Remarks as Prepared to the New York Presbyterian Healthcare System
Value-Driven Health Care
Good morning. Thank you, Dr. Pardes, for that warm introduction.
It's great to join all of you here. I almost didn't make it - I didn't have enough cash to catch a cab to the airport in D.C. this morning. Fortunately, I had my A.T.M. card with me. Isn't it amazing that as long as you have that little slip of plastic, you can get money instantly, from any bank, almost anywhere in the world? It wasn't that long ago that you could only get cash from your own bank - an apt comparison to today's theme.
I actually grew up in New York. When I was little, my mother used to tell me, "If you don't have your health, you don't have anything." And she said it in just that tone of voice, too.
I always do what my mother tells me, so I recently visited my doctor for one of my regular check-ups. He told me that I'm in pretty good shape for a man of 60. Unfortunately, I'm only 40 years old.
Speaking of mothers, a friend of mine - Maria Cino - formerly at the Department of Transportation, once told me about breaking the good news of her appointment to her mother. When Maria told her mother who her new boss was, her mother exclaimed, "It's so good to see an Italian-American running the Department." Of course, Norm Mineta is of Japanese descent. When I told my mother about my appointment under Secretary Leavitt, I was surprised when she didn't take the bait and say "Oh, it's so good to see you working for a nice Jewish man."
Seriously, though, I'm delighted to have this chance to tell you a bit about what President Bush, Secretary Leavitt, and HHS have been doing to transform health care in America.
America has the greatest health care in the world. We have the best hospitals, doctors, and researchers - and you are an important part of that. We lead the world in the development of new medicines, devices, and procedures. Our health care companies have the freedom to compete. But there are some significant problems in our system.
People have a great deal of anxiety about health care.
What's the underlying theme here? It's that health care in America is not value-driven. Providers cannot offer the best care they are capable of and consumers do not have the ability to consider value when they make their health care purchasing decisions.
From food to housing to entertainment to health care, people - not government bureaucrats - know best what they want and what they need. Yet the decisions of government actions affect prices. Prices then affect investment. Investment affects innovation. And innovation affects health. The more free competition there is in the markets for health insurance, health care, drugs, and medical devices, the better health all consumers will enjoy.
In a free market, companies allocate money to develop new products and offer new services. If they invest wisely, their products and services will have advantages over older ones. Many consumers will be willing to pay more to enjoy those advantages. In fact, that's how you know if new features have value: people buy them. When businesses gauge the market successfully, everyone wins: consumers and investors alike. And the value of everything is determined by consumer choices: from trivial things such as what entertainment to purchase or where to travel for a vacation to important things such as what food to eat or what health care to consume.
Given these basic facts, why should anyone make such a personal choice for someone else as what health care to consume? Choices about health products and services can involve very technically complex considerations. So it's understandable that physicians and health plans use their training, experience, and information sources to assist these decisions. But they should assist, not replace, the patient and his family in making informed choices in a market setting.
In order for markets to work as effectively as they can, though, patients need access to information about what health care options are available to them.
Right now, what happens from an accounting perspective if a patient walks into a clinic and asks or is referred for a particular test or procedure? Essentially one of two things. If she has insurance, she'll hand over her card and maybe make a co-pay. That's about it. Sure, her insurance company haggles out rates, and if she's on a government program reimbursement rates are set. But this patient doesn't see any of that, and, frankly, she doesn't care.
But if she's paying cash, things may get a little more complicated. Since she had to work hard for that money, she's probably going to want to know exactly what it is she's purchasing. Does she need the top-shelf procedure? How objectively good are this doctor's outcomes? What kind of rates are doctors charging at other clinics? Is she really getting a good deal? Is she getting the best care for her dollars? What kind of value is she getting?
