In his hour long talk and Q&A session, “Preparing Your Practice for Success in the New Era of Value Based Healthcare,” Dr. Kevin Bozic (of Dell Medical School in Austin) shares how you can prepare your practice for success by measuring what the patient values the most: improvements to their pain, function, and quality of life. Practices get access to this data by collecting patient-reported outcomes (PROs). Dr. Bozic goes on to share how PROs are being used in his practice to determine care pathways, performance improvement, clinical decision making, cost optimization, payer negotiation, and so much more.

This talk originally aired live at The Second Annual Interdisciplinary Orthopedic Value-Based Care Conference in February 2018.


Don’t have time to watch the whole talk. We transcribed it for you. Please forgive the typos.


Kevin Bozic on How to Prepare Your Practice for Success in Value-Based Health Care

Dr. Zeev Kain: Great, thank you. Dr. Albert again, our next speaker is a return by popular demand, Dr. Kevin Bozic. Dr. Bozic is the leader of Orthopedic value based care in our country. He’s the chair of the Department of surgery, which includes orthopedics at Dell School of Medicine, he was before the vice chair for Orthopedics at UCSF. He has published hundreds of articles, sits on multiple boards and he’s overseeing implementations of CJR and BPCI and I’m looking forward to see what he has to say is the future in that area.

Kevin Bozic: I’m going to run, wake up and I’m going to stand down here just because I can’t sit still it’s early in the morning. So I want to thank everyone once again for inviting me back. I have been putting on conferences and symposia on the topic of value based healthcare for since 2005.

I remember the first conference I did … symposium I did at the AEOS. They gave me a thousand person ballroom to put on a conference on value-based healthcare and there were 12 people in the room and six of them got up and left because they were in the wrong room. Now here we are 12 years later and as obvious packed ballroom of people. And so, I applaud him, but I applaud all of you for making the investment in time and hopefully you’ll find this to be a worthwhile experience in your journey.

Just by way of disclosures, I do have a couple of relevant disclosures. As I’ve mentioned, I’ve been a consultant to CMS for about a dozen years as well on topics related to value based healthcare, including, their value based payment models as well as a developing performance measures for their value based payment programs.

I am a colleague and student and mentee of Michael Porter, who I’ve worked with now since 2000. And so a lot of the ideas that I’m going to share with you came from my work with him. And I’m also the current chair of the American Joint Replacement Registry, but essentially I’ve had a lot of experience in both the private sector and the public sector around developing value based payment and delivery models.

Now I think everybody in this room knows this is a … would agree this is a very exciting time to be in medicine. I think about when I was a medical student in 1990 to 1994, we didn’t even have a way to diagnose hepatitis C and now we can actually cure it and wipe it off the face of the earth.

That the advances in biomedical science are mind boggling, the things that we can do and that have occurred over the last decade alone. So with that in mind, what are these people arguing about? Anybody tells me. Somebody tell me money. Okay, what they’re actually arguing about is, is what they call access.

So access to an insurance card. Who should get access to an insurance card? And I’m going to try to make the case today that the problem is not access. So, Todd mentioned Warren Buffet, I had the chance to sit on a panel, last year at Harvard Business School, with these two gentlemen, Warren Buffet, Jeff Himoap from a GE.

So, why would these two guys be sitting at a panel discussion at Harvard Business School on healthcare? What are they worried about? Cost, right? As Todd mentioned in his presentation, and I’m going to argue to you the problem is not cost.

And Todd also mentioned that we are frequently criticized in this country for having amongst the lowest publicly reported measures of population health in the industrialized world. And I’m going to argue to you that the problem is not quality.

So it’s not access, it’s not cost, it’s not quality. So what is the problem? Well, I think that the primary problem and what we’re going to be talking about over the course of the next two days is that we’ve really just lost sight of our goal.

So what is our goal? Every one of us in this room, no matter what aspect of the healthcare sector you’re in, everything that we do, true north for us when we wake up every day is to try to produce greater health for our patients per dollar spent.

And that’s what we call value. And so how did we get here? Right? So how did we get from all of us when into this, whether we are a pharmaceutical supplier, a physician, a nurse, a hospital administrator, because we wanted to produce greater health for patients and yet somehow we’ve lost our way.

So what’s accounted for that? Well, first of all we have a system that is heavily emphasize that heavily emphasizes care and not health. So I am a prime example of that. I’m an orthopedic surgeon. We are the highest paid amongst all healthcare professionals. We do nothing to promote health.

We basically fix things when they’re broken. And if you look at the people who spend their lives trying to promote health, and preventative health, and keep people healthy, babies and older adults, they are at the exact opposite end of the spectrum, right?

So the system itself, rewards care, we have a very fragmented system, right? So not a day goes by for me when I’m in clinic where I don’t reorder a test or an x-ray or a study that’s been done on that same patient in the last week just because I can’t access the information.

We have a culture of defensive medicine and we’ll leave that topic for another day. But certainly that does contribute to in medical area, does contribute to the cost. We have a medical arms race that’s intense. Before I came to Austin, I was the founder and chair of the Healthcare Technology Assessment Program at UCSF and we had a pretty sophisticated program where we did evidence-based reviews of new technology.

People would come in and say, I want this new gadget, and we would review it and look at the evidence and a look at the, potential impact on patient’s cost outcomes. At the end of the day, the argument that always won after that very thorough evidence review was, “Yes, I know that, that’s what the evidence says,” but we need this thing because Stanford has it and if we don’t get it, we’re going to lose business to Stanford.

And that was essentially how we made our technology decisions and all of us are in that boat, in our communities, right? And then finally there’s a moral hazard problem, which is essentially a disconnect between the people who make decisions about their care and the people who are paying for it, as Todd mentioned in a third party payers.

