‘Buying Value’ herds private market toward value based purchasing (transcript)

This is the transcript of my recent podcast interview with Gerry Shea of the AFL-CIO.

David E. Williams: This is David Williams, co-founder of MedPharma Partners and author of the Health Business Blog. I’m speaking today with Gerry Shea, Assistant to the President of the AFL-CIO. Gerry, thanks for being with me today.

Gerry Shea: David, good to be with you.

Williams: Gerry, you’re part of a new Buying Value initiative. Can you tell me what that is?

Shea: Buying Value is an effort among private purchasers: employers, large corporations, union health funds and some of the leading business groups on health that have been started over the last ten years.

The project aims to recruit more employers to value purchasing as opposed to just paying passively. This is an effort that some leading employers have been doing. They have been trying to do it for years, but with Medicare moving into value purchasing, this is really going to change the market dynamics. We have a unique opportunity to make headway in this sense. It’s critically important, not only in terms of the cost of care but also making sure that we’re buying the best care for people.

Williams: It’s interesting that you have to recruit more employers into value purchasing. Somebody outside of health care might scratch their heads about that. I mean, you don’t have to recruit employers to do value purchasing for steel or for electricity. Do I have that wrong?

Shea: That’s exactly right. We buy health care unlike the way we buy anything else. Sad to say but private purchasers pay the health care bill that comes in the door whatever quality the care was and without knowing what quality of the care was.

This is totally different than buying steel, as you say or anything else. When we pay a bill, we don’t know whether the care was world-class care, moderately good care, mediocre care or unfortunately, downright dangerous care.

Williams: You’ve mentioned Medicare changes and how that provides an opportunity. Can you say more about what those changes are and why they represent an opportunity on the private side?

Shea: There are a number of relevant provisions in the Affordable Care Act that’s now being implemented by Medicare. By 2017, when they’re fully employed, these provisions mean that 9 percent of all Medicare payments will be tied to performance by the providers, the quality of the care that they’re giving.

That’s big enough to change health care markets generally. Medicare is the leading here, but Medicaid is going to be right behind them. So the whole way that public purchasers are approaching health care is going to change. That means an opportunity to do something that a number of us had been trying to do for years but frankly only had modest success in doing.

Williams: I guess what we’ve seen here in Massachusetts is that when some of the health plans have tried to do innovative payment systems for the hospitals, the hospitals tend not to focus on them so much because it doesn’t fit the Medicare framework.

If I understand correctly you’re saying that Medicare is going to make enough of a move into the value-based arena to provide a framework for private sector initiatives that are consistent with what Medicare is doing.

Shea: Yes. And to put it another way, because so much money is going to be in value purchasing, that will change the way providers provide care and price care. And it will then enable private purchasers and payers to follow suit.

It’s important to make the distinction here. This is a new initiative by purchasers. We deal with payers who are the insurance companies and the health plans. And they are the intermediaries between the people who pay the bills and the people who provide the care. It has not been a consistently positive experience for purchasers in dealing with health plans because often, health plans have their basic business model or their programs that they want to sell.

And when purchasers have gone to them with innovative things, there’s really not enough of a market for them to want to change their practices at health plans or even change their computer systems. Many times, when purchasers pushed, the answer is, ‘Well you know, we can’t change our programming in our big computers just for one player.’ So this is really going to shake things loose. And it’s a totally new day in terms of how health care is going to be purchased.

Williams: The purchasers you identified all seem to be national players. Yet the health care system, to a large extent, operates at more of a state or even local market level. How does what you’re doing tie in at a more granular local level?

Shea: That’s a very, very perceptive comment, David, because it is local purchasing that is the primary focus of this effort. Specifically, we aim to bring together a critical mass of organizations and systems that favor value purchasing in focused activity in specific areas.

What we’re beginning now is what I call a mapping project. We’re looking at those local areas around the country or regional areas where there is a combination of national employers with local operations that are interested in or beginning value purchasing, where there are significant size union health funds that are also interested in value purchasing, where there are some of the very good community experiments like Aligning Forces for Quality, and where there are already local purchasing coalitions.

There are 50 or 60 coalitions, some of which have been around for 20 years. One of the most successful is the Maine Health Management Coalition, which has been around for 18 years. We’ll look at where those forces are and overlay them, do an analysis of whether we think the market is set to accept value purchasing. We’re going to put resources into those areas to see if we can greatly expand the amount of private purchasers engaged in value purchasing. Our primary targets here are medium-sized employers and health plans.

