--CONSULTATION REPORT-- HARVARD PILGRIM HEALTH CARE ETHICS ADVISORY GROUP November 18, 2009

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1 --CONSULTATION REPORT-- HARVARD PILGRIM HEALTH CARE ETHICS ADVISORY GROUP November 18, 2009 Developing a Framework of Values for Massachusetts Payment Reform Customer: The customer for the November 18 th EAG meeting was Bill Graham, Vice President for Policy and Government Affairs. Background On July 16, 2009 the Special Commission on the Massachusetts Health Care Payment System published its recommendations. The Commission s conclusions were revolutionary - decidedly not ho-hum! It recommended replacing (a) fee-for-service payment in Massachusetts with a global payment system, (b) reconfiguring the fragmented delivery system as a series of Accountable Care Organizations (ACOs), and (c) accomplishing all of this within five years. As envisioned, the change would apply to all payers, public and private. Leslie Kirwan, Secretary of Administration and Finance, Sarah Iselin, Commissioner of Health Care Finance and Policy, and Dolores Mitchell, Director of the Group Insurance Commission, represented the Executive branch of government. Harriet Stanley, Chair of the House Joint Legislative Committee on Health Care Financing, and Richard Moore, Chair of the Senate Committee on Health Care Financing, represented the legislature. The Medical Society, Hospital Association, Association of Health Plans and BCBS were also part of the Commission. The Special Commission s recommendations are now on the legislature s agenda. At the October 30 Massachusetts Association of Health Plan conference on Innovations in Care Delivery, Representative Stanley told the group that cost containment is absolutely essential, that she and other legislators want to see short term (1-2 years) cost savings, and that legislative action is likely before next summer. In conversation after her presentation Representative Stanley said that constituents want to see real reductions in premiums, not just bending the cost trend. Many, probably most, government reports sit on the shelf after publication until they die of old age. The Special Commission report is not likely to have this fate! Here are the Commission s basic conclusions about payment: The Special Commission concludes that global payment models that provide appropriate incentives for efficiency in the delivery of services, while strongly encouraging improvements in quality and access to appropriate, coordinated care should serve as the direction for payment reform. In addition, the Special Commission concludes that global payments can be implemented over a period of five years on a statewide basis, with some providers participating in the near-term, 1

2 while others will need more time and support to transition. All payers (including governmental payers) will need to transition to the new system within this timeframe. (p 56) The global payments would be made to ACOs that accept responsibility for all or most of the care that enrollees need. The Commission envisions ACOs as follows: ACOs will be composed of hospitals, physicians and/or other clinician and nonclinician providers working as a team to manage both the provision and coordination of care for the full range of services that patients are expected to need. ACOs could be real (incorporated) or virtual (contractually networked) organizations The Special Commission anticipates that a broad array of ACO models might emerge, and it encourages the development of a large number of ACOs. ACOs might have various central organizational forms for example, physician-hospital organizations, consolidated medical groups, independent practice associations, or integrated delivery systems they might form different legal relationships among the parties associated with the central organization Finally, they might differ in the extent of exclusivity among different components of the organization. Differences in these aspects of organizations can correspond to differences in organizational culture and mission, differences in how financial risks and benefits are shared among different components of the organizations, and varying degrees of clinical integration. (p11) (For those who are reading this report, I recommend reading the executive summary of the Special Commission recommendations. Questions for the Ethics Advisory Group It isn t yet clear what the legislature will do with the Special Commission s report. The EAG was asked to recommend a broad framework of values for HPHC to use in circumstances that are likely to be ambiguous and politically contested for some time. But whatever nuances emerge in the legislative process, the following issues are likely to be important: 1. ACOs and consumer choice. The Special Commission was fully aware of the consumer and provider backlash against capitation and managed care in the 1990s. It emphasized that while payments to ACOs will follow the enrollee s choice of a primary care physician, patients will not be restricted (unless as a condition of their insurance contract) to providers in their primary care physician s ACO. (p 57) However, in order to care for its enrollees within the global payment budget and to provide integrated care, ACOs will want to provide maximum care from within its own network. The values of consumer choice ( liberty ) and ACO efficiency ( stewardship of resources ) are likely to come into conflict in the state s effort to implement the Special Commission s recommendations. Please recommend a framework of values that HPHC could use to deal with this good versus 2