But again, I think that what we’ve come to learn and why all of you are here, is that the primary driver of dysfunction in our healthcare system is the lack of competition based on value as we have in every other aspect of our service economy.

So how do we get back to that place where we are delivering greater value to our patients? And that becomes the measure of competition. Well, first of all it starts with changing the delivery model, right? So right now we have a delivery model that is extremely fragmented. Patients bounce around like ping pong balls and they are essentially responsible for navigating their own care, they are their own case manager carrying around.

My mother-in-law’s rheumatoid arthritis, frail, elderly patient with lots and lots of doctors, carries around this big thick stack of medical records from doctor, to doctor and then tries to get them to talk to each other and communicate very inefficient, very poor quality care.

We’ve turned that model on its head in Austin, so we have what we call an integrated practice unit model where the patient is at the center and we bring the care to the patients. So on Monday when I get back, we’ll see 40 patients in the office that day. It’ll be me, a nurse practitioner or a Chiropractor an acupuncturist, a Dietitian, a behavioral health trained social worker, and a pharmacist.

We will all be operating at the top of our license because we’ll all be providing what we’re good at. And not every one of those patients needs to see an orthopedic surgeon. And so if you look at how we’re managing a lot of orthopedic conditions, say, take what I manage, which is hip into your arthritis. It’s extremely inefficient.

So I’ve always thought, you have a primary care doctor on one end of the spectrum and then you have an orthopedic surgeon and you have all this stuff in the middle, right? So I’m always amazed, and I’m sure I’ll see patients on Monday with knee pain that come to see an orthopedic surgeon.

So if you have … if I wake up with a headache, I don’t call a neurosurgeon, right? That’s not the first place I go, but my knee or my shoulder hurts, I’d call an orthopedic surgeon and think nothing of that, right? So there’s this huge gap in between what were the primary care doctors are doing and what we’re doing.

And that gap is being filled with non evidence based, non value added care, right? So we see this every day write lots of manipulative treatments that are not evidence based, lots of types of injection therapy, stem cells, hyaluronic acid, et cetera. I see 20 of these a week, patients with advanced arthritis at the first imaging study they had was an MRI before they got an x-ray. Essentially what that means, is there’s a huge opportunity here between what’s being done in the primary care setting and what’s being done in the sub specialty setting.

And that’s where we’re trying to create value. So again, as I mentioned earlier, involves down streaming care. We want our medical assistants doing things that nurses used to do, nurses doing things that nurse practitioners used to do, nurse practitioners doing things that physicians used to do. We want everybody functioning at the top of their license.

Not only does that create greater value for patients, but it addresses some of the bird down issues that Todd was speaking about. Essentially, we want to create a work environment where people feel rewarded, and they feel like they’re functioning at the top of their license. You need a strategy, and you’ll hear about this all weekend to engage your patients.

We tell our patients, they are not the subject of the care, they are actually part of the care team. They are right in the middle, and they are an active participant in the care, and they have responsibilities just like all of us do, and they have accountability.

And so we measure something called patient activation and all of our patients, it’s a simple measure of scale of one to four, and it tells us how likely that patient is to engage in healthy behavior. And so it’s a scale of one to four. And I can tell you right now, if a patient comes to see us with a patient activation measure of one or two, which essentially says that saying, fix me on broken.

They have done nothing to try to optimize their own health or to engage in healthy behavior. That’s not a person that we’re going to put into a surgical pathway. That’s a patient who needs greater engagement and activation before we’d even think about talking about something as aggressive as surgery. And then we put them through a program with our case manager and ultimately with our social worker, and ultimately they come back, if they get to a three or four, then that might be a patient who’s appropriate for surgery.

We’ve studied this and it’s been studied in the spine world. We studied it in hip and knee arthritis. And no surprise, patients who are more activated have better functional outcomes and lower complications. Make sense, right? So this is what I would consider a modifiable risk factor and a lot of the modifiable risk factors that we talk about smoking, obesity, uncontrolled diabetes, I believe are proxies for activation.

Patients who are more healthy and take better care of themselves, get better health outcomes. So then I wanted to shift to, how do we measure value, right? So we’ve talked about, okay the goal is to achieve greater value. We need to reorganize the delivery system to do that. Now, how do we know if we’re achieving that goal?

So every single one of these organizations on this slide organizations I’ve consulted within the last 10 years, who are today, right now measuring the value of us. So they’re all out there putting information out around value and how do they do that? There’s a bunch of different metrics that are used. There are things called structural measures, which are meaningful use criteria.

Are you meaningfully using an electronic health record, Okay? Maybe has some benefits, but as Todd said, not a real great correlation with value. There are process measures, which are things like, did you give the antibiotics or VT prophylaxis in the appropriate window? Again, it’s helpful to practice evidence based medicine, but that is not value.

That is not the outcome ultimately that we’re interested in, and we don’t like to be prescriptive about the only way to get to this outcome is through this path. We want providers to innovate and create outcomes through a variety of different paths and really focus on the outcome that matters to the patient.

And then their experience measures. But again, this is not value. So each cap scores and CG cap scores are not value. So what do any of these things really have to do with value? So ultimately, if what we care about is creating value for patients, what are the things that we need to focus on and measure, anybody tell me?

Speaker 2: Quality of life.

Kevin Bozic: Quality of life, Okay. And quality of life is what I would call a health outcome. And then health outcome and what’s the other part of the equation?

Speaker 3: Cost.

Kevin Bozic: Cost? Okay. So we have to understand the true cost of delivering care, which is different from the allocated costs. Most of us, if we practice in a hospital setting or a large multi-specialty clinic, most of the information that we get about cost comes from a cost allocation system. That’s helpful for management purposes, but it’s not helpful for understanding your true costs and being able to understand if you’re creating value.

