 On behalf of the McLean Center for Clinical and Medical Ethics, I'm pleased to welcome you to today's lecture in our series on ethical issues and health care reform. Today's talk is the eighth in this year's series of 28 noon lectures on that topic. I'm delighted to welcome and introduce today's speaker, Ralph Muller. Ralph is the CEO of the University of Pennsylvania Health System, a $3 billion enterprise that includes five hospitals, a faculty practice plan, a primary care provider network, home care, hospice care, and long-term care. Ralph is the director of the National Committee for Quality Assurance of the Joint Commission and is a commissioner on accreditation. Ralph Muller received his bachelor's degree in economics from Syracuse University and a master's degree in government from Harvard. After graduation, he served in leadership positions in the Massachusetts State government. I believe Ralph running the health department? Yes. In that role, he was responsible for Massachusetts Medicaid program. It was right around that time that Ralph was recruited by Hannah Gray to come to the University of Chicago as budget director for the university. Ralph's career in academic medicine began a few years later when he crossed Ellis Avenue and became the vice president of the University of Chicago Hospital and then deputy dean of biological sciences. For the next 15 years, that is from about 1986 to 2001, Ralph served as president and CEO of the University of Chicago Hospitals and Health System. Ralph has been a visiting fellow at King's Fund, the Health Care Foundation in London, where he conducted a comparative study of American and British health systems. Ralph has also served as chairman of the WANC and as chairman of the University Health Systems Consortium. Today, Ralph Muller will speak to us on the impact of health reform on academic medical centers. Please join me in giving Ralph a warm welcome. Well, it's a pleasure to be back. I haven't been in this room in 12 years. I remember the 16, 17 years I was part of what you now call University of Chicago Medicine. We had many, many meetings here. It was kind of fun to walk the hallways this morning. I had a chance to see a new hospital, but kind of some people hadn't seen me in a while. Haven't seen a while. It has been 10-12 years since I've been here, so it must be some of our faculty travel. I just think I was traveling a lot over the course of the last 12 years, but it's a delight to be back. What I want to do today is talk basically what's happened to academic medicine. I'll use Penn as an example, but really talk about it more nationally. Hopefully some of these things will be relevant to Chicago as well. And as you know, I as Mark pointed out, once upon a time I was trained as a quantitative social scientist, and part of what I learned in that time is, you know, with 50 states and many cities, you have a lot of cultures around the country, so it's not really one style of health care inside this country. It really varies as to what happens inside any environment. And while when I went to Penn, I felt my first day there, I recognized what kind of place it was based on the many years I'd spent in Chicago. You also have to learn what's different about any environment. So what happens in California, what happens in Massachusetts versus other parts of the country, you always have to decide what is distinctive about an environment that can only be done there, what can you do that can be replicated elsewhere, and hopefully I can draw some of those points out for you today. But as you'll see from what I'm saying, there's not one size fits all. The country is not moving to one kind of health care system, and obviously, like many of you I'm sure inside this audience, supporters of President Obama, the last six weeks or so have been pretty rough for him in terms of the role out of the health care site. But I'll talk a little bit about that as well in terms of where we are going. So what we talk about today is a kind of summary of health reform, talk about what we in academic medicine, University of Chicago, Penn, other places like us can do, and where society values us. And then what we as health centers and medical centers can perhaps do as a result of what's happening in health reform. Again, you've had other speakers before me, so I'll just go over this briefly. Even with the kind of confusion and difficulty of the website, we have to remember why Obama cares. Even the President calls us, so probably he wonders why he called it that. What the intention was first and foremost as the title of the Affordable Care Act says it's provide insurance for people who are currently not insured. Now, when they first passed the bill they thought up to 32 million people might be insured, roughly 16 million people by expanding Medicaid and 16 million people who basically who are in the working population after the Supreme Court decision roughly a year and a half ago, which gave states the option as to whether they want to expand Medicaid or not. That number of 32 million, which was the aspiration back when the bill was passed three and a half years ago, is probably the highest they'll get now is 24 million. And obviously given the difficulty of the exchanges, which I'll talk about in a bit, then the number may not be that high. It also, as the President said, it intended to improve health care quality. It wasn't just to bring more people into insurance and I'll speak a bit about some of the value propositions that we and other places can meet. And it also tried to pay for itself in part. And hospitals such as the University of Chicago and Penn and many hospitals around the country, insurance plans all kind of gave the church and took some reduced payments as a way of paying for it. And so for example, how did it hit hospitals? As many of you inside the room knows, we get paid annual updates from Medicare and teaching hospitals get even more money than community hospitals. They reduce those updates. They did much more measurement of quality. All of you are probably very familiar now with the core measures from the Medicare agency, which is called CMS, a big focus on bringing down mortality, a big focus on bringing down infection rates inside of hospitals, and something that we're all familiar with, whether it's Chicago or Philadelphia, anywhere, about 17 to 20% of the Medicare population gets readmitted within 30 days. So they put penalties on readmission. As we also know, sitting in Chicago, the Southside, where I sit in Philadelphia right now, a lot of the reasons that people get readmitted to hospitals have nothing to do with the hospital, have to do with the kind of social economic conditions that people live in. And obviously, those of us who are urban centers very much feel being held accountable for what happens 30 days after hospitalization may not always be under our control. And there are also kind of incentives and rewards inside the Affordable Care Act, such as having quality payment sling to performance outcomes. Again, how is it paid for is roughly almost a $3 bill. But as you can see from the pie chart here, roughly 40% of it came from those kind of cuts I mentioned to both hospitals and to Medicare plans. There was a tax on higher income people that produced about 20% of the potential savings. And then some of the things you've heard about, such as taxes on device manufacturers and taxes on so-called Catholic health plans, but also ways in which they paid for it. To the extent to which this is exactly how it plays out over the course of the next five, six years is still to be seen. But the intent was to pay for the health care plan through these various mechanisms. And as part of the effort that you've seen the House of Representatives over 40 times now vote to repeal Obamacare, one of the challenges they have, if they are sincere about deficit cutting, if you repeal Obamacare, you're going to increase the deficit. So we'll see how sincere they are really about that as well. So what do we do? What are prices like Chicago and Tendu? As you know, you have a Center for Advanced Medicine, you have a Center for Cure and Discovery. Basically, we're our point of differences and part of what you learn from people from business schools and people who teach marketing and in corporations and so forth. What's your point of difference? What do you as an academic center do the other prices can't do? And part of what I was proud of when I worked with all of you here in the 80s and 90s is thinking through what led to the Dutch Social Center for Advanced Medicine and thinking how I see Dr. Volks here, what it took to build up cancer programs and heart failure programs and take your premature infant. So basically, what prices like us do with Chicago or Penn, our counterparts in