Category Archives: Health Finance

Extirpating the “Health Insurance” myth

Extirpating (ĕk’stər-pāt’) v.

  1. To pull up by the roots.
  2. To destroy totally; exterminate.
  3. To remove by surgery.

I recently took a great road trip with my two boys. We rented one of the new Kia Soul’s which my boys recognized from a very funny commercial developed to highlight its hipster (hamster?) vibe. The commercial reminded me of the old Hamburger A or Hamburger B commercials from Wendys back in the late 80’s wherein this ludicrous contrast is set up to demarcate the dichotomy between two distinct choices.

This modern reinvention of that age old contrast struck me because it is something that I deal with everyday in explaining Crossover Health to people. It all stems from a pervasive misconception about the term “Health Insurance”

Understanding the components parts of our modern conception of "Health Insurance" is the our first step toward meaningful reform.

The challenge is that “Health Insurance” is a confused term which most people equate with both Health Care (care delivery) and Health Finance (how you pay for it). Our current employer based system (wherein your employer provides and in most cases pays for your insurance) as well as a third party insurance payment system (we have the insurance pay for us) creates all kinds of weird incentives but also results in no accountability in terms of cost, quality, or outcome. It is currently imploding before our eyes.

Our reaction, both opportunistic as well as obligatory, is to do something totally different by blowing up the current Health Insurance model and separating out Health Care from how you pay for it (Health Financing). We say that there is a better way to do BOTH – pay your physician directly for the care you need and then get smart about how you pay for it with the right insurance product. In fact, you should “self insure” with the highest deductible plan you can find and then take responsibility for your health for all the small stuff or hire someone to do that for you (like Crossover Personal Health Advisory Service). There is no reason to intermediate with a parasitic organizations that are taking your premium dollars and wasting it on overhead, fancy offices, mindless phone trees, and my all time favorite “this is not a bill” disinformation pamphlets.

As people begin to take this in (they always get how the practice model is a radically improvement), they immediately revert back to the combined “Health Insurance” concept.  Does Crossover Health want to replace my current “Health Insurance”? The answer is slightly nuanced, but a resounding YES!  I want to replace what you call “Health Insurance” with a direct “Health Care” product (Crossover Health) and a smarter Health Finance product (highest deductible you can get).

We believe there are large and significant opportunities to roll this into a single product that can be purchased by employers, families, and other organizations seeking fresh alternatives that can demonstrate not only trend bending improvements but trend busting outcomes.



Filed under Crossover, Health Finance, Innovation, Insurance, Value

Microcapitation: Prometheus Catches Fire

Prometheus (prə-mē’thē-əs) n.

  1. A Titan who stole fire from Olympus and gave it to humankind, for which Zeus chained him to a rock and sent an eagle to eat his liver, which grew back daily.
  2. A personification of the unconquerable will opposing greater power, forever chained and suffering but confident of the ultimate triumph of his cause.

The second health financing innovation with relevance to the Healthcare XPRIZE was highlighted in the most recent New England Journal of Medicine article. The Prometheus Payment Model has been a longstanding project of Francoise De Brantes (of Bridges to Excellence fame) and folks like Doug Emery who have been beating the “episodes of care based” financing for years. I have had some great conversations with Francois and Doug over the years and I am pleased to see their ideas actually being implemented in some pilots sponsored by the Robert Woods Johnson Foundation.

Prometheus is a payment concept based on clearly defined episodes of care  wherein all the services provided can be bundled together in discrete “Care Packages” (not everything fits neatly into this construct as they note). These Care Packages are then assigned a global budget from which all care providers must deliver their services (technical term is Evidence Informed Case Rate). The Care Packages are further adjusted for patient severity as well as for Avoidable Patient Complications (APC). These are things like hospital acquired infections, exacerbation of chronic conditions, or other events that if optimally managed would not have occurred.  This payment model rewards providers for organizing along the entire episode of care. It clearly is a move away from independent, discrete payments for disconnected care to a new model of continuous view of all the events that make up the episode. The global budget for a clearly defineable event creates financial incentives toward high performance and quality outcomes.

I was the first to call this new payment model “Microcapitation“, and describe further in another post. The NEJM article is a good read, and highlights many of the talking points that I strongly believe in:

  • Rewards for value not volume
  • Rewards for quality not quantity
  • Rewards for the organization and coordination of care
  • Provides a financial integration mechanism for non-integrated providers to work together
  • Provides financial incentives to reward the above
  • Leaves plenty of room for innovation and improvements underneath the global budget.