So ultimately, I would encourage you to read Bob Kaplan’s work on time-driven activity based costing, but just to understand what it actually costs you to deliver that service, not where you’re allocating to it, but how much of the physician time, the nurses time, the physical therapist’s time, the patient’s time went into delivering that care? But ultimately the most important thing if you walk away from this conference and Change, one thing I would say focus on measuring outcomes that matter to patients.

That is the key ingredient to improving value and so if we look at how do various members or actors within the healthcare system use value assessments? Well the payers, as we heard in the last talk, are increasingly using them in for so called accountability either through value based payment programs that are aimed at providers or benefit design aim at their patients.

So, they’ll steer patients in a way that hopefully creates better value. Patients are increasingly using this information for clinical decision making, but it’s hard. Most of the evidence suggests that they struggle with it as we do in understanding and differentiating value from publicly available sources. But what I wanted to focus on is how do we use value assessments as providers?

For me that’s in two areas. One is in performance improvement and then the other is in clinical decision making. So again, just from the payer perspective or the patient perspective, there’s kind of two strategies that have been pursued in this world of value based payment models and benefit design.

There’s the center of excellent strategy, which says that the employer picks, says hospital for Special Surgery, thou shalln’t have your surgery at hospital for special surgery because I know they produce better value. And I know what’s good for you as your employer. So I’m going to differentiate value until you were to go to get your care.

And then there’s the reference pricing strategy, which is actually more common in California, which all of you know about the Calpers experience with this. But essentially this is where the employer says, “I don’t know how to judge value, I don’t know what your value system is, I’m going to give you the money, $30,000 and you decide what good value is.”

And so this puts the owners on the patient themselves to assess value. Beyond the payers, how do we use value assessments? And this is what I really wanted to focus on here is so how many people here are competitive runners or have been at any point in their life, any people who’ve run a marathon or done any.

So any of you guys keep your times?

Speaker 4: Of course.

Kevin Bozic: Why do you keep your time? To improve yourself, right? So it’s really about getting better at comparing yourself to yourself. And this is ultimately when I work with payers or large health systems and they say, “We want to demonstrate our value and show that we’re better than so and so or so and so. In fact, I’m worried now a consultant to the joint commission and helping them determine how they designated centers of excellence to me.

Do you have a system in place to continuously learn and improve value? That’s what, to me, defines a high value system. Not one that can show they’re better than somebody else at some benchmarks that can be easily gained. So is anybody here from a line of health system in Minnesota?

I had the chance to go here, about quite 18 months ago now and speak to their board about value based healthcare and I got their brochure ahead of time, their outcomes brochure. I get these from all different kinds of places all over the country. Many of you in this room send me the affinity outcomes brochures and I flipped through them and I always find that you’re better than benchmark at every single thing you report.

You show that your infection rate, your volumes, your patient report outcomes, whatever it is, is better than benchmark. So I got this report from a line of health system and right there on page two of their glossy brochure, it showed me that they’re deep infection rate for surgery was double the national benchmark. Right there in their fancy brought glossy brochure.

And I am an orthopedic surgeon who needs a knee replacement. Just had it done two months ago. And I said to myself, that’s where I’m going to go to have my knee replaced. Now, why would an orthopedic surgeon who does knee replacement for living want to go to a hospital that has double the national benchmark? Anybody want to tell me?

Because they know that there are things that they can improve at and I promise you all of us can, and they’re actually focused on getting better at that and focused on. And they’re willing to share that with me. They have a culture of continuous improvement.

I went and visited a hospital that I won’t mention. But I like to say to them that John Wooden, who’s one of my heroes, said, when you’re through learning you’re through. If you’re only measuring things that you’re already better than benchmark at, stop measuring them, you’re missing the point. You want to be continuously improving.

So I went to a hospital again that I won’t mention and gave a presentation on this topic, and it’s a nameless, faceless hospital on the upper east side of Manhattan that I won’t mention the name of. But they said to me, “You know, Kevin, we just couldn’t find anything to measure that we weren’t already better than benchmark at. And I said, “Well, I’m sorry you’re not looking hard enough, right?” There’s always things that we can improve at. And this is the real engine of value creation.

So the last thing that I’ll talk about then, is so how do we use those outcomes to improve value? So we’re orthopedic surgeons, I’m an orthopedic surgeon, and ultimately there’s one outcome that matters to my patients. My patients come to see me for one reason, and what is that? Pain, function, Quality of life, right?

So there’s lots of different things we can measure. Todd showed some in his last slide, infection rates and complications, Yati Yati, that’s not what my patients come to see me. They don’t come to see me to avoid a blood clot or an infection or death, right? They walk in to see me because they want to get better quality of life, better functioning, less pain.

So the most important thing that you can measure if you’re in this business is pain, function, quality of life. This is our blood pressure cuff, right? How many orthopedic practices in the country do you think measure pain, function, quality of life on every patient at every encounter, for every visit? Less than 1%. So Todd mentioned in the last talk, total joint replacement, most common surgical procedure done in the United States, less than 1% of patients were ever measured the impact it has on pain function, quality of life.

So literally this would be like treating hypertension without a blood pressure cuff, right? Makes no sense. So I’ll just finish up by showing you how we use this in our practice because I think that patient port outcomes are a good tool, not just for performance improvement, but to actually understand where your patient is and what the most appropriate treatment is.

We did this and we published this in the New England journal catalysts last year to talk about our experience, but essentially we measure in every patient that walks through our door. We get a physical function score, a mental health score, and an overall quality of life score. And this is a study we published. The black line in this study show on, on this graph shows the baseline score, which is a measure of function in patients who had knee replacement.

Higher is better and you can see here that there’s a bell shape curve of patients who underwent knee replacement. And that blue dotted line is the percentage of patients who achieved a minimum clinically important difference, which is essentially the patients who said, “Yes that was worth it. I got what I was looking for out of that procedure.”