Boston and San Francisco, our basic, the thing that society most values us for is to do those highly complex procedures and interventions that nobody else can do. Doesn't mean that's all we do, but that's what we get paid for. So when Medicare gives extra payments to teaching hospitals, it's for this. When Blue Cross gives you better rates, then they give it can be hospital, it's for this. So I think one of the challenges we've always had is obviously all hospitals, including Chicago and Penn, some others do a lot more than just this, they serve the community as well. But our differential role is around complex care. And we always have to remember to constantly be innovating, constantly be discovering, otherwise we will not be rewarded by society for being, as we say here, the forefront of medicine. Obviously you also have, we have a major role in research and translational research. You've done your translational research investments over the last number of years. The NIH has moved much more in the direction of funding translational research than they did years ago. There's some controversy inside the field over where they've gone too far, but certainly that's what Congress and society, again, part of my job, and Dr. Polanski is here as well, part of our job is constantly interpreting those signals you get from society and figuring out what we as an institution do. And one of the things they want us to do is constantly translate those discoveries that come from the science into care delivery. They also want us to change the way in which we do care. The DECAM was an effort to say we're first going to build outpatient practices. For 30, 40 years now, care has moved increasingly from the inpatient to the outpatient setting. Part of what we had to do when we built DECAM now 17 years ago, and what we've done as Penn as well, is to have new settings in which to deliver care. But beyond just having a building, it's the new miles of care. I remember when I first became President of the Hospital in 1985, and some of the oncologists seeing here in the audience knows, we used to have a lot of our beds filled with patients who required, who were receiving chemotherapy. They came to the hospital for six to 10 days. That doesn't happen all anymore. So almost all of us have these big infusion suites inside. We have a CAM at Penn. You have a CAM here. And those kind of things have changed considerably. A lot of the procedures that are now being done on outpatient bases in your cath labs and your EP labs, those things were done with people as inpatients years ago. So that on-going innovation comes from setting such as ours. And one of the things we've had to do, and it's somewhat supported by the federal government, is to think about how one uses information technology to better advance care coordination. You're all familiar with, just before the stimulus act that the President had passed when he first came in, there was also an act called the High Tech Act, which is basically the money that all of you received to advance the proliferation and diffusion of EHRs, electronic health records around the country. Part of the aspiration there was if we were connected through electronic records, we'd be much more able to coordinate care. Now as we know, information technology by itself does not change the patterns of care. We as people have to change the patterns of care. But I remember in the old days, the old paper records we had down in the basement here of Billings Hospital, and now obviously you do that all electronically. So part of where academic centers are really taking the lead is that kind of investment in changing care patterns. So what are we being faced right now with the Affordable Care Act? First of all, you hear this language all the time. The fee-for-service system, which is essentially how most of us get paid for care outside of places in California, in some parts of the upper Midwest, is the jargon around that. It's a volume-based system. They want to go to value-based. Essentially what that means right now, doctors and hospitals are paid and have been for the last 20, 30 years where they do more and in some sense they get more. And they're trying to change that to what's the outcome. What are you trying to get for the payments? And you see experiments that we'll talk about in a moment in the Affordable Care Act like ACOs and bundled payments that try to achieve that. They want us to be more efficient and they do that in part by just cutting off payments. So one of the ways you learn how to live on less is they pay you less. You have to learn how to live less. So there are payment cuts inside the Affordable Care. You also see, you see this in Chicago and I saw you made an announcement this week about some affiliation you're doing in North and Northern Indiana and other places beyond. Around the country there's a lot of consolidation going on. Hospitals consolidating. Physician group movement and we can talk about that later is not moving as quickly as what's happening in hospitals. The insurance companies really have consolidated the last 10, 15 years. So part of this goes back to classic economic theory of if one side of the transaction is bigger you have to be bigger kind of theories of countervailing power. And more and more you see that around the country. Unfortunately the evidence that that either reduces, increases quality or reduces cost is not there. So these basic are classic economic moves to get more market power to get higher prices. So as we know we have an American healthcare system and we're part of it in the both Chicago and Penn. It gets pretty high prices. It has increasingly a big part of the share of the economy which causes citizens and politicians to get worried about how much money we're getting. Unfortunately a lot of consolidation has not yet led to better care or lower costs. Now I think I'm going to come back to it. That's a big challenge for us because just getting bigger does not mean you get better. But it certainly gives you market power and that's one of the concerns government obviously has. We are obviously a place like all the great academic places in the country again whether in the east coast or west coast of Chicago and so forth. How to integrate the patient care mission, the research mission, the teaching mission. And again when you think about the differential advantage we have it's the integration of those things that really other hospitals can't replicate. So we always have to hold on to that as one of the points of real difference that we make. Another theme that's increasingly being voiced is are we going to be responsible for patient populations? Now I'm going to speak about that more fully but I'm much more skeptical that most of the American system knows really how to manage patient populations. So Penn is Mark's introduction. We have five hospitals. We have a lot of physician groups. We have a lot of post-secute care such as a rehab hospital, a long-term care hospital, inpatient hospice, a big home care company, nursing homes and so forth. We do not have an insurance plan. We do not own an insurance plan. And one of the things when people keep saying they want what happened to Kaiser, Henry Ford, or Geisinger to be a model for the rest of the country, all those places are built around group practices which academic medicine is not and they built around insurance plans. So whenever you try to take the Kaiser model and drive it nationally, you have to remember you have to have an insurance plan and you have to have a group practice in it. If you don't have that you can't replicate it. And I'm always amazed the extent to which people think they can kind of Kaiserize the nation without having those prerequisites there and therefore you have to think what Chicago Penn can do absent being a true group practice and absent having an insurance product. That's the very substantial difference and whenever you see people making these national comparisons, when you don't have insurance plan as part of what you should do, now I would argue it's not necessary if I have an insurance plan but if you have one like Kaiser and Henry Ford do, you can do different things than when you're just a hospital. Now the reason for that is fairly obvious because if you run an insurance plan then if you reduce hospital utilization or do a better job of reducing your readmissions then you, by reducing hospital utilization, you make more money as an insurance company. Basically hospitals are in the bed filling businesses as one does that. Insurance companies are in the bed emptying business and so whenever you try to get those two companies in the same place, you get very schizophrenic and you get a lot of clashes and if you watch what's going on in Pittsburgh right now, this big war going on between