I  hope to see the Prometheus model gain additional traction. A variation of this concept and much simpler to follow is the highly successful “Proven Care” model employed by Geisinger (see their excellent website describing the development process and the elements of their Angioplasty episode of care). I am encouraged to see these begin to flourish as part of the ongoing efforts of health care innovators.

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Filed under Health Finance, Healthcare, Innovation, Quality, Value

Transcript to Transformation: Twitterview with @Berci

Twitterview (twĭt’ər vyū) n.

  1. A twitterview is a combination of the terms Twitter and interview.
  2. The Twitter medium of 140 characters forces a concise style of interviewing and response.
  3. The public can join in on the conversation and become participants themselves by following along or tracking hashtags.

On March 26, 2009 the leading health care bloggers (see list below) throughout the blogosphere participate din a Blog Rally to raise awareness for public participation in the Healthcare X PRIZE design. Bertlan Mesko, leading Medicine 2.0 Advocate and author of the popular Science Roll blog, also conducted a “Twitterview” in support of the effort.

Berci: Can we start the twitterview now? I’d have 10 short questions, you may have 10 short answers. So everyone can enjoy it.

HealthXPRIZE: Thanks for taking the time. We appreciate your help in getting the word out. This Twitterview will complement the Blog Rally. Ready!

Berci: Great! First, what is the X PRIZE Foundation? What is the X PRIZE model?

HealthXPRIZE: The X PRIZE Foundation is a non profit organization that conceives and operates large incentivized prizes that lead to revolutionary breakthroughs. The X PRIZE model is based on leveraging a large purse, with a clear set of rules, that allows innovators to break through barriers.

Berci: Please tell us more about Healthcare X PRIZE!

HealthXPRIZE: The Healthcare X PRIZE is intended to be a competition to redefine health and demonstrate how new models of care can dramatically increase health value. We chose to focus on health value as opposed to a new wonder drug or device as our sponsor (WellPoint and WellPoint Foundation) & advisors were most interested in a systems prize. Systems prizes are much more difficult to conceive and operationalize than technical competitions like going to space or even replicating the genome rapidly. We are expecting that teams will need to innovate around health finance, care delivery, and individual incentives to increase health value. We are currently developing a clear set of rules, which provide the parameters of competition, as we believe that “creativity loves constraints”.

Berci: Reforming the US healthcare system is quite a brave mission, isn’t it? Why the focus on health value?

HealthXPRIZE: The US Health reform gets serious this summer and the HXP is well timed to actually demonstrate and prove in practice the principles of reform. Value is powerful organizing principle for reform efforts – we cannot just reduce costs, nor can we just attempt to improve quality without financial accountability. The focus on health value highlights the need to focus on both sides of the equation. Since Value =outcomes/cost, we are challenging teams to improve both simultaneously.

Berci: Why use an incentivized competition?

HealthXPRIZE: Incentivized competitions are very efficient, highly leveraged, and create an “X” factor within the competitive framework. Sponsors only pay the winner, a $10MM purse typical spurs >$100MM of investment, and the X factor creates global media attention to a key problem, inspire hero’s, encourage non-traditional thinking, and creates a powerful incentive for innovation.

Berci: And how can you properly measure health value? I guess you need pre-defined parameters. What are these?

HealthXPRIZE: Health Value has never really been measured within the US Health Care system. There are many efforts underway right now to properly define and measure health value. Many innovators are leading the way and we are attempt to build on their work or actively collaborate with new/ongoing initiatives (Dartmouth, IHI, AHRQ, etc) to solidify the health value measurement framework. In the context of competition, we are trying to make our measurement framework as concrete as possible by focusing on outcomes (mortality, specific morbidity, ED visits, hospitalizations, sick days etc.). Effectively communicating the notion of “health value” remains a challenge; we are considering focusing on aspects of health value (like decreased hospitalizations and sick days) as a more effective way to communicate to the public the hoped for prize breakthroughs.

Berci: How are the Teams and Test Communities Selected?

HealthXPRIZE: Teams will be selected by through a series of concept design and testing evaluations. They will be required to demonstrate or model the impact of their proposed interventions against test database provided by WellPoint. Independent judges will evaluate the merit/validity of the concept in order to advance. Communities will be selected based on specific criteria that are still being worked through. Intent is to have a defined population of 10K participants from which Teams will voluntarily enroll in the intervention. Test community will be matched against a geographically adjacent control group. Both the team and community selection requires further design, detailed analysis, and expert opinion which we are soliciting at this time through our network of national measurement experts.

Berci: When does this competition start and when will it end?

