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Transformer Man

David Chin is optimistic about U.S. health care—if it follows the new prescription for affordable care.

By Brian W. Simpson

There’s no Richter scale for measuring tectonic shifts in American health care, but that’s okay: Seismic changes will soon be apparent to all. When the dust settles, the fee-for-service model (which pays physicians more for doing more) will be a much smaller part of the landscape, says David Chin, MD, MBA, a former senior national partner with PricewaterhouseCoopers. Soaring health care costs and estimates that 20 to 50 percent of expenditures are wasted have made change essential, says Chin. One new model that is challenging fee for service is called the accountable care organization (ACO). Part of President Obama’s Affordable Care Act, ACOs are basically networks of hospitals and doctors that are rewarded for keeping patients healthy rather than for racking up office visits, angioplasties and tests.

Chin, now a Bloomberg School Distinguished Scholar, is leading an executive education program for transforming health systems to the accountable care model. The first cohort of doctors, nurses, managers and pharmacists is from the Johns Hopkins Health System and is learning from a similarly diverse group of educators from the schools of Public Health, Medicine, Nursing and Business. Their goal: lead ACO transformation. In a March interview with Johns Hopkins Public Health editor Brian W. Simpson, Chin explained how U.S. health care is changing and why he’s optimistic about its future.

Should we, as some argue, let the U.S. health care system collapse and rebuild it from scratch?

That’s the Alcoholics Anonymous model, right? You’ve got to crash and burn first. And then you’ll be willing to change. I think the system is too big to ever want that to happen. Too many people would get hurt. Until this point, the pain hasn’t been great enough in terms of cost to really drive change. But I think we’re getting there at 18 percent of GDP. Since the states cannot run deficits and they are on the hook for ever-increasing retiree health and benefits costs, they must come up with creative solutions. Otherwise, they go bankrupt. They have the most motivation to find a solution. That’s why I think the states will lead with innovation. I can imagine that … different states will come up with some model that will work, and then we’ll say, OK, if it works there, then we’re willing to adopt it nationally.

Is fee for service really going away?

It’s funny. I think fee for service will be always with us, but maybe moderated some. You could make the argument that you might pay primary care physicians fee for service so you incentivize them to bring in patients at the primary care level, but then you might put specialists on some kind of global payment so there is an incentive for them to be more cost-effective.

How are ACOs incentivized to keep their population healthy?

[As a physician] in the current fee-for-service system, I only get paid if the patient comes in to see me. I do not get paid to keep a patient healthy or to keep a patient out of the system. The more I do, the more I make. Under an ACO model, I’m given almost a lump sum, a set amount of budget to take care of a population. And I know that a certain proportion of patients who are very, very sick and could use a lot of expensive therapy and in-patient days the next year aren’t necessarily the patients coming in to see me. It incentivizes me to go looking for patients [with] whom I can intervene earlier and reduce their costs. It also incentivizes me to use services more cost-effectively for those patients who do come and see me.

How does this affect physicians?

Not only is it a different reimbursement model, it’s a different mindset. Physicians aren’t classically equipped to deal with thinking about population health, number one. But also, number two, [there is] the notion of practicing in teams, like a patient-centered medical home. Many medical schools don’t have a curriculum around what’s the role of a physician inside a system of care. Classically, that’s a public health kind of discipline. I think that’s another potential source of discomfort for the docs. Not only is the money, the reimbursement thing, different, but now you’re moving into an area where you’re no longer the expert.

Are ACOs something that physicians welcome or dread?

I suspect you probably know the answer to that question. Most doctors grew up under fee for service, and that’s worked very well. Whenever you start changing the rules, particularly about money, people get kind of upset. But people do know that the current trajectory is not sustainable. Physicians are rapidly offering themselves up for employment with hospitals and health systems trying to get shelter. They can see the handwriting on the wall that the fee-for-service model is broken and that the inexorable rise in fees is no longer inexorable.

What’s the most important thing you teach in the executive program?

We actually spend a big chunk of the curriculum focusing on change management, how you work on teams, how you negotiate. Because we recognize that if you’re going to transform your system for accountable care—you can have a great idea, but if you can’t get the people, the docs, the managers and the nurses to buy it, it’s not going to happen.

Are you optimistic about U.S. health care?

Yeah. I tend to be inherently optimistic. I do think, given our pluralistic model and our penchant for experimentation, that we’ve got some potential to fundamentally change the system. But I don’t think it’s going to happen right away. I think a 10-year horizon is probably the right horizon.

Training health care executives sounds like business school. Why is this public health?

“Accountable care” really means a structure and a set of incentives to care for a population of people. To do that, there needs to be a set of measurements, incentives, structures and processes. That’s the public health focus. Accountable care starts by saying, I’ve got a whole population of people I am responsible for. Not only the people I see face to face in the office, but also the people who are out there as part of my population, that I’m going to be responsible for next year, and if I don’t get a handle on them, I’m going to be in trouble. That’s the public health twist to this thing.