Highmark which is the Buick Cross product in western Pennsylvania and University of Pittsburgh Medical Center where they basically a war with each other, they both run both insurance plans and hospitals and I think that kind of schizophrenic behavior leads them to do very disruptive things. Again these are the missions that we have such as yours. Penn is a little bigger than Chicago as we can see. We're roughly a bit over four billion but you know big residency programs over a thousand residents and fellows, 2000 faculty, second to third, biggest in NIH so and we do also like you a lot of primary care in the surrounding areas. Now our market and as I mentioned at the start of my conversation with you you have to really look how your market changes. So one of, when I was in Chicago and it's social here you have University of Chicago, you have Northwestern, you have Ross, you have U of I, and Laurel has kind of drifted into a more major Catholic system but you have five academic centers competing. Four big insurers is a different kind of market than if you have a place in which there's ten insurers or one insurer. If you have one insurer like you do in Iowa or Alabama you better get along with that insurer or otherwise you're out of business so the University of Alabama, the University of Iowa have to figure how to get along with that. If you in a market that's four or five insurers you can try to hold yourself out as a differential player, be those insurers but you have to be attentive to what the insurance market looks like you know as a leadership of the Medical Center here, things about that. We are still, as you kind of go from west coast to east coast, as I say Philly is the land of cheese steaks and California is the land of tofu. So it has an effect on your patient. So the hospitalization rates in Philadelphia are two to three times what they are in Southern California or Portland, Oregon because of different lifestyles out there, different medical practices so the whole corridor from Boston kind of Baltimore is very high utilization. So when you have high medical utilization it changes how you run a system. When you have California which is very primary care driven and with these big primary care groups in Kaiser you have the whole different kind of system than you have in Chicago or Philadelphia. So you have to look at what your local environment is. We are still an environment in Philadelphia where there are not large primary care practices. Insofar there's any kind of aggregation of primary care it's around the medical centers there really no big primary care groups. So essentially we get all our patients from referrals from private physicians around the metropolitan area. So we like Chicago have to be very attentive to those referral relationships. Those patients are not driven by insurance product like they are in Kaiser. They're not driven by big primary care group. So the high utilization area, high cost area. Now inpatient activity has gone down. Dr. Polanski told me inpatient activity in Chicago is growing up at least for the USC. But the main reason it's going down in Philadelphia and beyond is probably too technical for mostly but the so-called observation days are now turning one to two-day hospital stays into outpatient stays. But hospital utilization in Pennsylvania is going down. Now when you start with very high utilization to begin with there's opportunities to bring it down in Philadelphia that there are in California or in Minnesota. So that's one of the things one has to be very attentive to in terms of understanding your market. There's a simple jar. We're all over the place. We have more geographic distribution than we had here at Chicago with more hospitals. One of the things that Dr. Polanski and I discussed briefly this morning that I learned from my Chicago days is to put multi-specialty centers in geographic dispersed areas from the hospital. We've located them 5, 10, 15, 20 miles away from our hospital. We aggregate like 10 primary care physicians with oncologists and cardiologists and orthopods. And that's a way of keeping a patient population tied to you by having those multi-specialties. So they're like mini decams. You kind of cluster them around the area. And I know you're thinking about that here, too. I think it's a very valuable way of keeping a patient population tied to you who will come downtown to Chicago or Penn for the kind of advanced care that you can do inside this kind of setting. But when patients need ongoing chemotherapy, ongoing radiotherapy, and so forth, will follow visits with their orthopods. Having those distributed sites is a very good thing to do. And we've done that in many areas around Philadelphia. One thing I learned here at Chicago is half the people in the country go the closest hospital. It's like they go to the local church, local supermarket, the local elementary school. And you have to have a set of programs that causes people to say, when I'm not going to local hospital, why do I go to Chicago? Why do I go to Penn? You also, they go to you, because I mentioned earlier, because you have complex programs that only can be treated at Chicago or Northwestern or Rush, a Penn, a Mass General, and so forth. So what you see is that the further way that patients come is really a measure of the fact that they're coming to bypass the local hospital and come to you. So you have to give them a reason to bypass the local hospital and come to you. And that means it has to be differentiated program. Now, fortunately, the current moment, the way we get paid, given by Medicare and Blue Cross, is we get paid more for complexities than we do for simple disease. So the kind of money we make also is a very much a function of people bypassing the local hospital. Some of those also function in the American system in some ways. Geography is destiny in terms of how you get paid because people who live in more affluent areas have better insurance and people who live in less affluent areas. This is not hard to figure out. It's part of what Obamacare is trying to remedy. But we've all learned you have to have a regional reach to be able to make the ends meet. Now, 10 years ago, as you thought about integrated care, it was basically hospitals and special care and building a decay. And then as that evolved, adding other programs such as Reeve evolved at Penn, and the question is what's going to happen in the next couple of years? Is there going to be any kind of integration of insurance plans and providers like us? Are the ACO is going to take off or not? Well, we have more focus on chronic care management. There will be more information technology connectivity. Will there be different payment models in FIFA service? And the aspiration of many people largely associated with the kind of policy crowd that drove the Affordable Care Act is will remove more and more to population health, which is really the kind of California model. So what do we do? What's the challenge to us? First of all, as I've noted, whether Chicago or Penn, our core competency, what we do best is this highway complex care. We have expensive costs. First of all, doing complex care is expensive. Secondly, an academic mission is supported by this. And all of us, whether Chicago or Harvard or Michigan or Duke or Penn, has to support the infrastructure of academic medicine. As we all know, in an accounting sense, research doesn't pay for itself. In an accounting sense, education doesn't pay for itself. So you have to have big margins in the clinical programs to cross subsides. That's true of any medical center big medical center inside the country. In some sense, the more research you do, the more clinical program you need to support. That's a simple tourism that Dr. Plants and others know. Well, Dr. Rubenstein knew it when he was at Penn. I know it and his question is how do you do that? And most of our patients, 80% of our patients at Penn come from somebody else's practice. So we do not own the front end of the practice or the back end of the practice when they get referred back to local hospital. They come 60, 70 miles away. So how one does quote-unquote population health when that patient is being seen elsewhere by primary care physicians and specialists sees our doctors and then goes back to them is hard for me to imagine exactly how you do that when you're just basing in the middle of that transaction. We're not and for us to do to own all the primary care which Penn tried to do in the 90s and almost took the university down because they lost $800 million doing this, which is a big number even then. And now is you cannot establish a primary care practice that covers the whole metropolitan area in the sense that Neurokaiser and Billings Clinic and Marshall Clinic have tried to do. But that will