HealthXPRIZE: The “competition” has several phases: Design, Selection, Competition. We are currently in Design phase through our anticipated Launch later this fall. The Design phase includes soliciting public comment on how we can improve our initial concept/construct to create the most viable competition possible. After official “Launch”, we will begin recruiting teams to compete. Teams will then be narrowed as described above through late Spring 2011 when 5 finalist selected. After a brief integration period into test community, HXP competition is planned to officially begin in January 2012.

Berci: How does this shift the paradigm? What kind of outcome do you expect?

HealthXPRIZE: Great question – we believe the current paradigm is based on volume not value, on process not results, and incents the wrong behaviors while delivering bad outcomes. We want to shift the paradigm to rewarding the reduction of hospitalization / sick days and begin to pay for overall health improvement (this is the outcome we want!). We also want to not focus solely on disease care, and aren’t interested in just improving health care; but believe that we must move to an entirely new notion of engaged, activated health called “Vitality”. We want to demonstrate that this CAN be done at scale, with new entrants / new ideas, and want to set the HXP up as a framework from which these efforts can be tackled in the real world. By focusing on outcomes, instead of regimenting care processes or dictating care delivery, let providers/patients innovate and create rewards for those who obtain the best outcomes.

We believe incentivized competitions are a great vehicle from which we can accelerate change, shift the paradigm, and be a catalyst for the transformation that is required for the US healthcare system. We hope the outcome is a new way to think about health, measure health value, and demonstration of new models of care that demonstrate how to improve community health and individual vitality.

Berci: My last question, regarding X-PRIZE – first rockets, then genomics, now healthcare. What do you think? What’s next?

HealthXPRIZE: XPRIZE is a mission driven organization seeking to inspire the very best in human kind for the benefit of all – this isn’t just a nice quote. It is inherent in the DNA of the organization. We are attempting to be the catalyst in any “stuck” industry by creating incentivized competitions that can lead to radical breakthroughs to the grand challenges of humanity. HXP is now looking at education, energy (some really cool stuff), and developing world initiatives that can truly have major impacts. Fortunately for me, HXP is our focus for launch this year. It is quite challenging work, deals with multiple hard to think through issues, but includes the privilege to work with great people and teams including our sponsor WellPoint.

I have been thrilled with the level of commitment to this process and this prize development process has been tremendous experience. They have a very talented innovation team, led by Chad Pomeroy, who is fully supported by senior executives all the way up to Chief Executive Officer Angela Braly. They have been driving this initiative forward far beyond the $10MM prize purse; they are providing operational resources, sharing data, working to create appropriate test communities, altering business practices to accommodate the prize, and are committed to transparency as part of the HXP process. Their commitment to the project is the reason I became involved as I saw an unprecedented opportunity to really implement the innovation in an idealized but competitive test environment. We appreciate WellPoints leadership, foresight,and commitment to engage X PRIZE in developing the Healthcare X Prize for benefit of all. Very cool stuff.

Berci: Thank you very much for the interesting answers! I will publish the transcript on in a few minutes.

HealthXPRIZE: Berci, again, thank you for this twitterivew. We hope to have everyone visit our website, download the initial prize design, comment on our blog, and add their input to the Prize Design process.


Filed under Health Finance, Healthcare, Industry, Innovation, Leadership, Quality, Rational Choice, Transparency, Uncategorized

Recap: Building Health 2.0 Into The Delivery System

Recap (rē-kăp) n.

  1. To replace a cap or caplike covering on: recapped the bottle.
  2. To restore (a used tire of a motor vehicle) to usable condition by bonding new rubber onto the worn tread and lateral surface.

We had a busy session yesterday during my panel. Besides the irritating AV problems (in/out sound, survey probs, etc), we had a pretty good conversation on stage with 4 innovative provider types who are making a real difference in health care. The slides that we used to set the stage:


