the pilot is moving in that direction. He notes that the three organizations do "have skin in the game to make sure" they deliver quality care while holding costs. "We've moved a long way toward that," he says. They are now looking at a "ballpark of over $10 million" in savings—by the end of the year getting interventions in motion that will reduce costs while maintaining quality.

This includes focusing on areas where to provide quality care such as with high risk OB cases or joint or hip replacement. It includes avoiding multiple, repetitive lab tests. And, it also includes repatriation when a plan member is admitted to a hospital outside the plan—a high-cost problem.

"What happens many times is that members go to a non-CHW hospital—and historically no one at CHW was watching that or paying attention if someone was five miles away at a different hospital," he says. Now, a process has been put in place to repatriate individuals when they are medically stable back into the system "as quickly as possible."

The biggest change, though, has been doing business with providers. "Instead, of being in silos and separate, we are all now in a room from the medium levels to the highest levels of the organization—working together to better deliver service, higher quality and get costs out of the system," Davila says.

"It's one thing to talk about [ACOs]. It's a totally different deal when you're doing it," he says. Working together, the entities need to realize they have to get rid of past hurts—what may have occurred to them even 15 years ago—which does come up.

"The neatest thing is the dynamics between ourselves. It's different. I think that's what a system needs—you need to get out of [arguing]" and about who wins and who loses. "I could win or you could lose, and vice versa and none of us should care. Now we care. In fact, it's important that nobody loses. It's the patients or clients who gain," he says.

The biggest lesson so far from this arrangement is that it is important to build trust between the providers themselves and the health plans, says Davila.

"This only happens when you lay all the cards out on the table and start to take a risk. We took a risk of including all these cards on the table [which] could have been used against us—if they chose not to participate," Davila says. "To build trust you've got to take a bit of a risk, but I would say it's sure been worth the effort."

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