And you can see that patients who have a score below 58, almost 100% of those patients. And that includes patients who had blood clots and infections and readmissions and re-operations and blah, blah, blah. Almost 100% of those patients achieve their goal. But if you look beyond that 58 mark, it’s really hard to achieve a minimum clinically important difference, and this is the kind of information that I can now share with my patients to help them make a better decision.

If you layer on top of that, not to get too technical there, mental health, which you can see in this graph, the dark blue is the percentage of patients who got better and the lighter yellow is the percentage of patients who didn’t.

And so what you can see here is that patients who have worse physical function and greater mental health or resiliency, as Todd mentioned, almost 100% of those patients who walk into my office, I can tell them and predict with very high degree of certainty that they’re going to get better from surgery. But patients who have even slightly above average physical health or poor resiliency or activation, I can promise them that they’re not going to do well with surgery.

I can actually make that prediction ahead of time and discuss it with them and point them in another direction. So we can actually use that to personalize. So it’s always hard when I hear people say they have shared decision making conversations with patients and they say, you have a 1% risk of this and a 90% chance of getting better and a 2% risk of that. But that’s for some sort of normalized patient that’s not for me. Kevin Bozic who needed my knee replaced.

So we want to give our patients personalized assessment of their risks and benefits of surgery. So very last thing I said that was the last thing, but the very last thing I want to touch on is the need to transition in payment models. I know Alex, of course is going to talk about this more and there’s others that are going to talk about it more in detail, but ultimately if we’ve now transitioned the delivery system the way I just described in a way that creates better value, and the payment system is lagging and the payment system is still a fee for service siloed model.

It’s not going to work very well. So in Austin, we have the margins on our value based payment business are significantly higher than they are in our fee for service business because of the model that we’ve created. So we now the onus is on us to quickly shift in our payer contracting to value based assessments. And so what is the role? I’d like you to think for a minute, what is the role of the payment system in creating value?

So there is the fee for service system we know incentivizes over utilization and Todd mentioned the word population health. I actually don’t think population health models or capitation incentivize value. They incentivize what? Under utilization, right? So what we really want is that sweet spot in the middle, which is where basically conditioned based bundles where people are, providers are coming together in a way where they can actually manage a patient’s condition and improve and be paid around a condition not around a population.

I can’t make a population better. I have no control over how many of those patients get sick, how they treat themselves. But if I, if somebody comes to see me with a condition, I can get a group of people that manage that condition or expert at it and we can continuously improve. So if you look at the fee for service model, it’s interesting because I know so many providers that are just trying to glom on and especially hospitals that want to hang on to this model and think that it’s been a really successful model for them.

If you look at it, the model is designed so that the better and more efficient you get at something, unless you get paid. It’s like chasing your tail, right? So if you’re a hospital, you shorten your length of stay or your DOG weight goes down. If you’re a physician, you reduce the time it takes to do the procedure and you get paid less because you’re relative value units go down, right? So the system is set up to discourage innovation in efficiency and improvement.

In a value based system, you’re going to see that there is, as you not only do you get the opportunity to improve, and by the way, it does require an upfront investment. Anybody who tells you the things that we’re talking about up here today is an expensive, it costs money to do this, but number one, it’s more rewarding. It creates better value for patients and ultimately as you improve and get better, you actually improve your financial margin in addition to your clinical margin, unlike the fee for service system, right?

So you have the opportunity to continuously learn and improve and as you create more value, it’s actually rewards you as the provider. So as I mentioned, if you’re designing a value based payment system, the reason why conditioned based bundle is a much better model in capitation is it puts us at risk for the performance. We want to be taking performance risk, not insurance risk. Leave that to the insurers.

They’re better actuaries than we are. They have larger populations over which to spread the risk. I don’t want to be managing risk. I want to be managing performance risk, not an insurance risk. So if you look at how the payment model has evolved, these pay models evolve. The original bundle payment that was … project that Medicare did was around, it was called the Acute care episode demonstration. It was about 12 years ago in the southwest United States and it was a bundle for the inpatient stay for cabbage and total joint replacement.

It had some pretty good results, from there that led us to the BPCI program, which then said, well, we’re gonna, we’re gonna put the provider at risk for the inpatient stay and then some, some length of outpatients or post acute stay after the in-patient stay. The CGR program, which I was involved in helping design was really focused on the post-acute. There’s no risk and the inpatient stay and the seizure program. It’s all around the post acute.

But what we’re trying to do in Austin and say there’s a real opportunity to manage risk at the condition level rather than the procedure level. Why is that? Well, if you look at what’s missing from bundle payments today, procedural based Bundles, there’s basically one thing that’s missing that I want to describe to you here. And you’re only going to get so far in value creation if you’re bundling at the procedure level.

So this is an X-ray of a patient who came to see me, I’m 18 months after a total knee replacement that was done in the Medicare, BPCI program had a perfect bundle for Medicare standpoint. So she was in the hospital one night, went straight home with no home healthcare, had no complications, or readmissions to the hospital. So perfect value creation from the definition of the procedure based bundle, came to see me 18 months later and was absolutely miserable. Anybody want to guess why?

So we went back and got her pre-operative extra, shouldn’t have arthritis. So if we are only bundling at the procedure level we are going to completely miss the discussion of appropriateness, right? So we need to back up from the procedure and focus on optimizing value at the condition level. And so what we’ve done an Austin is now we actually have a condition based bundle for the management of hip and knee arthritis where we actually get paid for an annual bundled payment for the management of hip and knee arthritis.

Then for a certain number of patients if surgery is appropriate based on the algorithms that I talked to you about what the patient report outcomes that will trigger a surgical bundle, but they’re completely separate. And so I think this is my last slide here, but wanted to show that, how does that work? So any of you that want to get into condition based bundling, I’d be happy to speak with you offline, but you go to a large employer, we have some large employers like Todd mentioned, and you look at their total population of patients.

