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REMARKS BY:

The Honorable Mike Leavitt, Secretary of Health and Human Services

PLACE:

Washington, D.C.

DATE:

November 17, 2006

Remarks as Prepared to the National Summit for Employers on Health Care Transparency

I would like to thank the Business Roundtable and the other cohosts for their leadership in this effort.

Later today you will hear from Al Hubbard, the President's National Economic Advisor. You will meet with and hear from some of the members of my value-driven health care team:

  • Leslie Norwalk, the acting administrator for the Centers for Medicare and Medicaid Services, will talk with you about what CMS is doing to promote transparency in health care cost and quality.
  • Dr. Carolyn Clancy, head of AHRQ, is leading efforts to bring about better quality in health care.
  • Our regional directors are here; they are my representatives throughout the country. They are already interacting with employers and state and local governments interested in value-driven health care.
  • Andrew Croshaw coordinates our efforts. Today, he will introduce you to the reference guide we have created.

My wife, Jackie, and I had one of life's great privileges this year. We became grandparents for the first time.

A friend explained why there is such a strong bond between grandparents and grandchildren. He said, "They have a common enemy."

I'm going to spare you from pictures or stories, but I want to tell you how grandchildren have affected the way I see the world. I have begun to see the passage of time in a different way.

Standing at a hospital bed, I watched my son holding this tiny little soul, and suddenly I realized how quickly the past 25 years have passed. It was just yesterday, yesterday that I held him for the first time.

The lesson: Time passes.

I am 55 years old. When I was born, health care occupied 4% of the total economy.

When my son was born in 1977, health care had doubled; it occupied 8% of the total economy. This year, a generation later, as my first grandchildren were born, health care occupies 16% of the total economy. Double again. Time will flash again, and my granddaughter will be the one holding a baby. By then, health care will be nearly 25% of the economy.

There is a growing imperative for action and it has already triggered the forces required to reshape the health care system in our country. Ten years from now, I hope we will look back on a decade of sweeping change, one in which the health care sector became a connected system.

I want to acknowledge something we cannot repeat enough: The main thing driving health care costs up is our personal habits. We don't take good care of ourselves. I'm talking about diet, exercise, and basic habits. Until we pursue prevention with the same rigor we give treatment, our cost problem will persist. We own that problem, every one of us.

There's another problem we have to own: Our health care system. We commonly use the word �system� to describe health care. I'd like to challenge that. We don't actually have a health care system; what we have is a large, robust, rapidly growing health care sector.

Millions of Americans provide health care, or work in related businesses, but there is nothing that connects them into a system. This is more than a play on words; it's a critical problem.

We are surrounded by systems: A telephone system, an airline system, a banking system, the Internet. In each case, there is aggressive competition for our business, but each entrant has adopted standards optimizing value to customers.

Not many years ago, transactions with a bank required a teller to write with a ballpoint pen in a paper bankbook we carried into the bank. Now, we use ATMs or computers any place in the world. Banks compete to have you carry their credit card but they all use the same system to optimize the value we receive.

Here's the vision for health care: Over the next decade, the health care sector must be reshaped into a true health care system. Doctors, hospitals, pharmacies, and labs will be connected electronically.

Patients will receive cost and quality comparisons on doctors and hospitals based on standards developed by the medical family; everyone in the system will be rewarded by decisions that increase quality and lower costs. It will be health care competition, based on value.

This system will be built on four cornerstones. My description today will be brief, but detailed plans can be found at www.hhs.gov.

Let's start with the first cornerstone. The system will be electronically connected. In the next three to five years, every doctor, hospital, pharmacy, and lab needs to adopt electronic medical records using standards that make them interoperable.

Many companies and organizations make electronic health record systems. Lack of interoperability has been the problem. We are changing that. Standards are being rapidly developed by the American Health Information Community. (Details are at www.hhs.gov and www.hhs.gov/healthit/ahic.html.)

The second cornerstone is quality measures. Every patient deserves to have an independent assessment of the quality that different doctors and hospitals provide.

A patient deserves to know if more people get infections at one hospital than another or the experience a doctor has with a particular kind procedure. As long as the information is reliable and based on standards experts in the field agree on, having that information publicly available will help everybody improve.

An alliance of doctors, hospitals, insurance companies, and the federal government�the AQA Alliance and Hospital Quality Alliance�are working to develop the standards and measures and improve our ability in this area.

Collecting accurate information is the biggest problem. When all the records are on paper, quality measurement ends up being a nurse that comes in on a Saturday and sorts through a two-foot-high stack of paper files. It's slow, expensive, and not always reliable. Electronic medical records will be the key. Details on how these standards are being developed, and our vision of their use, are available at www.hhs.gov.

The third cornerstone is comparable prices. Price isn't a consideration in health care and that's a big, big problem.

Frankly, people who have health insurance often don't care about price. People who don't have insurance can't find out the price even if they ask. Does that sound like an exaggeration? Just ask some time. Hospitals and doctors are simply unprepared to answer the question: How much will this cost?

After they get care, people get a blizzard of paper from doctors and hospitals. The billing system is simply incomprehensible. They contain medical codes, co-pays, and conflicting messages. Medical bills are simply not understandable to a mere mortal, and the system of medical pricing is a mystery to everybody.

The AQA Alliance is devising ways to group medical charges in more understandable ways. The groupings are known as episodes of care. When cost is understood, it allows consumers to compare the cost and quality.

Billings organized into care episodes will also give physicians and hospitals important information. Without consciousness of the entire cost of a medical episode, practitioners lose site of value.

The fourth cornerstone is proper incentives. With information on quality and price available, consumers, doctors, and hospitals can be rewarded for making decisions that increase quality and lower costs. If you're interested in the way these incentives may work, go to www.hhs.gov.