not work for academic medicine almost anywhere inside the country. So how do you take more responsibility for a population? And I'm going to give you my suggestions. If you're not the front at primary care and you're not the place where the patients go back to our patients like yours come from 80 miles around. They do not all live here. So the question is how to take care of that population. And so we get, as I say, we get signals all the time from society. By society I mean the government Blue Cross employers, patients. And they obviously want a healthcare system that has changed but it's like people who say they don't like congress but they like that they're congressmen. Everybody thinks the healthcare system will be changed but they don't want anything changes that affects them. So exactly what it means that everybody wants to have more population health is kind of interesting for me to consider. So what should we do? Well at a very simple level getting your quality up and your cost down is a good strategy no matter what you're doing. You'll win no matter what happens if you do that. This is not very profound. But the efforts at reducing infections reducing preventable mortality and doing all those kind of quality improvement efforts that I know you're committed to will win in the long term. Patients want that. Patients society demands it. And getting your costs under control. Now Chicago and Penn are never going to get their costs down to a community hospital level. But you have to constantly keep figuring out how to get efficiency. And one of the those of us who run hospitals know just like always to ride airplanes these days the way you run a hospital at high efficiency is to run it at 90 percent. So whenever you run any part of your hospital at 60 percent whether it's your ORs or your cath labs or your rooms at 60 percent you're going to lose money. The airlines figure this out too. Now running a hospital at 90 percent around 60 percent cause a lot of issues just like those of us who ride airplanes these days a lot of issues when every plane you go on right now is every seat is jammed compared to the old good old days where you could have 50 percent of the people on it. Because I remember as Mark said I used to be the chair of the WIMC now to go down to Washington every week from Chicago to do advocacy. Luckily this was pre 9-11. And I remember those days it cost 1200 bucks round trip to fly to from Chicago to D.C. Right after deregulation went down to 172. I remember that number. I always said to myself John Maybes here has been a long time board trustee member and said if I were to do the hospital going from 1200 bucks to 172 I would not do it. But the point is here you have to figure out how to run these things at lower cost. So maybe what part of the support I can give to the administration here just as an outsider who is once here. These cost reduction efforts you just have to keep focusing on them. But you don't do it. You don't do it. It comes from kind of performance improvement whether you use Toyota methods or lean methods or performance improvement from elsewhere. You have to have some kind of methodology for really efficiency reduction. And at the core the doctors and nurses have to lead that because they know best how to change the front line of health care. So in many ways that kind of efficiency is paramount for all of us to figure out and those of us who figure out better will do well because sooner or later as having hung around University of Chicago economists a long time in my 20 some years here the marketplace will find the more efficient providers. You can't hide your inefficient programs. So having a constant thrust towards cost efficiency is of critical importance. I've said you need to create partnerships and link it with other providers and a part of what we've done at Penn. And I know you're doing some of it here. I remember when I was here in the 90s I would have loved if we could have gone on a cardiac unit elsewhere or an oncology unit elsewhere in another hospital. And then in those days hospitals weren't willing to let a University of Chicago Northwestern come in in one of those units. Now they're more willing to do that to get that kind of expertise. And I know you're considering some of that with some of your affiliates here. But you don't want to own a lot of hospitals but you want to make sure you have programs elsewhere where the expertise of your doctors and nurses can be shared with the local population. So thinking out ways to get off and disperse yourself by being part of the hospitals or having free-standing centers I think is a good way to think about that. Now I wouldn't go around owning a lot of hospitals but here and there pick out a cancer unit and a population that can't be served pick out a neonatal unit pick out harder and you have to respond to opportunities and obviously I think it's a very wise move for you to go to Indiana because Indiana is a natural place and as we always learn you have to go past University of Chicago before you go to Russian Northwestern so Indiana is a good place for you guys to go. I learned very early when I some of you remember Jeff Goldsmith I know I see Ann Dudley Goldblatt here one of the things that Jeff Goldsmith he worked with John maybe as well one of the things he did he was here in the early age as I was coming to my role and he put me up in the helicopter before it became famous in ER so we basically flew over the whole metropolitan area to look at travel routes and one of the things you learn you have to look at the travel routes that get you to Chicago and which are the ones that get you most conveniently locate your practices they are locate your affiliations where people can come most conveniently to you and I think you have to target patient populations that can benefit from the kind of stuff that Chicago and Penn does well I'll give you some so what kind of things should you try out and I think in many ways you have a couple years to do this as the implementation of BiomaCare has shown or it's not so well implementation so far nothing changes in healthcare that quickly so the kind of lower risk things you can do is more service line structures and one of our intents when we built ECAM was just try physical co-location neurology neurosurgery orthopedics with rheumatology cardiology with cardiology try physical co-location as a way of trying to move towards programmatic integration but I think you have to extend that now and really have service lines across the hospitals so that and for example we've done at Penn we have cardiology and imaging and cardiac surgery and pathology all working and with rehab medicine all working as part of one unit so we've gone big time towards service lines the art of this for those of you who are the academic chairs here is you have to both continue to honor the traditional academic structure and also figure out how to blur the service have service lines across those lines it's very challenging to do but my advice is that's one of the ways in which we can stand out and it causes you to start thinking about populations in ways that again the government and the Blue Cross employers and patients want you to think about them they don't want to have to be the people who navigate across your surgeons and your radiologists and your pathologists and your internists and your cardiologists they want you to figure it out so I would say that's a low-risk way it's not easy to do it's a low-risk way of doing that you can read something I'm not going to read all my slides to you but you know the next couple years is going to be much more of what's called bundling and in some ways those who have been around a while as I have DRGs which we've had in 1983 are form of bundling because part of 1983 the hospital had kind of fee-for-service every element and since from 83 on they basically said you get so much for a hip replacement you get so much for a cardiac transplant you get so much for chemotherapy that's a bundle now what they're going to start doing is extending that in time where we held accountable I'd say for a week after the hospitalization a month after the hospitalization so basically as physicians or nurses you held accountable for not just the hospitalization itself but what happens after the hospitalization you can also see being moved forward in time where you're assigned let's say and one of the things we're experimenting with right now is heart attacks and basically looking at populations who are at higher risk of heart attacks and managing for the heart attack and then managing them after we've written about this in the New England Journal last week and we call it automated hovering where you basically hover over patients high-risk populations as a way of trying to manage their