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Health-Care Experts Say Reform Should Stress Structural Changes Over Cost

The amount of money is not the problem, said former Bush administration official Mark B. McClellan -- it's what we get for it. "If we're living longer, better lives, that health-care spending is a good thing," he said. "The problem is that a lot of that spending is not leading to productive improvements in the quality of life."

Repeating lab work, performing unnecessary surgeries, treating hospital-acquired infections -- all sources of revenue for providers -- have no health benefit and may cause harm. Although the changes envisioned by Obama have not been tested on a large scale, many of the ideas have shown promising results, said McClellan, a physician and an economist.

Regions such as Sacramento; Green Bay, Wis.; and Portland, Maine, have held Medicare increases to about 2 percent a year, he said. One of his major complaints about the legislative plans, including a deal announced Friday in the House, is that he thinks they are small and incremental and do not give the government the power to rapidly implement what works.

McClellan said it is possible to write policy that over several years would reduce medical growth by about 1.5 percentage points annually, which he said would result in "trillions in savings." The draft bills in Congress, he said, "have a ways to go."

Health systems such as Intermountain Healthcare in Utah, the Billings Clinic in Montana and Gundersen Lutheran in Wisconsin have brought growth under control while delivering superior care, though they largely serve smaller, homogeneous populations. And the results did not come easily.

'Challenging Work'

It took Virginia Mason Medical Center in Seattle "eight years of very difficult, challenging work" to wring tens of millions of dollars in waste out of its system, Chairman Gary Kaplan said.

In one case, Virginia Mason teamed with Starbucks to re-engineer treatment of lower-back pain, the No. 1 medical expense for the coffee company. By offering physical therapy on the front end, doctors reduced the number of costly MRIs from 35 percent of patients to less than 5 percent. And the vast majority of baristas who once endured 66 days of exams, tests and waiting now return to work within 48 hours.

"The insurance company does better, the employer does better, the patient does better," Kaplan said. "The only entity that doesn't reap the benefit is Virginia Mason, because the only thing that was really profitable was the MRI."

Number-crunchers at Intermountain found that reducing the number of Caesarean sections it performs from 21 percent of births to 19 percent would save patients and insurers $8 million but cost Intermountain $1.8 million, Vice President Brent James said. One solution is to add "gain-sharing" to the legislation, enabling health systems to retain a portion of the money saved and use it to continue innovating, he said.

Financial incentives are also critical to instituting broad changes beyond providers with creative leaders such as Kaplan and James, said Nichols of the New America Foundation. Paying for results "creates a motivation for people with eyesight that is not as good as the visionaries'," he said.

Conceptually, some lawmakers embrace the notion. Senate Finance Committee Chairman Max Baucus (D-Mont.) has not released his bill but has expressed enthusiasm for reorienting financial incentives. The challenge lies in the nature of today's system, a $2.3 trillion industry that touches every person, business and politician.

David Kendall, a senior fellow at the nonpartisan Third Way think tank, notes that one out of every 10 health-care dollars spent in the United States is directly linked to diabetes. Pilot projects have shown that paying a medical team for total care -- monitoring blood-sugar levels, giving eye and foot exams -- rather than paying for each visit to an ophthalmologist or podiatrist is better for the patient and costs less.

"The financial losers will be hospitals that no longer amputate somebody's foot or the dialysis centers" that are no longer needed, he said. "That's where we save a lot of money."

Congress should direct Medicare to make a single "bundled" payment for packages of services, such as diabetes care, and publish results so that patients can shop around for the best doctors, Kendall said. "We have every reason to believe it will be worthwhile, but we're not sure how to implement" a variety of such experiments in a large, diverse country, he said.

Dick Davidson, a former president of the American Hospital Association, said too much of the debate has focused on the insurance market, rather than on broader problems inherent in the country's "piecemeal" delivery system.

Still, Davidson, who helped defeat the Clinton administration's health-care plan, had words of praise for Obama, saying the president "has had enormous courage" in pushing for major changes. "People say, 'Slow down, slow down,' but that's what policymakers in Washington always say," he said. "If he misses this opportunity, he's not going to have another one."

Staff writer Dan Eggen contributed to this report.

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