3 good conflict. 2. Provider consolidation. Global payments will be new, confusing and threatening to many providers. They may seek shelter by joining one of the large and experienced provider systems. This would create more consolidation, more market leverage, and potentially higher prices. Which values provide guidance for how HPHC can best deal with consolidation of Massachusetts providers? 3. ACO readiness to accept risk. In the 1990s, some provider groups that were inexperienced in managing capitation took on more risk than they were prepared to handle. Many groups teetered and some failed. Massachusetts wants to move the payment system to global payments, but providers are variably skilled at handling the associated risks. Please recommend a framework of values that HPHC could use in dealing with the question of appropriate provider risk. 4. What other important values-related issues does the EAG identify in Massachusetts payment reform? Relevant precedents On April 5, 2007, 11 ½ months after Massachusetts launched its health care reform process, the EAG was asked to advise about a framework of values for dealing with reform. The EAG recommended the following: 1. Always tell the truth. Several participants felt that health plans were being placed in an impossible situation of being (a) asked to offer comprehensive benefits at (b) premiums significantly lower than current marketplace rates in (c) an environment predisposed to blame insurers for any failures of the program. The EAG felt that if it is not possible to offer a comprehensive level of coverage at the premium rates being sought HPHC should make this dilemma clear. 2. Be a responsible corporate citizen. Despite the difficulties Massachusetts Health Care Reform poses, the EAG felt that because of (a) its mission to improve the health of the people we serve, and the health of society and (b) its status as a not for profit corporation (c) Harvard Pilgrim should do all that it reasonably can to ensure the success of the reform effort. 3. Risk being unpopular. While the unanimous perspective was that HPHC should support the aims of the Massachusetts program, telling the truth about problems with the program may not win popularity in the public arena. 4. Remain financially sound. The pressure to achieve insurance affordability for low income persons and the public spotlight on health plans could lead to pricing 3

4 the new products below a point of actuarial soundness. The EAG saw remaining financially sound as a significant value, as reflected in the aphorism no margin, no mission. 5. Encourage fair distribution of responsibility. Everyone wants Massachusetts Health Care Reform to succeed but no one wants to bear disproportionate financial burden. Making the premium affordable by shifting costs to employers would create a new (but hidden) tax on business. Making the premium affordable by creating unrealistically high deductibles for low income persons would harm those who reform is intended to help. 6. Educate constituents. Over the years the EAG has frequently defined education of constituents and the public as a key value for HPHC. Health Care Reform is complicated and politics does not necessarily promote transparency and education. The EAG felt that HPHC should not whisper the truth but should actively seek to educate itself and others re the Health Care Reform process. On October 29, 1997 the EAG considered The Ethics of Choice at a meeting that addressed challenges for HPHC, members, and affiliated providers, arising from the 1997 version of ACOs then called referral circles. The strategic objective for referral circles was similar to the one the Special Commission endorsed twelve years later encouraging providers to take more comprehensive responsibility for quality and cost effectiveness by working with a group of colleagues to manage the care of a population of patients within an overall budget. The EAG made four recommendations: 1. Members often do not understand the concept of referral circles. While recognizing the limitations of how much HPHC could educate potential members prior to enrollment, the EAG emphasized the importance of facilitating maximum understanding of the nature of the product members were choosing. This recommendation was based on the high value the EAG placed on meaningful informed consent. 2. PCPs who attended the meeting emphasized that they and their colleagues found it very difficult to explain the referral circle concept to their patients. The EAG felt that PCPs could not be expected to shift their thinking from a risk-free indemnity framework to a managed care framework without education that focused on the new concepts, the values behind the new approach, and communication skills. 3. The EAG did not see the risks and rewards in use in 1997 as being of a magnitude that raised concern about biased clinical judgment. The difficulties in implementing the referral circle model did not appear to arise from excessive financial pressure to prevent referrals from leaking outside of the circle. 4. At the 1997 meeting Dr. Walter Murphy, then president of the Harvard Pilgrim Physicians Association Board, emphasized the importance of building a 4

5 trusting patient-physician relationship as the basis for well-managed care. Dr. Murphy told the group that at times the wiser course of action is to allow referral outside of the referral circle as part of the long-term objective of building trust. EAG DISCUSSION/RECOMMENDATIONS I ve summarized the wide-ranging discussion under three headings: 1. The current health reform situation in Massachusetts. Massachusetts has followed a bold health reform strategy fix access first and then work on cost containment and delivery system transformation. The degree to which this strategy turns out to have been inspired wisdom versus wishful thinking remains to be seen! With 97.5% of the population enrolled, access to insurance is almost fixed, but costs are out of control. Legislators are feeling intense pressure from businesses and individual constituents to reduce insurance premiums. And, although the population is largely insured, meaningful access to primary care and well-coordinated treatment is still not universal. In addition to constituent demands for cost containment, Massachusetts is in the national spotlight as a leader in the reform process. The federal government and other states look to Massachusetts as a test of whether and how reform is possible. This intense national scrutiny puts further pressure on legislators and the executive branch to move forward successfully. In other words, pressure to decrease costs and increase quality will not abate anytime soon! The EAG felt that developing a framework of values for dealing with the pressures HPHC will encounter over the extended implementation period was an excellent idea. 2. Capitation, cost, and consumer choice: Is this déjà vu all over again? As mentioned above in the case (p 2), the Special Commission on Payment Reform was fully aware of the consumer and provider backlash against capitation and managed care in the 1990s. It tried to avoid appearing to be recommending a return to capitation and limited networks, as by saying while payments to ACOs will follow the enrollee s choice of a primary care physician, patients will not be restricted (unless as a condition of their insurance contract) to providers in their primary care physician s ACO. The EAG, however, felt that the conflict between consumer choice and delivery system efficiency that ultimately toppled managed care 1.0 in the 1990s could similarly upend the Special Commission s recommendations if stakeholders do not learn from past experience. But for several reasons the EAG felt that déjà vu all over again was potentially avoidable: In the 1990s the there was virtually no public recognition of the ethical importance of cost containment. In the public eye, only bureaucratic bean counters thought about costs. That wasn t a term of praise! With the collapse of the auto industry 5