care both before hospitalization and after it I recommend you keep experimenting with that as well and the bigger higher risk things is you know as we know the physicians have not aggregated inside this country as much as people have been trying to aggregate them for 34 years and we've had cars that are added for 70 years the Mayo for over 100 years Cleveland Clinic for 80 years and so forth fewer than 10% of the nation's physicians fewer than 10% of the nation's physicians are organized in groups in more than 100 and that includes all the patients like USC and Penn that has a thousand physicians under under our roof so most two-thirds of American doctors are still in groups for less than 10 it's still a cottage industry so the notion that you're going to have big population management when most of the doctors are 2C, 3C, 4C, and 6C they're not us they're not Mayo and so forth is something that I think is much harder and teaching physicians how to share risk when they're three four-person groups it's one thing to do if you're a 100-person group but I think for most American population this is not happening anytime soon so while we've done inside the future service structure you know we've done the service line integration that I pointed out we've made a massive investment in big data and having real-time information so any one of our nurses any one of our clinicians can now on any unit look exactly in real time they can go to a cardiac unit or a cancer unit inpatient outpatient immediately log on what are my quality metrics for last month compared to last year what are they today what are they by program what are they by doctor what are they by patient so you can just almost the way you can check your Amazon account or your Vanguard account you can now check everything and manage your population that way that we made a big investment of that and we think having that kind of real-time information there available to doctors makes a difference it has to be real-time just like all of you know you would not cross the street based on looking at a Google map right because the Google map might have been you don't manage care based on information at a year old so you have to have real-time information to do that and obviously like all of us we made major investments in IT as well we are like other places we're doing a lot of experimentation so we have these our big plan is blue cross and on joint cardiac procedures now we're having a shared savings model whereas we as you know in the fee-for-service system right now every time we reduce a readmission because we do a better job of following the patient afterwards to make sure they see the doctor take their meds deal with the activities of the other living every time we reduce a readmission in a sense and when people get readmitted the hospital gets paid for so when we reduce the readmission that's a savings to the insurance company not to us so but obviously you want to have doctors and hospitals incentivized to reduce readmissions rather than having then come back but you have to have plans in which there's a shared savings around that as well in terms of population management my feeling is places like us as I mentioned earlier where 80% of our patients are referred not to that we're better off taking certain populations and I'll talk about them like congestive heart failure heart disease strokes breast cancer and learning how to manage those populations but I'm discussing with Blue Cross right now and say look give us all your prostate cancer business in the and the Philadelphia area or breast cancer so I'd say in breast cancer we now are able to do genetic analysis and indicates which women will which women will respond well to chemo hormone therapy which will not so if you give us 100 patients we'll sort out the 50 that will respond and the other 50 they don't get the chemotherapy the patients better off you save money so let us sort it out and it's much you're much better off having pen with our brand name just like in Chicago with your brand name having pen do that screening around genetic and other kind of diagnostic skills rather than having quote-unquote the insurance company do it and having all that kind of you know harrying relief stuff in the 90s about the insurance company denying care but if you do better diagnostic interventions on a population at risk and then share the savings and so both the patient and insurer and employers better off we think it's a model for real success so that's the one we're working with them on right now take those populations where our diagnostic skill is superior and as you know the doctor's audience know you can't claim this for everything we do so you have to pick the spots in which we really are better than the community hospital and say assign that population to us and as we kind of sort out the right interventions then you have a better chance of a better outcome and cost savings so what kind of models do you have these are this is kind of work the WMC has has been doing some of this really goes back to efforts in the 90s as well and again my sense is we a place like Chicago and Penn should be kind of the middle of the spot the kind of yellow bar in the middle where you try to manage certain kind of populations where you really feel that where the patients and the employers and insurers feel they have to come to Chicago or Penn for their kind of outcome much more skeptical about trying to dominate a whole region and I think examples where people take a Billings Clinic in the middle of Montana or a geist in the middle of northern Pennsylvania there's nobody around and those populations have two, three hundred thousand people you can be the only provider there but that's not a model for a place like Philadelphia or Chicago or New York there's not going to be anybody who's going to be the provider of all primary care and the insurer of that so those kind of plans population health manager makes sense only about five, ten spots in the country where basically there are no people and no other competitors which is not the reality for most parts of the country that are urban and very congested and as I said to you you can kind of segment your population now the Obamacare is trying to get the healthy people into the population our comparative expertise in taking care of healthy people is minimal community hospitals can do that if I always said you can deliver a baby in a taxi cab you can deliver in a community hospital they didn't insult it when I say that but basically the healthy people are not our comparative excellence I've spoken to on the complex at the bottom here cancer strokes, transplants those are high expense cases as we know from many studies five percent of the population five percent fifty percent of the cost of American health care is in five percent of the population we should focus on how to get that five percent better managed through our diagnostic and therapeutic outcomes and the savings you have there largely by also reducing clinical variation the IOM Institute of Medicine just came out and studied two months ago that looked at geographic variation you may for those who are kind of policy wonks in the audience know there's been a big controversy going on the last few years you know why is Miami so high utilization versus you know Minnesota is the kind of paragon and Dr. Gawande from Harvard wrote about New York a few years ago when he compared to two sections in Texas in terms of hospital utilization so there's this big controversy that was put into the Affordable Care Act should we take the money from high utilizers like Philadelphia and Chicago and Miami and move the money to Minnesota so the IOM was committed it was commissioned to do a study of this and they found out that utilization is not that geographic it's within geographies there's enormous variation inside Chicago enormous variation inside Philadelphia enormous variation inside our hospital enormous variation in our practice so when we look at our cardiac surgeons and our vascular surgeons and our orthobots they vary same patient they vary in what they do so we're really focusing how do you bring that variation down and try to make sure that bring the variation down bring costs down get better outcomes so that kind of focus on bringing variation down again it's a special place in which I think we can have a comparative advantage and I've mentioned as well you know when you have the onset of chronic disease I think the special niche that we have is what I call the acute expression of chronic disease chronic disease is obviously especially with the obesity is kind of expanding inside America and I think where we have a relative advantage is figuring out when they need that acute intervention how to manage that a lot better and do the kind of things