So in this case it was an employer that had 35,000 beneficiaries. We and the hard part is getting them to share their claims with you. But if they’re willing to do that in the interest of creating conditions based bundle, we could see that about 1800 of those patients had a IC 10 code for arthritis in the past year than we know how many of those patients had treatment with a specialist and we figured out that it costs about $3,800 a year to manage arthritis for those patients.

So we’re able to apply our algorithm and figure out that we could manage those patients at a discount from that $3,800, create value for the employer and we actually a much higher margin for us because we know that when we apply an evidenced based care algorithm that we’re going to get a better outcome and we’re measuring those outcomes.

Again, patient port outcomes, every single patient. So this isn’t rationing, this isn’t, Oh, easy way to get below 3,800 is just do less to the patient, no, this is actual. We’re measuring the health function quality of life of each of those patients. And then ultimately, that got us to a condition based bundle and a procedure based bundled. So I’ll just finish up with a couple of quotes.

I think that as you go through the course of this weekend, it’s, it’s interesting because we get into these debates over in cocktail parties about what is driving the dysfunction in our system. It’s the greedy doctors or the green insurance companies or the lazy patients who aren’t engaged, et Cetera, et cetera. And I really think, as an orthopedic surgeon and kind of like to simplify things. I think we’ve basically got two simple choices in front of us.

Either we find ways to achieve greater health outcomes per dollar spent, in other words, value what we’re talking about here. Or we just simply take our lumps and cost containment is imposed on all of us. We deliver care, we narrow the number of patients that we treat and we take less reimbursement as providers. And the encouraging thing for me is although the ladder is going on and that is the fee for service model that we’ve been talking about.

The fact that there’s 250 of you here this weekend that have an interest in, and probably a lot of experience already and the former is really encouraging to me. And I’ll just say that no matter what kind of practice setting you come from, I truly believe after studying this for 15 years, the value is agnostic to practice setting. What do I mean by that?

When my residents come to me and say, “What, does this mean I have to go to work for Kaiser?” No, I have actually seen examples of high value care in single solo practitioner practices, single specialty group, multi-specialty group, large integrated networks. But the sole question you got to ask yourself, every single strategic decision that I make in my leadership role can boil down to one question and that is, “Is this going to allow me? Is this decision, this business decision? This person, I’m hiring, this investment I’m making, this partnership I’m engaging in? Is that going to allow me to create better health for my patients per dollar spent?”

And if the answer to that is ‘No,’ then it’s a no. It makes strategy very simple. And to Todd’s point about this announcement from JP Morgan and Berkshire Hathaway and Amazon, I mean, he may be right that these are not healthcare experts, but as was pointed out in this article, these guys don’t do anything half asKed, right? So the fact that you’ve got three of the smartest people in the world and business giants saying, “We are disappointed with what you, all of us collectively have done and your inability to solve the problem. So we’re going to apply all of our might and resources to try to help you solve it.”

I think that creates an enormous leadership opportunity for us. And I think that this is … I tell my trainees, these are the glory days of medicine, right? When before, have you had the opportunity to completely rewrite the code for how we deliver and pay for healthcare. But I understand that change is discomforting and disorienting for a lot of us. So this is my last quote, and this is my favorite quote on the topic of change, comes from King Whitney Jr, who was a business consultant in the ’60s.

He published this in the Wall Street Journal. “Change has a considerable psychological impact on the human mind. To the fearful, it’s threatening because things may get worse.” And this is where most of organized medicine has. This is where the AMA is. This is where the AUAS is, Oh my God, what are they going do to us next? Fear, fear, fear.

To the hopeful, it’s encouraging because things might get better, but to the confident, it’s inspiring because the challenge exists to make things better. And that’s where I am. I truly believe that these are exciting times. I thank all of you for being here and listening. I look forward to the discussion and the interaction over the rest of the weekend. Thank you very much.

Q&A

Dr. Kain: Thank you Kevin. Mr. [inaudible 00:32:18] can you come here please? So we have a panel discussion right now. You have the opportunity to ask questions. There are two microphones at the top right here. Kristen, can you take the microphone and just kind of delivered to people who wants to speak? I will ask the first question here to fill up gap. And Kevin, I think you knew this question was coming.

Kevin Bozic: It’s a plan.

Dr. Kain: Okay, where are we going with this mandatory bundles from CMS? My God, I feel like we are in a trampoline here. We are on, we’re off, we’re on, we’re off.

Kevin Bozic: Good question. So I think that HHS and CMS made it very clear that they are transitioning to a model where they want the majority of their payments to be through so called alternative payment models, of which bundle payments is one. We had a small blip when an orthopedic surgeon was the secretary of HHS and was against the idea of mandatory bundles. And, his rationale for that, which you know, you can agree with or not was that, in the BPCI program, the providers who were set up and ready to accept risk and manage risk jumped in feet first.

So it was a voluntary program and you sort of pruned all the … you got the low hanging fruit of the places that were ready to do this. And what medica said is “Okay, that’s fine, but that’s not going to get us to where we need to be. That’s 500 hospitals out of 5,000. We need to get to the others. So we’re specifically going to pick places that are not prepared and figure out if they can figure out how to do this and create value.” And what secretary Price said is, “That’s dangerous to patients.

Because you’re acknowledging that you’re not prepared to manage risk and we’re going to force it on you, which may result in bad decisions on the part of providers.” I don’t necessarily agree with that philosophy. That was his philosophy. He’s since been replaced. And as you know, when BPCI advance was announced, this is a voluntary program, but it’s significantly broader than BPCI legacy. I was up at [inaudible 00:34:24] two weeks ago meeting with him about the sort of entire roll out of the value based payment program. And the new secretary [inaudible 00:34:32] acknowledged.