I'm thinking of getting one of those new iPhones. If I were to walk into the Apple Store over on 5th Avenue, I could get all sorts of information on its features, how it compares to the other models they offer, how much it costs for different versions and cell plans. It's not an opaque process. Isn't it odd that I can get more information on my iPhone purchase than anyone seeking health care can get about their purchase? Due to misaligned incentives between consumers, providers, and political interests, our health care industry, just isn't set up to provide transparency.
That's why the President has charged us with making health care more value-driven. We want to realize the sunshine effect of transparency.
We want our health care industry to reward value instead of volume. We want an even more competitive system of value-driven health care that includes price and quality transparency, consumer-directed health care, incentives for quality care delivery, and the wide-spread adoption of interoperable health information technology.
So we're building a system of competition based on value.
Such a system would be based on four cornerstones:
It's too bad we can't hang a picture of our future health care system in every hospital and doctor's office in America.
It would create considerable consumer demand. People would see personal health records, electronic prescriptions, and consultations with doctors online, rather than waiting in line. They would see independent assessments of quality and cost for doctors and hospitals. Everyone in the picture would have incentives to seek higher quality and lower cost.
It is an exciting vision, but we have a lot of groundwork to build first.
We need to start with a foundation - phase one. As with anything on the market, our foundation will be a critical mass of purchasers committed to making the Four Cornerstones a meaningful part of their buying criteria.
Last year, President Bush signed an executive order committing the federal government - and the quarter of the health care market we control - to doing just that.
Since then, Secretary Leavitt has traveled to nearly every state, meeting with the doctors and hospitals, governors, employers and unions, and asking them to make the same commitments.
So far, 25 states governments have joined in the effort. More than 100 of the largest private companies in the country are among the nearly 900 purchasers who have made that commitment. I'd like to invite all of you to sign up at our website - hhs.gov/valuedriven.
All together, plans covering more than 100 million lives have already committed to the Four Cornerstones. That's a solid foundation. We've accomplished phase one.
Let me tell you a little about phase two - what we're building on that foundation.
I'll start with electronic health records. In 2005, nearly a quarter of U.S. physicians reported using some form of electronic information systems. But only 10 percent actually used an EHR with the ability to perform basic functions - things like documenting visits, ordering medications, and retrieving lab results. And less than 5 percent of solo practitioners use electronic health records. That's almost five times less than doctors in practices with more than 10 physicians.
What does that mean? It means that today, most patients' critical health data is scattered between pieces of paper in file cabinets wherever the information was collected. That's not just inconvenient; it's dangerous.
Despite your valiant efforts to reduce mistakes, a recent report from the Institute of Medicine found that more than 1.5 million Americans are injured every year by medication errors in health care facilities.
A 2005 study found that many medical errors result from missing information. The information is there somewhere in the patient's file, but it's not there at the point of care. The same study showed that information was less likely to be missing in practices with fully interoperable electronic records systems.
To address this need, the President set a goal for most Americans to have access to an interoperable EHR by 2014. Since then, we've made considerable progress toward this goal.
Just two days ago, Secretary Leavitt announced a new, five-year Medicare demonstration program that will reward providers who use certified EHRs for delivering high-quality care. This project will target physicians in small to mid-sized practices, where most Americans receive health care.
In the first year, Medicare will reimburse practices that use certified EHRs at a higher rate than those who do not. Those using more sophisticated technology will receive higher payments.
In the second year, we'll up the ante. Medicare will offer rewards to practices that use EHRs to report performance according to certain quality measures. Again, higher payments will go to those who make the most use of technology.
Starting with the third year of the demo, another bonus will be added for practices that continue using EHRs to improve the way they perform for patients. In other words, beginning in year three, we will be rewarding the higher quality that will come from the use of EHRs.
We expect to involve about 1,200 small to mid-sized physician practices in this demo. That would mean that about 3.6 million Americans would receive better care through the use of electronic health records.
Besides expanding adoption of electronic health records, the pilot program will also help us learn how to make the best use of them. We will also gain needed experience in paying doctors based on how well they treat their patients, not just on how many patients they treat.
