Thomas H. Lee, MD, MSc. Network President, Partners HealthCare System

1. The Nash Equilibrium Breaks Down Thomas H. Lee, MD, MSc. Network President, Partners HealthCare System Professor of Medicine, Harvard Medical School Professor of Health Policy and Management, Harvard School of Public Health Associate Editor, The New England Journal of Medicine July 23, 2009

2. The Good News in Massachusetts … Enrollment Since April 2006 MA now has lowest uninsured rate in U.S. (2.6%) … But MA didn’t make healthcare a right; we made it a responsibility. And that has unmasked a major problem…

3. Health Care Affordability Is Now a Middle Class Problem Cumulative increase 2000-2007 “Employer Health Benefits 2007 Annual Survey” (#7672), The Henry J. Kaiser Family Foundation & HRET, September 2007 This information was reprinted with permission from the Henry J. Kaiser Family Foundation. The Kaiser Family Foundation, based in Menlo Park, California, is a nonprofit, private operating foundation focusing on the major health care issues facing the nation and is not associated with Kaiser Permanente or Kaiser Industries.

4. Why We May Be Hitting Generosity’s Brick Wall

5. Willingness of Healthier and Wealthier to Subsidize Care for Sicker and Poorer is Weakening Harris Survey question: Do you agree or disagree? The higher someone’s income is, the more he or she should expect to pay in taxes to cover the cost of people who are less well off and are heavy users of medical services. Implication: We shouldn’t expect help from taxpayers. http://www.harrisinteractive.com/news/allnewsbydate.asp?NewsID=1076

6. The Bad News: Progress Raises Costs – and Generates Chaos • Flood of progress and knowledge imposed on fragmented delivery system leads to: • Individual clinicians feel less knowledgeable • Super-specialization, which means: • More MDs involved in care • Physicians knowing “more and more about less and less until they know everything about nothing” or • “less and less about more and more until they know nothing about everything” • Physicians approaching patient with question of “Is this what I do?” • Too many people, too much to do, no one with all the responsibility or all the information

7. No Bad Guys to Blame for Our Issues • Why are healthcare costs rising? • Surprisingly small contributions from: • Profits of drug/device companies • Administrative costs • Malpractice • Aging of the population • Life-style choices • Personnel • The dominant factor – progress (60-70%) is main driver of rising costs • Safety and reliability issues are attributable to turbulence in the wake of progress as well.

8. Reason for Optimism…

9. John Nash

10. John Nash’s Nobel Prize Work • Nobel Prize for Economics in 1994 for describing an equilibrium concept for “non-cooperative games” in which binding agreements cannot be written. • Nash Equilibrium -- Multiple parties frozen in current relationships because no party can change its strategies while the other parties keep their strategies unchanged. • Nash Equilibriums break down when pain of status quo for multiple parties exceeds fear of unknown.

11. An Optimistic Long-term Perspective Finale Breakthrough High Act III ClinicalReengineering Large annual gains in quality and affordability Act II Performance Sensitivity Faster uptake & discovery of “better, faster, leaner” care delivery innovations Efficiency of Health Benefits Spending (Health Gain / $) Act I Transparency Performance-sensitive health plan design and/or provider payments Universal hospital & MD performance transparency Low 2005 2015 Evolutionary Path Slide used with permission of Arnold Milstein, MD, of Mercer

12. Working to Achieve the Vision: EMR Adoption Percent of PCPs Using EMR • Success in adoption has allowed focus to shift to effective use: • Rate of Computer Generated Prescriptions among PCPs is 85%-88%. • Rate among community specialists has exceeded 70%. Percent of Specialists Using EMR

13. PerceivedGains Losses Gains PerceivedLosses Prospect Theory Explains Why Relatively Small Incentives Can Produce Major Change Prospect Theory, Kahneman and Tversky, Econometria 1979

14. Evolving Reimbursement and Care Models Full Capitation Closed System Sub-Capitation *Team-Based Care Case Rates *Disease Management Evolution of Supporting Systems PAYMENT METHODOLODY P4P (Robust) EMR P4P (“Lite”) Registries Fee-for-Service Non-MD Clinicians Solo MD Practices Group Practices Multi-Specialty Group Practices Integrated Delivery System Clinic Model STAGE OF EVOLUTION