Again, the cornerstones are:

  • An electronically connected system
  • Quality measurement and reporting
  • Comparable costs
  • Incentives for people to choose higher quality and lower costs

Changing the health care sector has proven to be hard. In fact, many people believe that there simply isn't enough political will to change health care. In fact, the opposite is true. When a meaningful change is proposed in the health care system everyone unholsters their political will and points at each other. It is a perpetual stand-off of economic interests.

The only force strong enough to change the course of health care is consumer choice, a market based on consumer value.

Over many years, large payers of health care have attempted to introduce stronger consumer interests into health care. Success has been limited for many reasons, but one of the most important is that the largest payer of health care in world has not been part of the effort. I'm speaking of the federal government.

Our presence here is evidence of our willingness to change. In fact, the federal government is not only willing to participate: We will lead.

Between Medicare, Medicaid, the Department of Defense, Veterans Administration, and the Office of Personnel Management, the federal government pays for nearly 40% of the health care in America. Without federal leadership, it is simply impossible to give any effort critical mass.

On August 22 of this year, President Bush signed an Executive Order directing federal agencies to make the four cornerstones a major priority in they way they buy and organize health care. He ordered that federal influence join with other employers, unions, governments, and the medical family to create a national movement of value based competition.

Those changes will be reflected in our requests for proposals when dealing with payers, and will also be used in many other ways. This will significantly alter the weight of our criteria.

For markets to move, the participation has to be real; it needs to be a meaningful part of decision-making.

So, in addition to the federal government, health care consumers and providers are coordinating their energies and activities to make it happen. The reasons for participation differ, but the common thread stitching this effort together is a converging economic interest in having a sustainable system.

My first focus has been on the 200 largest employers. Represented here today are more than 180 purchasers and more than 25 associations, which represent health care to 200 million Americans.

When the marketplace begins to reshape itself, the commotion generates less media drama than a high-stakes election or a vote in Congress. Let there be no mistake; this type of leadership has plenty of tensions and colliding interests.

In any effort that involves 16% of the economy and requires agreement between natural competitors and traditional adversaries, there will be plenty of drama, some of which will inevitably play out in legislative forums.

The reason I have optimism this system will form isn't because there is a lack of tension, but the opposite. The pressure to act in our mutual interest is high enough. And so while the economic interests of the various interests here are different, they have economic pain in common. It can be relieved by the same thing: Rewarding better health. It is the common denominator.

I have met with thousands of business leaders, doctors, hospital administrators, insurance company executives, and consumer groups to talk about these issues. While they all express interest in better health, economics is what creates the energy and the differences in their perspective.

It can be boiled down into two conversations. One was with a human resource officer of a giant company who pays, on behalf of his company, over a billion dollars a year; the other with a doctor in a solo practice.

The business executive said, "My CEO's hair is on fire. He told me he didn't care if I had to break some things; the survival of our business depends on getting health care costs down. Measuring quality is the key. I don't care if the measurement is perfect; we have got to start measuring sometime."

The doctor said, �Look, I want to know if I'm providing quality of care to my patients, but if you're going to show that information to my patients, it needs to be right. It is unfair to my patients�it is unfair to me�if I'm portrayed as a poor physician when I'm actually a good one.�

Both want to measure quality; but there is a tension in why. The doctor needs to feel the urgency of the market. The HR executive will need to remember if the doctor doesn't accept the measure as legitimate, the system won't work.

There is power in healthy tension and with payers, providers, patients and plans all can benefit. The presence of both perspectives will help find the balance.

The pace of this effort greatly accelerates today. Because we working together, we can create the momentum we need to move to a value-driven health care system. By the end of the year, in addition to the federal government, dozens of the largest employers in America will formally commit to join this effort.

Much of my travel, and that of my regional directors, over the next six months will be devoted to this effort. We need to be joined by associations working with their members too.

By spring next year, when payers put out their requests for proposals for 2008 ,over 60% of the entire marketplace will include the four cornerstones as a significant part of their criteria. We are moving just as aggressively to form quality-price information collaborations in communities all over the United States to work with medical associations, hospitals, insurers, and governments to learn and improve the process of measuring quality well.

The health care market place has begun to respond. Electronic health record vendors are adapting their products to meet interoperability standards. The medical community has organized to measure and report quality. Insurance companies are preparing to begin pooling claims data in episodes of care. The federal government and other payers are standardizing incentives for patients and providers to pursue value.

Within two years, competition based on value will begin to happen in selected communities on a few procedures and conditions. Within five years, the word �value� will be a standard part of the medical lexicon. In a decade, it will be ubiquitous.

Some of you here have already committed to taking the first steps. I ask the rest of you to do so. I ask you to make a formal commitment that you will follow the four cornerstones of a value-driven health care system by signing a Purchaser Statement of Support.

You can find the Purchaser Statement of Support in the Reference Guides that are stacked near the registration tables. It, and the reference guide, can also be found at the following website: www.hhs.gov/transparency/employers.

You can declare your support online, or you can sign and submit it via mail or fax to:

Department of Health and Human Services
Value-Driven Health Care
200 Independence Avenue, SW
Room 738G
Washington, DC 20201
Fax: (202) 205-7897
Telephone: (202) 205-5552
Email: valuedriven@hhs.gov

With your help, we can move the market. So, I hope you will sign the Statement of Support and send it in.

In conclusion, let me acknowledge that there is a lot of change here, and change is hard.

But in a global economy, change is inevitable. There are three ways we could handle it:

  • We could fight it and fail,
  • We could accept it and survive;
  • Or, we can lead it and prosper.

This is the United States of America. We have become the strongest and most influential force in human history because we have been willing to lead. And lead, we will.

Thank you.



Last revised: November 17, 2006

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