There's an additional step that we're going to have to take before we truly see the widespread adoption of electronic health records. We need to make them interoperable throughout the health care community.
Think about how cell phones work. Right now, if cell phones were like electronic health records systems, I wouldn't be able to call Verizon or Nextel subscribers from my AT&T-based iPhone. I wouldn't be able to use my phone while roaming, and even when it was working, I would only be able to send text messages.
We need standards for electronic health records that everyone agrees to use. We are working hard to find that consensus.
We have also made progress on another cornerstone, standards of quality.
The Hospital Quality Alliance has adopted 24 quality measures in four sub-categories - heart attack, heart failure, pneumonia and surgical care improvement.
The AQA has adopted a starter set of 26 standard performance measures - and continues to adopt more and more measures. These are now being put in physician contracts and implemented around the country.
We're not very good at this yet, but we're getting better as we go, and our momentum is beginning to increase. Our approach is national standards, neighborhood strategies.
Some say that consumer empowerment can't work in health care, that the decisions are too complex. To the contrary: regardless of which industry you study, when the distortions of government and the third party payer system aren't involved, the free market actually works to create value-based competition that benefits consumers. The health care market responds to economic laws just as all other markets do. In a free market - where consumers make their own decisions - innovation in everything from capital structure to packaging to materials tends over time to drive real price down and quality up. Look at iPods, shoes, and dishwashers - or face lifts, nose jobs, and LASIK. With all of these, providers are able to compete for business and people pay out of pocket. The technology and techniques rapidly improve. Quality rises and prices drop. Look at LASIK - between 1999 and 2004, the average price per eye dropped about 20 percent. In short, freedom fosters prosperity.
What's our vision of the end game? We envision Americans being able to access basic information about the health care they consume, so that they can become more engaged, savvier purchasers. As consumers become increasingly savvy and engaged, they expect more choices, more responsibility, and more control in every aspect of their lives. Right now, movie patrons can visit a website like Hollywood.com and look up movies. They can see which ones are playing in their neighborhood. They can read reviews, or just look at aggregations of thousands of reviews. They can find out how much they cost and buy tickets at home - or from their cell phone, in some places - instead of standing on line.
We need this for health care. We need a Hollywood.com or a Google or a Travelocity or an eBay for health care - or better yet, all of those, competing against each other - using the consensus measures of quality that we want to work with you to develop. Their competition needs to rest on a foundation of standards and consensus approaches.
Our vision for health care is to enable this, and spur good, old-fashioned, inventive Americans to develop the tools we all want to become educated consumers.
Within two years, we expect to measure pockets of quality against price, and to see value-based competition in several markets around the country on several procedures. Within five years, we believe the term value will have earned its place in the health lexicon of America, and that we will be using it on a regular basis. Within ten years, we hope that a system of value-based competition integrated with health information technology will have truly emerged.
As we create this pool of price and quality information, we see a day when a health care consumer planning a hip replacement will be able to go online to a website provided by their insurer or by some other private party. This website might tell them which hospitals in their area perform hip replacements, what distance they are, what quality rating each hospital has received through any number of private sector rating entities, how many hip replacements that facility has performed in the last year, what the average total price range of a hip replacement is in that facility, and what that consumer could be expected to pay out of pocket given his or her health plan. These websites won't be run by the federal government. What the federal government is doing is organizing a platform of standards and consensus approaches upon which information can be generated to allow this market to work more efficiently, to empower consumers, to make the health care system value-driven, and more efficient.
I have faith in Americans' ability to make the best choices about their own health care in a competitive marketplace. By keeping that as our guiding principle, I believe that we can foster a transparent health care system that is efficient and effective and helps Americans live longer, healthier lives. I hope you will join us.
Note: All speeches from the Office of the Deputy Secretary are available at http://www.hhs.gov/agencies/depsecspeeches.html.
Last revised: December 5, 2007