15. Disease Management Averts a CHF Admission MD notified of weight gain. Patient called, and MD learned she had stopped taking furosemide twice daily. Regular regimen restored

16. The Real Agenda: Two Revolutions • Industrial Revolution – in which clinicians adopt systems that reduce errors of over-use, under-use, and mis-use. • Cultural revolution • Teamwork instead of MD as the lone cowboy • Focus on care of populations over time • Chronic diseases like diabetes, heart failure • Complex, high risk patients with multi-system disease

17. Medicine’s Cultural Revolution • New types of responsibilities • Responsibility for non-visit care of patient • Responsibility for population of patients • Evolving concepts of professionalism • Not just highest possible individual standards of excellence • Ability and willingness to work with teams that can assume new responsibilities. Examples: • Use of EMR • Computerized prescribing • Medication reconciliation at discharge • “Opt out” approach to team care • Exploration of variation in practice patterns

18. Variation: A Challenge and Opportunity • Issues for which there is a clear right and wrong (.e.g, ASA for AMI) constitute minority of medical decisions. • Most decisions are “gray zone” issues for which there is no clear “right” thing to do. • But … if there is a bell-shaped distribution of what rational professionals (e.g., your colleagues) are doing in that gray zone, wouldn’t you want to know if you are at one end or the other?

19. Variation is Greatest When Right Thing to Do Is Less Clear Variation in rates of care across 306 Medicare regions (2000-01)*. Back Surgery Hip Fracture Implications Procedure Rates of 306 Regions * [Adapted from The Dartmouth Atlas of Health Care; Jack Wennberg presentation 2005.]

20. The approach to managing variation differs depending on the existence of a standard of care Standard of care exists • Gather and feed back data • Set guidelines, standards or protocols • Consider explicit financial/non-financial incentives • Provide analytic services and peer support Variation in clinical practice • Success requires mindset that variation is undesirable even without a willingness to define a group norm • Describe variation and agree to internal ‘standards’ • Can form basis for research to define standard of care • Success requires very high will from clinicians to reduce variation (bottom-up nature of project is even more crucial) No standard of care exists ?

21. John Doe1, MD John Doe2, MD John Doe3, MD John Doe4, MD John Doe5, MD John Doe6, MD John Doe7, MD John Doe8, MD John Doe9, MD John Doe10, MD John Doe11, MD John Doe12, MD John Doe13, MD John Doe14, MD John Doe15, MD John Doe16, MD John Doe17, MD John Doe18, MD John Doe19, MD John Doe20, MD John Doe21, MD John Doe22, MD John Doe23, MD Data on Variation Are Reaching Individual MDs

22. Why Does Variation Exist Within Small Groups? • Clinicians are overwhelmed with information, and have gaps in knowledge • Experts tend to get to answers in fewer iterative cycles • Clinicians vary in tolerance of risk/uncertainty • Experts can often live with greater level of uncertainty • Clinicians are isolated, and do not have way to develop group consensus • Clinicians are influenced by local norms from where they trained and their current environment • But… ironically, clinicians often don’t know how they compare with local norms

23. Variation in physician risk thresholds drive individual propensity to act regardless of patient risk * [Pearson et al., Triage Decisions for Emergency Department Patients with Chest Pain. J Gen Intern Med. 1995; 10:557-564.]

24. Taking on Variation: PHS Strategies • Develop guidelines, and disseminate them • Attack the “gray zone” where specific guidelines cannot be described yet: • Increase group-ness and increase conversations • Show data • Ideally, in unblinded, ranked formats for practice • Also provide data proximate to time to ordering of tests/drugs • Follow-up on data with chart reviews • Cultivate individual accountability through 1-1 meetings and pairing of clinicians for chart reviews

25. Can We Address Right Side of Curve? Rogers EM. Diffusion of Innovations, 1983

26. Conclusions • An important root cause of our challenges in healthcare is tremendous progress imposed on a fragmented delivery system • Result is chaos – leading to inefficiency and disappointing reliability and safety • Regardless of how healthcare is financed, important strategy is for healthcare providers to become organized and adopt systems that improve quality and efficiency -- over episodes of care that matter to patients • Organization as a goal poses challenges and opportunities for medicine’s leadership