that prevent that from becoming acute expression of chronic disease that's a comparative advantage that I would have and I think we can do that in the current payment model as well so just a quick aside obviously the last six weeks if you watch the morning news have been a bit of fiasco for the healthcare exchanges it opened on October 1st the number of people signed up have been very modest from the start you know they clearly are very apologetic about what they did now as they point out they knew some parts of this weren't going to work in the atmosphere where there was not a single republican vote for Obamacare they had no room to kind of go back to congress say there's certain parts of this are broken we need to fix it there's no no opportunity to fix it that being said they totally misunderstood what a big experiment this was as you know from running information system inside your hospital you don't start with a big bang putting information system in a whole place at once at Penn where we start our IT implementations at a smaller hospital a smaller way and kind of roll up and I was with one of the speakers who was speaking here in two months Nancy and DeParle who have to help so on Obama I was with her yesterday and I said why didn't you just start in North Dakota it was like 10 people and then moved to Kansas before you ever try come to Pennsylvania so you know the whole notion that you learn from systems implementation starts small learn tweak it and so what they made that big mistake now they felt they had no room to admit their mistakes in public given the kind of and obviously when you send a cruise out there you realize there wasn't a lot of appetite for people to have reasonable debate about what's going on now the other thing is you know you would not design the American healthcare system this is like the Bob Dole chart in 1996 you're not meant to look at this this is what all has to get done to get you eligible and obviously anyways built a system with all this kind of connection you know this is not going to happen smoothly you're going to have a lot of snafers along the way where they made a big political mistake as not being honest inside the administration as to how complex this was and when you think about as I point out to be on Medicare you have to be 65 you know once you're 65 as I've learned Dr. Ziggler you say 65 you don't go in an hour 65 income you may have income in January not in February maybe in April you have it again income verification is very tough and how to do income verification determine subsidies that's the biggest snafu in this whole thing they can't forget the subsidies to get people so this is going to take a while to fix there's no way this thing is getting fixed by November 30th I hope they come clean pretty fast now this is going to take at least a year more to fix before they get this done and it therefore has big consequences for what's going to happen so where are we all I've tried to suggest to you a couple of things one is going from kind of the FIFA service system to population health is going to be a real challenge for us I think there's a lot of things Chicago can do like Penn can do inside the current system to improve again working on your quality working on your costs experiment a lot figure out especially how to manage certain segments of the population that you feel you have a special expertise on and in moments all of that all of us that's going to be inside cancer inside heart disease inside high-risk infants and around inside the neuroscience I would pick some areas inside that and sort of experiment inside of that whether you can provide better value and work out a deal with your local insurers to do some experimentation on that also every market's a little different you cannot generalize totally so you have to understand as your leadership does what's different about Chicago versus Philadelphia versus San Francisco unfortunately here you're not be Chicago's not driven by big primary care operations as you're not you don't have what you have in California you have in Minnesota and you have in Wisconsin but primary care drives it you still have the opportunity to work with the specialist inside the region to try to change the care processes now the big part of the change that's being driven is by the payment system change in Obamacare but the other things are changing as well and I listed some of them here you know the internet and social media and how people access information about healthcare and all the doctors the audience know compared to 20 years ago you know patients now come to you with stuff they've downloaded from the internet and say hey doc what should I do as if you know you have time to look at 100 pages of stuff that's half good and half bad and figure out what to do but the patient is increasing involved especially with these kind of technologies being available quality measurement just keeps ratcheting up your CMS is the federal government during commission US news everybody's doing chronic quality metrics and you can't be inattentive to it the professions themselves as some of you have heard of the board of internal medicine coming out a year and a half ago of what's called the choosing wisely program to get physicians to take more of a lead and only doing what's necessary both in terms of both under and over utilization and as you see in California again where a lot of things come from California is it likely that payers will channel patients now I think that's not a big risk in Chicago or Philadelphia but you certainly see it in California Wisconsin and so forth so these kind of things are going to keep moving in many ways this can be the most exciting of times of for academic medicine because there's many advantages we have I remember having been at this for a long time every decade I remember when DRGs came in everybody thought that's the end of academic medicine and then the balanced budget act in the 90s and Hillary care the Clinton healthcare program and regional consolidation and movement towards primary care they thought that's the end of academic medicine now we're being challenged again I always felt that our comparative advantage are these programs that we have it's the fact that you can aggregate under one roof all the towns that you have here whether it's on the whether it's your specialist such as the internist with the surgeons with the pathologist then the anesthesia and imaging and so forth and all the various allied therapists and now the various capabilities you have in informatics and policy considerations the community hospitals cannot replicate that the insurance companies can't replicate that so it's the kind of aggregation of human talent that ultimately is the special expertise that the University of Chicago and the Penn has and as long as you keep building those teams and bringing them together and keeping them together I think you'll come out of this decade and the next decade as well as you have by the other decade so it's a pleasure to be back and I think Mark and I will take some questions Mr. Mueller's talk is hoping for questions and comments Mr. Maybe's question was about whether things like the affiliations that people have with Mayo and Cleveland first of all there's very few national brands in healthcare Mayo and Cleveland are true of them but even then that's known inside a room like this the average person in the street may know about Mayo and not much else so most you know the tip on the yellow we said all politics is local essentially all healthcare is local almost all even the Mayo 80% of their patients come from 100 miles around Cleveland and it's true of Chicago it's true of Penn it's a very local business so I think these affiliations they're attractive as those of your business it's attractive you can get a franchise fee from some hospital in Florida or elsewhere for example MD Anderson which is the big cancer center in Houston just signed up a hospital in Camden, New Jersey so it's nice for MD Anderson because it's you know they got a mean dollar fee but New Camden has the same demographics as is Newark it's one of the poorest areas in the country it's all Medicaid and uninsured and the Anderson doctors have given a chance they want to practice in Scottsdale, Houston or in Camden I'm going to say where I am because I can't afford to practice it so a lot of these things I think are good franchising moves for the people who are franchising not good moves for the people who get it because it doesn't change the practice whether it's in Florida or elsewhere it doesn't change the practice there they may have access to protocols but they get access to protocols through their specialty societies and so forth so I think basically it's a clever marketing move that a couple of places can make