Time To Adopt A Value-Driven Health System

Op-Ed by Secretary Leavitt as appeared in Investor’s Business Daily on June 24, 2008

What if we bought cars the same way we buy health care? The dealer would say, "Look, we don't really know the price of our cars, but we know you really need one. So, why don't you just come by and pick one up."

Then three weeks later you would begin receiving a blizzard of bills — a bill from the people who made the chassis, a bill from people who made the transmission, a bill from the seat maker and the paint people and the folks who made the sound system.

Then you'd get the bill from the dealership, including a $27.90 charge for the coffee you drank while in the showroom.

Gratefully, cars aren't sold that way. All of those costs are packaged and managed by a car company. Consumers get one price, and it's a price they can understand.

We need packaged deals for health care, too. Fortunately, there's a growing movement in this country to get us there. The movement doesn't issue membership cards, but it does draw together a network of people who believe that value should replace volume as the most important virtue in the way we consume health care in this country.

What it needs now is for Congress to grant a few key authorities to the Medicare program.

An important development in recent years has been the emergence of a basic framework setting out the four cornerstones of a value-driven health care system — a health care system that delivers high quality at low costs. The four cornerstones are standard quality measures, cost comparisons, electronic health records, and value-based incentives. The movement is slowly making progress on all four.

Groups like the National Quality Forum, the AMA Physicians Consortium, the Ambulatory Quality Alliance and the Hospital Quality Alliance have been working together to define, align and implement standard quality measures.

The Robert Wood Johnson Foundation has provided funding to create comparable cost groupings for 20 common conditions. Medicare is now reporting on its costs for common physician and hospital procedures. I have also seen a number of insurance companies aggressively organizing and shaping pricing data for their own beneficiaries.

To encourage interoperability of electronic health records, we have created a certification process for products meeting interoperability standards. Certified EHR products now account for 75% of market share. In addition, a national health information network will start testing the flow of information between different points by the end of this year.

My department is also beginning a pilot program that will provide Medicare beneficiaries with personal health records. And we are signaling that in the near future payers like Medicare simply can't reimburse doctors at the highest level unless they're willing to interact with us at the highest level of efficiency.

As quality and cost information improve, so will our capacity to develop incentives that motivate better results. As information on quality and cost becomes more reliable, plans are better able to design benefits offering patients better value.

So things are slowly changing in the health care marketplace, but many necessary changes are dependent on changes to Medicare.

Medicare is potentially the most important agent of change in the health marketplace. Because of its size, the entire health sector follows Medicare's lead.

This week, Congress is once again debating reimbursement levels for Medicare services. This is an opportune time to take some major steps forward in the value movement.

One change being discussed is e-prescribing. It saves money. It saves lives. It's convenient. The software exists today in 70% of pharmacies and in many doctor's offices. It's time to fully implement e-prescribing, but we need Congress to give Medicare the authority to construct incentives that encourage implementation.

We have also asked Congress for approval to provide more price and quality information to the public, so that we can verify what drugs and procedures really do improve quality and reward providers accordingly.

Many of these provisions have broad bipartisan support, and, frankly, I am optimistic that we will make progress.

Change is necessary if we are to keep our place in the world, and in a global marketplace there are only three ways that you can approach change. You can fight it and fail, you can accept it and survive, or you can lead it and prosper. This is the United States of America. Let us lead.

Leavitt is secretary of the Department of Health and Human Services.