He said, “Yes, we are going to experiment with mandatory bundles again. Because again the voluntary bundles create value, but they’re only going to get us so far down the road and down the path of encouraging and bringing providers in and helping them make this transition to value.” So that’s a long-winded way of saying, I think we’re going to see a lot of emphasis on voluntary bundles were a lot of the innovation occurs. But I think we’re going to see increasing number of mandatory bundles as well. There’s got to be some comments and questions out there. Yes, come on.

Speaker 5: So hi Kevin. Fantastic talk. In the clinical bundles, for example with knee pain. How or when do you take entry of the patients from the primary care doctors into the bundle? As you mentioned, a lot of times they hand us the MRI for something that we could figure out on an x-ray. When is that transition happen so that the primary care people feel like they can get into the pathway for their patients?

Kevin Bozic: It’s a great question. We’re right now exploring … I think one of our biggest customers is going to end up being primary care driven, accountable care organizations because as primary care docs they hold on to these patients because they’re definitely afraid of what’s going to happen to them when they let go. And that results in a lot of that non-evidence based care. One of my colleagues who’s a primary care doc says, “I love my surgical colleagues, but every time I send a patient to him, they come back with a scar somewhere on their body,” They’re always in fear of “Okay, well let me try snake oil and stem cells and all these sorts of things.”

We encourage them to send them as soon as possible because of the model we have. But essentially the way it works is, we have an actuarial rate for one year. We know that it costs $3,800 to manage that patient. And we know with our model overall we can do it for less and so we’ll take them at any point, but that’s why we didn’t bundle in the surgical rate because that creates really perverse incentives. If you’re now at risk for a $40,000 surgery in addition to that $3,800 bundle. But we guarantee and lock in that if they look at their surgical utilization over the last year, whether it’s back … we had the same thing for back pain and hip and knee arthritis.

Ours will be lower so we can guarantee them. And we did originally create sort of a advanced moderate and mild OA bundles, but they’re just too hard. They were too hard to negotiate contract for and manage because you just don’t know when the patient walks in. What we do have in our contract, if a patient walks in and it appears that they’re not going to need any follow-up care, any physical therapy, any dietary recommendations. That they were sent to the wrong reason. We just bill them at an encounter rate in a fee for service rate.

And we don’t charge them the bundle. If it’s a patient who’s going to need care through our telehealth model or through some other model then that patient gets put into the case rate. One thing is you can’t always figure out exactly what that patient is until they come in to see you, but we’ve just taken all comers and we take the advanced, and the moderate and the mild and we know that for that population we can do better than was done previously and we’re tracking and measuring the outcomes.

Dr. Kain: So Kevin back to the kind of broader question. The employers and the third party payers. Obviously they can be very powerful within this area of value based care and bundles. Where do you see that going?

Kevin Bozic: We’re pursuing a number of direct employer contracting arrangements. The private insurers have been sort of the late comers to the game here, right? The Medicare got into this game early and then people like Warren Buffet and Jeff Bezos said, “These health plans … the value that the health plans provide is they can adjudicate claims, which is a pain in the butt for providers to do.” And when I talk to large employers, big, big employer groups and say, “Why do you use this health plan?” It’s for two reasons.

One is the claims administration and the other is data. They have really good data that they can share and they can look at patterns of utilization and things. That’s why if we can get better at data, if we can get better at harnessing that data and we’re going to have the patient report outcomes which they’re not, they would much rather contract with us, because they can cut out the middle man who’s taking a 15% markup in just passing it along. If you look at the employer sponsored healthcare, has done a relatively poor job of controlling costs and improving quality.

Because they’re just the middle man that takes the premium, marks it up and passes it along. So there’s more and more large employers like Buffet and Amazon and JP Morgan saying, “We’re going to take control of this ourselves because we’re unhappy with the way the third party insurers are managing it. And they’re a lot more incentivize. Most of these companies are self-insured, right? So the insurer is not actually accepting an insurance risk. When United Health Care managers, a TPA for a large employer, they have no risk in that. They’re just getting their commission and they’re marking it up.

So the employers themselves are the ones that I think that are the most motivated. You have to be large enough and you have to have enough employees in a certain region to do this unless you’re a national organization, which we’re not. So for us it’s things like Dell Computers, Whole Foods, ones that are in our community. Because if it’s a national organization, they’re going to want that plan to apply to all of their employees all over the country or all over the world. And unless you’re a provider organization that has that kind of coverage, you’re not going to be able to do that.

They’re also travel plans, as Todd mentioned. There’s reverse tourism where they’ll send patients to a particular place. I think that market is very, very small and it’s going to stay small. I think that more of the direct employer contracting will be in a region with a provider that’s focused on these principles. There’s got to be some more questions out there. We’ve got to get people to wake up.

Dr. Kain: Yes. What’s up with that?

Speaker 6: I have a question over here. Thank you very much. By the way for your talk. In the back.

Kevin Bozic: Ah, there you go.

Speaker 6: Got you. Okay, so BPCI Advanced was announced as an advanced APM. I’d love to hear your comments about that.

Kevin Bozic: You mean you don’t think it’s advanced?

Speaker 6: The advanced APM piece.

Kevin Bozic: So let me see if I can answer your question. So first of all, what I don’t think is advanced about it is that most of the bundles are procedure based bundles and for the reason that I mentioned, I think we’re working with CMMI right now actively to get a condition based bundle. It’ll be the first one in that program. But does it qualify … are you asking does it qualify as an advanced alternative payment model?

Speaker 6: Well, they’re saying it does qualify as an advanced alternative payment model. And they’re going to collect quality measures for the first two years.

Kevin Bozic: It depends on how you’re using it, right? So you have to have the use of the electronic health record. Have a certified electronic health care and you have to have two sided risk, right? So you can be in a alternative payment model. [Inaudible 00:41:25] was an example in the first year that was one-sided risk, so it didn’t qualify as an advanced APM. Next year when the two-sided risk kicks in, it will be an advanced APM.