We will work with all sizes of purchasers, including a special effort with small businesses through some of their networks like Chambers of Commerce, but the most likely early participants in this effort are going to be the midsized employers and funds that are not now buying on value and who would greatly benefit from doing that because they’re having such big cost problems.

Williams: Will this initiative have dedicated resources or is it simply an amalgamation of the different efforts of the members?

Shea: It’s mostly volunteer efforts of the members. But when I say that, we have the leading business groups on health, which are pretty well-resourced organizations that are already working on projects around the country. What we aim to do in this project is to do some focused targeting of their resources.

We have applied to the foundation that gave us money to put together the website and the tools on the website for some operating funds, where just a couple of people will do coordination work among the different organizations. But mostly this is the volunteer resources of these groups that already exist. We don’t think a new organization is needed. We’ve just done some coordination to bring about the result we need.

Williams: The Affordable Care Act survived, more or less, its encounter with the Supreme Court but there are still challenges to it in Congress and we’ll see what happens with the general election. How will your plan or this initiative change, if at all, depending on the results of the election and the fate of the Affordable Care Act?

Shea: The election would make no difference in terms of the basic motivation here, which is high costs are making care less and less affordable every day for employers and for individuals. The changes that are underway in health care are not going to stop even if the Affordable Care Act is repealed.

Some of the specific provisions that moved Medicare towards value purchasing would be removed if the Affordable Care Act is repealed. Although I would say that in our conversations on Capitol Hill, there is significant Republican support for these kind of programs because they see the problem with health cost as something that has to be addressed. So even if it were repealed, we don’t assume that all those provisions will be repealed.

But beyond that, there has been a real culture change within US Health and Human Services and within the Centers for Medicare and Medicaid Services (CMS). They are now very, very committed to aligning the way they purchase care. Within all the different Federal programs they’re using exactly the same measures of quality now.

The biggest accomplishment that Buying Value had had so far is getting commitment from CMS to attempt to create a core set of measures that would be used for purchasing by private purchasers and Medicare so that we’re all sending the same signals and using the same methods with providers to reduce the burden on them and to make everything more consistent.

They agreed to do this almost a year ago and subsequently to that, issued a contract with a private non-profit group to develop the core set of measures. That work is underway for measures such as wrong side surgery and hospital-acquired infections. In terms of care coordination, do people get the kind of follow-up when they’re discharged from hospitals? Is the handoff from one position to another well-coordinated and is the patient fully involved in that? They are also focusing on cardiovascular care, which is one of the biggest disease states that we have and a big cost center, and diabetes, which is a near epidemic in this country and one with huge human consequences particularly among minority communities. It also has huge financial implications.

The trend in diabetes combined with obesity is probably the biggest single problem we face in the future in health care. So those are the first areas, and those reports are due by October 1. And then following that, there’ll be other areas addressed. But this idea of a common core set of measures that both private purchasers and public purchasers can use for purchasing is really revolutionary. It’s never happened before, there’s never been an attempt to do it before and that’s really the biggest accomplishment to date.

Williams: For people that are owners of medium-sized or small businesses that may be listening to this interview, what are the practical things that they might do to get involved either directly with the Buying Value initiative or perhaps to be able to learn from some of what you’re doing and gain some of the benefits?

Shea: The simple thing they can do is go to our website, buyingvalue.org and look at the Value Purchasing Primer, we call it, it’s just a short report that gives an overview of one of the different kinds of things that fall into the value of purchasing category. And they could look at those and try to find some local resources to help them implement some of those.

There’s also on the website, a set of anti-trust guidelines so that private purchasers can make sure if they’re going to work with other private purchasers, that they’re not going to run afoul of the anti-trust law, because the anti-trust law does apply to the health care sector.

And there are also resources in terms of data from health plans about what they’re doing and what’s been successful in their payment incentives to drive change. That’s what’s available right now. Then as I said, we will be targeting a number of communities, probably six to eight, but it could be as big as a whole state or even a multi-state region depending on the size of the states, where we’re going to be working. So they’ll have opportunities like that in the future.

We’re not talking about rocket science here. We are talking about a different way of buying that simply does track the way employers buy everything and anything else. Our goal here is in these communities is to have very simple ways for employers to engage in value purchasing where they don’t have to go out and hire their own consultants, where they can just plug into some value purchasing effort that’s going on and get all the help that they need from that.

Williams: This is David Williams, I have been speaking with Gerry Shea, he’s Assistant to the President of the AFL-CIO. We’ve been talking about the new Buying Value initiative for purchasers. Gerry, thanks so much for your time.

Shea: Great, David, it’s good to be with you.

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