I don't think it's dramatically can change healthcare in America I think the kind of this is still hardcore emphasis on variation inside your hospital quality improvement inside your hospital and infection rates mortality those kind of things that's hard work we should work at it I think bringing it somebody from outside sometimes I think management sees that oh well I brought the mail in but it doesn't change anything I mean mayors glad to get their fee so how much more skeptical those things are fruitful things to do I mean if you're a male or a Cleveland clinic you should be glad sometimes you want to pay your marketing fee but it won't help the local hospital the question is about the ACL now the ACL's are very much an integral part of the payment changes that are built into Obamacare the Affordable Care Act and now there's several hundred of them that have been piloting around the country I think we have to a University of Chicago is an evidence-based place just like Penn is so first we have to see what evidence comes out of these ACL's the previous the big demonstration around the group practice model six, seven years ago showed some models quality improvement and cost savings in only one of the ten sites and the big cost savings was the University of Michigan site and they had pretty high utilization like Philadelphia did to begin with so they were able to bring utilization down I'm pretty skeptical that the results on the ACL is going to be that positive part of it is as any of you who try to manage a population they were a little bit too politically correct on this so they have what is called attributions of ACL so if you're running an ACL you don't necessarily know who your patients are now exactly how you manage a population if you don't know who they are it's very difficult you kind of by definition you can't manage a patient you don't know about they attribute patients to you based on their utilization so for example one of my colleagues that used to be with all of us here Steve Lipstein he tells me the ACL they have down at Barnes Jewish in St. Louis 25% of the patients in the ACL they didn't know about till after the period was over so I think the current ACL methodology is deeply flawed that being said the underlying ACL concept makes a lot of sense so I think we'll learn from that and that kind of the ACL is we develop with within our regional markets can be done differently but as my comment suggests you know like we get our patients from 80 miles around and 80% of our patients come from somebody else are seen as primary care by somebody else how do how does my medical center manage the care of populations to whom we have no IT connectivity no way of managing that care we don't know about them before or after so I think the ACLs have to be done more around the kind of chronic disease population I talked about so I'm going to do an ACL around heart failure I'm going to do an ACL around heart attacks I'm going to do one around strokes but as I say here's 100,000 people if I said to you here you're responsible for a population in Wisconsin and one down in Indianapolis and a couple of people out in Joliet say how the heck do I keep on top of those people I don't have IT connectivity I have no way it's very hard to do that kind of general population management you can do it if you're the only game in town there's no other hospital it's very hard to do it in a metropolitan area I think you can do it around cluster populations I think the ATO should be based much more around those kind of cluster populations where you can in fact say I'm going to keep in touch with the heart attacks I'm going to keep in touch with the stroke I'm going to keep in touch with the breast cancer patients well it's very exciting about half the states are given the Supreme Court willing to sign not to expand Medicaid in fact that's happening in Pennsylvania at the moment two of the not expanding men I think that's a real travesty because those populations need access to care and I heard Scott Walker was nominally running for president on morning Joe this morning saying you can trust the federal government to fund this they're getting 100% funding for four years and it just baffles me why in fact the citizens of Wisconsin are paying and citizens in Pennsylvania are paying for Medicaid expansion in those 25 states I've never figured out why they wouldn't do it and I mean the hypocrisy of saying that their word that in due time it won't be funded now it's true of all federal programs in due time they may change but the reality is turned on 100% funding for four years 90% funding after that just strikes me is very unwise it's obviously an ideological statement not a policy statement and it denies you know there are about 16 million people who are going to come in out of that Medicaid expansion 16 when Obamac there was the estimates by the CB congressional budget office when Obamac was passed and with half the states not participating that number is going to go down quite a bit so I think it's it's a major mistake and it will affect obviously in Pennsylvania and Wisconsin Texas obviously opposed to child for types that should have people insured with 25% on insurance so but this is driven by ideology not by any kind of evidences so what's wrong with the system phenomenal talk and welcome back for having you I just wanted to have a corollary to what you said in that you have 80% of your patients from 80 miles away and 80% are from private hospitals or providers how do you combat the interoperability problems in terms of electronic health records where they may have a different system and now you have to see them for the first time and for me as a radiologist having your image transfer has Penn done anything to deal with this? it's very hard and so obviously you know we we're an epic shop so we can use programs I'm not going to epic jargon with you but you can have epic link in those kind of places where you can read we do let doctors elsewhere have read only access to our system but when they're coming in with information from a hospital outside images and so what with the same problem you have you know so many of our doctors want to redo the MRI want to redo the image so we have all those challenges that you have as well and that interoperability has advanced in some states out in the way Illinois is Pennsylvania is and not even close to doing it Delaware some of the small states have done a little better at it but my guess is the big complex states to be fair New York has done a pretty good job of this in New York state but it's very it varies very much around the country and it makes it very hard do that kind of integrated care that that one wants to but what we do with some outlying hospitals and you can't do it with that many is have joined tumor board to do telemedicine with them as a way of keeping track of some of the more complex acute populations but you can't do it to a whole population that you can't you can't put telemedicine into hundreds of offices you can do it in clusters like a big hospital and so for what you can do so that's a big challenge in most parts of the country we'll continue to be for the time being my guess is there has to be some kind of technology breakthroughs to allow that which is going to happen more from the technology providers not from the health systems to figure out how to overcome that problem Hi Ro welcome back it's not great to see you here oh that's a little thank you the question I want to ask you about is the issue of cost transparency and what I'm thinking about is that your institution like the one you left behind are likely very high cost institutions and so there are two aspects of this that keep my mind very active and that work one is to what extent will patients be making their decisions where they can get the best cost for their total hip replacement or their bone density screening or whatever the issue is that they need and the one that I deal with very regularly is how do we teach students and residents about the costs of care when it is completely opaque and impossible to figure out what in fact those costs are so you've been at this a very long time and I'm wondering if you could speak to the question of how far away are we from real transparency and cost and then secondly how will that transparency if in fact it happens impact patient behaviors and our ability to teach the next generation a couple questions there so first of all we've known for 40 years going back to the RAND studies that if you have the patient pay more it has some effect on some of the behaviors such as seeing a doctor for well their vaccinations and come for primary care visits so it has an effect there when somebody is diagnosed with breast cancer you know and they come to New York Chicago or