So it’s those two things, right? It’s the use of the certified electronic health record and the two-sided risk. But again, I think that if you’re sort of meandering into this field of the value based healthcare to manage risk, you really have to have the infrastructure in place to understand your costs and outcomes before you start taking on risk. You can get into some of these programs that are not advanced APMs and essentially shared savings type programs as sort of foot in the door strategy, which would be my advice.

I think that we especially should be doing this with our ACO colleagues as the primary care colleagues. They have to manage the capitation risk, but if we can show them that we can create better outcomes at a lower cost for certain conditions then we’re a perfect customer for them. And that’s what we’re going to focus a lot of our attention.

Dr. Kain: Great.

Kevin Bozic: I think there was over there.

Dr. Kain: Shawna?

Shawna: [inaudible 00:42:29]. Nice to see you. Hi there Kevin. So Shawna Butler was singular University … one of the pieces that you mentioned, two of them actually, that I think have an even bigger impact, is you were talking about everybody working at the top of their skill deck and there’s a key piece in regulatory and scope of practice on this.

So particularly where nurses, all of us working on these different levels. We need to have a lot more support particularly in the legislature. But it really comes to the AMA, the CMA, the TMA. Could you spend a little bit more time talking about how you are going about making that happen?

Kevin Bozic: Yes, so you’re preaching to the choir, although I’ll say that I’m an outlier. I was on the Board of the American Academy of Orthopedic Surgeons for seven of the last nine years. And I was the sole outlier when we discussed the scope of practice issue. So I think that turf battles decrease value, right? So all of us sort of circling the wagons and shooting in and saying, “You can’t.” The classic is Orthopedic Surgeons fighting podiatrists.

Well, you know, a podiatrist only spent six years in school instead of eight or nine years, so they shouldn’t be able to operate on a foot. Well, I think that maybe you could spend two years and you can figure out how to do some of this stuff, right? I think we should be reducing the length of training and we should be getting people specialized earlier and we should be having everyone functioning at the top of the license.

So every time we try to squeeze somebody out, and if any of you’ve read Clayton Christensen’s work on disruptive innovations, he has a really good chapter on this whole scope of practice issue and it is lots and lots of examples where it depletes value. So rather than saying, “We don’t want the nurse and anesthetists doing this. And we want to keep the PAs and nurse practitioners in their box.”

And by the way, the radiologists do it to us, as orthopedic surgeons. They say we shouldn’t be reading MRIs because we haven’t trained for six years on MRI reading like they have. And so it cuts both ways and I think that what we really want to be doing is relaxing some of those scope of practice of boundaries and focusing on outcomes.

If a podiatrist can care for a patient and get a better outcome than I can, then by all means they should be doing that. And I actually want to see more of the emphasis on outcomes. And so that sort of breaks down these barriers of who can do what. Everyone will make the claim that you know, “Oh God, you’re going to maim and hurt people,” right? Hospitals did this to ambulatory surgery centers.

It’s evil for these ambulatory surgery centers to pop up and start operating on patients. They’re going to kill people. They have to send them by ambulance to the hospital. Same scope of practice issue guys. So those of you that think chiropractors and podiatrist should be kept in their box. The hospital would like to keep us in our box when it comes to ambulatory surgery center.

So you can tell that this is a subject I’m pretty passionate about, but I think she’s absolutely right that we need as a profession … organized medicine needs to step up and focus on, patient outcomes rather than defining our turf battles and protecting them.

Dr. Kain: I could not agree with you more. And breaking the silos was why this particular organization and this particular meeting was born. Because you go to the AOS meeting. It’s an amazing meeting. But it’s orthopedic surgeons. You go to the ARN meeting.

It’s an amazing meeting and its nurses and I can continue with the AOE and the AOSA and all these other acronyms. So the question is, how do you want people to work together in practice when they can’t even come to the same meeting? So that’s definitely the point.

Kevin Bozic: There was a question over here. Yes, right here. Give her a mic.

Speaker 7: Okay. Thanks. When your patients enter into the bundle to try to close that gap that you were pointing out between the PCP and the orthopedic surgeon, who do they see? Is that a physiatrist or?

Kevin Bozic: So what we do is we do an intake. For hip and knee patients we do a KOOS or a HOOS, we do a NIDA screen. We do a promise global and then a PHQ2 and a GAD2. So basically we’re assessing their physical function, their mental health, their quality of life in any unhealthy habits.

For instance, if it’s a patient with a BMI of 50. The first person who sees them is a dietician. If it’s a patient who screens positive for moderate to severe depression or anxiety, the first person who sees them is our behavioral health trained social worker. If it’s a patient who has a crew score of 15 or 20 and it’s clear from their history that they’ve had a lot of other treatment already. The first person they’ll see will be an orthopedic surgeon. So it depends very much on … but that’s why it’s key to get that information upfront ahead of time and understand the type of patient that you’re dealing with. Out of those 40 patients that we’re going to see in my practice on Monday, I’ll see less than 10 of them because less than 10 of them need to see an orthopedic surgeon.

The others need to see the dietitian, the social worker, the physical therapist, somebody else on the team. And in many cases they’ll see multiple people. But not necessarily an orthopedic surgeon. So who they see is very much dependent on what they tell us ahead of time about their pain function, quality of life, and lifestyle.

Dr. Kain: So let me ask Eric a question, so you won’t feel alone here.

Eric: I feel left out.

Dr. Kain: Yes. I know. I know. So the ARP has 48,000,000 voters. What is the ARP going to do to fix our healthcare?

Eric: Good question.

Dr. Kain: Sorry I wanted to wake you guys up.