6 in significant part driven by health costs, understanding that as costs go up more financial risk is being transferred to individuals, and awareness of personal bankruptcies driven by health expenditures, there is greater readiness to see cost containment as a shared civic responsibility, not an ethical abomination. Information technology and overall care management capacity is much better now than in the 1990s. This means that in principle ACOs and health plans can do a much better job of tracking costs, the health status of enrollees, and quality of care, than was possible for managed care 1.0. There is much more understanding of the importance of transparency for developing trust among health plans, providers, patients and the public than there was in the 1990s. Harvard Pilgrim aims to be the most trusted and respected name in health care, and transparency is central for achieving that vision. Managed care got its bad name largely from programs elsewhere in the country that were more managed cost than managed care. Massachusetts health plans are at the top of the U.S. News and World Report/NCQA health plan ratings. There has been less demonization of health insurers in Massachusetts than elsewhere in the country, and, potentially, greater readiness to trust the actions of our state s health plans. Several participants suggested that defining consumer choice (which reflects the underlying value of liberty ) and attention to cost through capitation-type models (which reflects the underlying value of stewardship ) as irreconcilable opposites is incorrect. One participant recalled that as members of Harvard Community Health Plan in the 1990s he and his wife were able to choose between a somewhat longer obstetrical hospital stay after uncomplicated delivery or earlier discharge with augmented home care services. And Lachlan Forrow, who leads the BIDMC ethics service and chairs the Massachusetts Expert Panel on End of Life Care reported that when insurers and providers collaborated in giving families the option to choose more extensive palliative care alongside the familiar option for intensive, high-tech care, many patients chose the palliative care opportunity. This led to improved patient and family satisfaction and diminished costs. 1 The EAG suggested that combining this form of managed choice with clear explanation of the rationale for what was being done could mitigate much of the potential standoff between liberty and stewardship 3. A values-based framework for dealing with Massachusetts payment reform. A participant pointed out that while the legislature is feeling tremendous budget pressure, the Payment Reform Commission recommended a 5 year phase in period for the changes it envisions. The near-term budget-driven interventions are likely to be seen in the Medicaid sector. This creates a window of time for commercial health plans like HPHC to respond to payment reform in a thoughtful, strategic, educative manner. 1 These examples reflect an approach Richard Thaler and Cass Sunstein call libertarian paternalism in their book Nudge. The authors argue that well planned choice architecture such as offering new, additional benefits along with an earlier post delivery discharge - can nudge us to make choices that are best for ourselves and wider society without resorting to heavy handed, liberty-depriving directives. 6

7 Another participant commented that the Payment Reform Commission recommendations emphasize two lines of action cost containment and quality improvement. Providers in the EAG discussion described cost and quality as synergistic goals. They pointed out that our wasteful system creates excessive risks for patients as well as excessive costs. By rewarding increased procedural intervention our system has promoted more hi tech, more safety risks, higher costs, and less hi touch. The public, however, has been educated to equate more with better. This poses a significant challenge for the changes the Payment Commission recommended. A system of global payments to ACOs will work only if patients, providers and the public trust that the ACO is concerned with improving quality, not just with reducing cost. In the 1990s, that trust broke down. In 2009 the same distrust shows up in federal health reform in the equation of attention to cost with rationing and death panels! The EAG recommended that HPHC use the ramping up time of payment reform to (a) encourage consumer engagement with their care and the care system in ways that will promote trust and (b) work with providers and employers to create collaborative partnerships for implementing the new system of global payment to ACOs. The more consumers understand their own role in promoting health and their capacity to be comanagers of care, the less they will see managed care as something being done to them. The more providers endorse quality-improving, cost-containing patterns of care and have tools for carrying this out, the less likely a managed care 1.0 backlash will be. And, similarly, employers need tools to help their employees understand the new system. Summary 1. The EAG strongly supported the principles embodied in the Payment Reform Commission s recommendations. The challenges and conflicts will emerge as the state moves from high level abstractions to actual implementation. 2. A system of global payment to Accountable Care Organizations will not recapitulate the problems of 1990s managed care ( managed care 1.0 ) if managed care 2.0 puts quality of care in the forefront. 3. In the 1990s, consumer choice (reflecting liberty values) and cost attentiveness (reflecting stewardship values) collided. The EAG envisioned a process of managed choice that could reframe that conflict. 4. For the new system to succeed patients, providers, purchasers and the public must trust it. Trust requires transparency and educative communication. HPHC s commitment to openness and support for consumer engagement are values that reduce the likelihood of déjà vu all over again in the new system. 5. The EAG thanked Bill Graham for giving it an opportunity to engage with the crucial issues of Massachusetts Payment Reform. Jim Sabin 7