Pennsylvania one day the hospital will blow through any politically feasible deductible so if you think about the politics of this what can you charge a patient for care in the politics of America I'd say it's probably somewhere under $10,000 a year in an insured system under $10,000 a year so basically even with co-pages deductibles payments and so forth we're not a society yet that's going to say I mean obviously if you're totally uninsured then your house has taken a look at us but in an insured program like Obamacare or if you're employed by the bank or the University of Chicago you're deductible in co-payment for acute diseases you're going to blow through it in first one day so my answer is on ambulatory care on routine care on colonoscopies and that kind of stuff you're going to have price sensitivity which is going to affect demand and the complex stuff has very low price effect because basically once you've been diagnosed with heart failure you need a transplant have premature triplets and so forth in one day you've used up your deductible for the year after that basically you're covered by insurance so in some ways we're a little bit more protected from that than a place that's just the primary care place and the reason that Walmart and CVS compete at the $59 level that's what people want to pay so I think it has less effect on us so I don't mean therefore we should be complacent about that secondly as I've argued we're always going to be high cost per unit so my argument is as I said in my example around the breast cancer try to work out deals with insurance companies or depending where you are with employers as Cleveland Clinic gives on needs and hip replacements and say give me a whole population or give me a big secondary of your population and I'll sort it out for you and I'll tell you who you have to spend a hundred thousand on and who you have to spend one thousand on because I'll do the genetic another kind of evaluation that tells you who will respond to the therapy and so forth I think that's a way of taking our higher unit costs if we cost three, four thousand dollars a day and by basically saying if we take care of people and evaluate who needs the care and who doesn't need the care who can benefit I think that way our higher unit costs can be turned to something that perhaps is an advantage to society by working out those kind of arrangements now those are going to take five, ten years to work out that's not a panace here tomorrow but I would really try to figure out how we use our relative advantage and diagnostic skill to that effect in terms of transparency of prices you basically get transparency on the easy stuff you know medications scopes imaging and so forth you'll probably see more just like people right now go to eBay and Amazon and you see it around the country right now in Dallas and places you know who will do an MRI for 400 bucks and people will sign up and do the MRI for 400 bucks when you're in the middle of cancer therapy or seeing you and your colleagues in any of the programs in medicine or surgery or seeing Dr. Kaplan you're not in the middle of Dr. Kaplan's oh I'm going to say well I want independent pathologists to come and read this slide for 20 bucks you know and not going to happen so I think once you're in a course of care that model of going to the spot market for pricing is not going to work as well in healthcare but it's much more integrated and the extent to which we want the model that we teach over the business school having everything done on a market-based and contractual base versus the model of integrated care and population health they compete against each other so I'm very suspicious that you can really have a lot of price transparency once somebody seriously ill and since this place is going to focus on the 5% of the population that's 150% of cost I still think price transparency is not going to be our biggest issue what's going to be our issue is bringing our costs down so the methodologies you can use for your students, residents and then they want I would do as much as you can and obviously you do a lot given your role in the training program I would do as much as you can to have the kind of conversations where the RICS and other people in the world kind of talk to your residents and your medical students about what care costs in America and I think that I know this in any curriculum people have a lot of suggestions but that's something I would look at have you calculated the potential cost to the University of Pennsylvania system of the likely health reform that's going to take place in the next year or two what they're basically trying to do is quote unquote bend the cost curve so I don't think by and large what we get paid is going to go down in any measurable way I don't think that's me I think what is going to happen is we're not going to get the kind of inflationary increases we are used to getting five, seven percent increases over the last decade and that's not going to happen anymore so I think the big challenge is to figure out how to keep your cost inflation at the one, two, three percent level rather than six, seven percent level and you know for example national health care costs the last three years have been going up three, four percent a year the lowest increase in about 30 years if you go up two or three percent versus five percent as you know from your retirement account it makes a big difference after 10 years so if we can keep if you can keep your cost inflation here at the two, three percent level around the five, seven percent level that's a big win and I would focus and I think both and I think your staff your doctors, your nurses all your people feel a lot better they don't think you're gutting the price but basically they challenge all of them reduce variation figure out better care and by reducing that variation you can bring the cost down last question my question Marshall it's around the roads because then meeting where the CEOs of WoW Cornell and Beth Israel Deacon said that if your hospital is still maybe 23 percent of the patients that are really the high tech high complexity patients that really are unique to actual medical centers they said that the majority of centers including the patients still is like 70, 80 percent of patients really are the more red bar cases of that they're going to be done equally well at community hospitals so in terms of like the viable business model I mean you mentioned WoW you could increase the inflow of higher tech well you know when you Marshall is very good this kind of stuff we do kind of what's called case mix adjustment adjust for acuity those routine cases now but aren't that much more expensive than they are in the community hospitals the community hospitals they are cheaper than us but they don't have the same kind of acuity point one secondly you have we have to hope that some of the premium pricing that we've been getting for 30 years from Blue Cross from Medicare and I spent a lot of time in Washington trying to keep it going that the premium pricing we get through the complex stuff is also allows us to get a little better pricing on the rest of it if we really if those all become commodities we're all in difficulty so I think that requires us to keep educating the people who pay us whether it's Blue Cross or the Congress and so forth that if you treat us on that 70-80% of the business is a commodity you'll stink all the big medical centers in the country and then you lose all the advantage you get from academic medicine so I think part of that is a political discussion so I mean if we go to that kind of market we're all in trouble so that doesn't mean therefore you kind of whistle past the graveyard but you have to keep figuring out how to make the case to Blue Cross to CMS to Congress that the package of what they get from us is worth it it doesn't mean that they'll pay us outlandish numbers but I think as I've said if we can figure out how the 2-3% increases I think society will back us I think we're not in a period where we can keep getting 70-80% increase and you know the federal budget on Medicare you know CBO and even the critics if they want to be honest about this heritage foundation if you start getting 1-2% increases in Medicare and Medicaid over the next 10 years the entitlement budget problem solved it's if you project out it's growing up to 7-8% you have a big entitlement budget problem so a lot depends on whether we can dampen the increase by doing the kind of things I suggest around reducing variation managing the chronic diseases in a much more powerful and insightful way using the kind of skill sets we have and diagnosis as well as interventions to manage this but I think that's that's a course forward for us I want to thank you so much for coming thank you