Eric:
Good. There are things that we are doing that we hope improve healthcare. Let me start with a sort of a granular level. Although some may not agree with that and that is, in many, many states, we feel that the scope of practice of nurse practitioners and physician assistants are unduly restricted from any of the same turf battle motives noted.

And by the way, I cannot tell you how excited and interested and pleased I am at the presentations. I think they are magnificent both of the ones that came after myself. A lot of good information and ideas. So one of the things in a practical level we’re doing is to try to increase the availability of medical services through a more comprehensive utilization of nurses, nurse practitioners, physician’s assistants.

Because in many areas, particularly rural, there’s a shortage of medical practitioner. It’s terrible in many areas. A lot of places you could get a nurse in there who you would have enough revenue support, but you certainly couldn’t get physicians. The other thing is that there’s an increasing … I think we do defend the Medicare and Medicaid and all that.

That’s not really structural. Structural things would be that we are doing research and trying to popularize research about the notion which is inherent in your bundle model. I think that a wider range of issues could theoretically be addressed for each patient because some of them may yield some tremendous improvements in both cost and quality at a very much lower cost.

For instance, we know that isolation is a huge issue. You know, the lack of hearing aids is a detriment to health. Depression is a huge issue. So if we could find ways of addressing those issues outside of medical intervention, at least classical medical intervention patients will be much happier. The bills would be much lower.

And I think that’s a simplistic way of saying, a lot of the things that you have been saying and that is very eloquently. I guess the other thing is some interesting personal history and that is, one of my first jobs is deputy insurance commissioner was I was tasked to solve the number of rising healthcare costs which were vexing, the Detroit automakers.

This was in the mid-70s. I was about 28 years old. I was a doctor all right? A doctor of laws. So you started to look at things like, and it was very apparent that there was no profit motive, if you will, or financial incentive in the medical system as we knew it on fee for service basis to minimize costs or to innovate. Now, the mistake we made was thinking that the HMO model might be the answer.

Get vertical integration, bundle payment that that might solve things. And there were a lot of missteps. All I can say is with the best of will that was not going to happen from somebody with my level of skill or the mandate or lack of it that state government had. But what I can tell you is this. I think I know why Mr. Buffet, Mr Beasel’s. Mr. Gates have done what they did.

My interpretation is that the one thing they do know is how to use the profit motive to cut costs. And I’ll close with a little vignette where we had an ARP seminar. We invited the person who hits the Gallup poll. We invited him to talk about healthcare and he just said one or two things. He said, “I’ve watched the cost curve on healthcare. This camp continue. Thank you.

Any questions?” But he’s right. We all know it. It is going to kill us. And with the tax cuts that have been enacted by Congress. The day of reckoning probably occurred about a week and a half ago on the stock market. That may be or may not, but the world knows now that the bills that are going to come due for government services including healthcare, are not going to be easily met and there will be hell to pay.

So changes coming perhaps more rapidly than you think, but I think the Gates and Beasels and a Buffet really see a chance to harness the profit motive. And I think the most logical approach is many of these muddling mechanisms that allow you to use that motive.

Dr. Kain: So now I know how you guys will solve it. Thank guys. Three more questions.

Kevin Bozic: There’s one back there.

Speaker 8: In the back.

Fred: Kevin that was great talk. All the talks.

Kevin Bozic: Is that Fred, I can’t see clearly.

Fred: Yes it is. How are you? I agree with you about setting up the clinics centered around the patient like you’re going to be doing when you go back Monday because I’ve been doing that for many years, but many of my colleagues feel that’s very inefficient even if you can set it up with having it … so it’s not as inefficient, but many of them complain and instead of seeing 40, you could see 80 patients that day if you didn’t have the clinic centered around the patient. And I’ve been battling this for many years. I don’t know how you fight that.

Kevin Bozic: So couple things. One is [inaudible 00:56:14] asked me right before this. What do you do … how do you get the patients to be comfortable seeing they almost … I want to see the doctor. I want to see the doctor. If they want to see the doctor, they see the doctor. I can tell you that 25% of them want to see the doctor right? If they go through this model and they have this kind of process.

They don’t all want to see the doctor as much as that’s what we think coming into it. It’s different from saying you’re going to come to a clinic where there is no doctor and you’re going to see these other providers. If they want to see the doctor, I’m there and I can see them. As far as the efficiency point, I think it is actually a valid point. And if you’re in a condition based bundle, this makes a lot of sense.

Because we’re getting a bundled rate for every patient we see. And so all of those services are our costs and we’re paying for them and the margins are much higher. If it’s in a fee for service world. That model that I just described is very inefficient.

And so right now we’re underwater in most of our fee for service contracts because we’re providing extra services that either we can’t bill for or we don’t want to because it tarnishes our image and our idea to the population that we’re actually trying to improve health, not saying you four different co-pays for seeing, four different providers in a visit.

That again puts the pressure on us to run as fast as we can to get as many conditioned based bundles because the condition-based bundles are very profitable for both us and for the employer. But the fee for service ones, we’re losing money on because we’re providing a bunch of … so your colleagues operating in the fee for service environment are providing a bunch of extra services that are either not billable or billable at below cost.

And so I think a lot of it depends on your perspective, but if you go into this world of condition-based bundles, this is in my opinion, the only way that you can come out ahead and by the way it creates better value for patients.

Dr. Kain:
Yes. I think the quality of care is better when you do it like you’re saying and it’s better for the patient, but even when I’ve been in a few of the courses not as many as you have taken at Harvard, but a lot of the colleagues have said this is not efficient and they’ve gone away from it some of them.

Kevin Bozic: And you’re right. I think if the goal is to keep the surgeon busy, then they’re right. But if your goal is to create value and you can do it in a very profitable way then I disagree with them.

About the Author

Ellen Laux

Ellen Laux

Ellen cares deeply about brand, customer experience, and helping health care organizations make the most out of their patient-reported outcome data.

ellen@codetechnology.com