  1. Integrated Delivery Systems rock. The integrated systems deliver the best results. Period. But what about the other 85% – what can they learn from them? How can we distributed thier lessons learned to others who are trying to create “systems”. Both Group Health and the Dartmouth Clinics have acheived amazing results. Of interest, audience selected by 55% integrated delivery system, and 35% chose a small group practice.
  2. Transparency Rules. We opened up our second discussion going just right to the heart of the matter – What the heck happened with ePatient Dave, BIDMC, and Google Health? While much media has been generated regarding the ptifalls and perils, I think Roni Zieger (rhymes with “Tiger” as he unfortunately had to correct me) hit the nail on the head by essentially saying “don’t throw out the baby with the bathwater”. Essentially ePatient Dave has a very complex history – 92 ICD9 codes during the course of his illness – and essentially the entire data stream was released to his PHR. This was flawlessly execute by BIDMC to Google but exploded as ePatient Dave actually looked at what was sent over. The signal to noise ratio was impercetible (so much noise!). While there was no harm done, ePatient Dave appropriately called FOUL! regarding the potential for error, problem, and pain. This created a juicy story for the media which created a potential crisis for both BIDMC and Google. In Zen-like Fashion, John Halamka immediately diffused the situation by calling a meeting with all the players, openly discussed the concerns, made both a short and long term fix, and then putting together a strategy on how to deal with this issues in the future.  While the media story was the problem with the administrative claims data being shared, the real story was how – in a health 2.0 world – being transparent allows troubles to be trumped tersely. We heard directly from Roni, from John Halmka, and also ePatient Dave who spoke out as well. It was a great session, great conversation, and great example of the brave new world of health 2.0.
  3. Death to Innovators. Rushika had alot of great comments regarding both the opportunity and the challeng faced by innovators within the system. He was shunned, excluded, cursed, vilified, and all but tarred and feathered in Boston as he chose to focus on optimizing health of individuals to the exclusion of feeding the rapacious “system” as now constituted. He has pushed the boundaries in terms of adopting and expanding on the notion of the medical home, customer service, payment mechanism, etc. But serious challenges exist to reform the regulatory, the payment, and the entire culture. Rushika mentioned that health 2.0 will allow the patients to “vote with their feet” as they move to practices who deliver in this way.
  4. No Money, No Change! The bottom line was that all the good, bad, and ugly of our health care system has some roots in the financial incentives that are created. We need to fundamentally need to get to the root of this in order to create/reform the next generation system. If the actual financing of health care does not change, there is little hope that the delivery can change. An interesting insight into this was Group Health – which financially aligns the physicians payment to quality outcomes. According to James, “listen, changing the culture toward quality outcomes is hard enough – trying to do it when its against your self interest to do it is impossible”.  Even for innovators like Myca, there rate limiting step is potentially the payment mechanism as well (although they have a very juicy $250B cash payment market to go after!).

We did not have enough time to discuss, or take questions, but I believe we were able to accomplish our stated objective:

  1. Sense of realism of the challenges, but more importantly an optimism for the potential of Health 2.0; 2
  2. A realization that not only are new entrants creating systems from scratch based on this new paradigm but large, established players are leveraging these tools/technology as well; and finally,
  3. The possibility to transform our health system will happen both inside and outside the current system to ultimately result in a high performing, value-based, next generation health system to increases individual vitality and improves community health.


Filed under Conferences, Health 2.0, Health Finance, Innovation

Return of Microcapitation: Condition Specific Capitation Payments

Microcapitation (mī‘kro kăp’ĭ-tā‘sh en) n.

  1. A health care delivery mechanism wherein a service provider contracts with an administrator to provide health care services on a per capita basis.
  2. A financing mechanism wherein a service provider assumes financial risk, is compensated at a fixed per capita rate for predetermined services, and is evaluated based on service performance .

I am having some flashbacks this week to some ideas I introduced long ago that are just beginning to take hold (note to self – even if they don’t catch on immediately there is still satisfaction in coming up with the idea first). I read with interest the recent publication by the Network for Regional Health Improvement describing their suggestions for payment reform entitled, “From Volume to Value” (kudos to Bob Coffield for surfacing!).

It is a great read, complete with some compelling graphics which clearly explain the notion of value. Redefining Health Care helped get me there originally, and this document just confirms the notion that value based competition on results WILL transform the payment mechanism of health care by realigning incentives in such a way that people get rewarded for producing outcomes not procedures. In the new model, the excess capacity that exists (as described by supply sensitive care) will be reoriented around paying only for the outcomes we seek not the procedures or processes required to get us there. But we can’t get there all at once, because as demonstrated in the Innovators Prescription, we can’t pay for outcomes for everything because our clinical science is not far enough along (only 10% of care is Evidence Based).

The paper also shows two examples of a “Capitation 2.0” – one described as “Episode of Care” and the other a “Condition Specific” payment model.  These are examples of what I had previously described as “Microcapitation” previously (including the exact example that NRHI used). In theory, Capitation or other forms of pre-payment, can create alignment between the patient, the physician, and the payer (ie, see Kaiser, Geisinger, VA, etc). But this only works within an integrated system wherein everyone is motivated to help keep the patient healthy and can enjoy the gain sharing achieved through higher performance. “Capitation 1.0” failed previously because it was just a per head model, without any consideration for the disease condition, the health status, or the perverse incentives in a fragmented system.

Doctors foolishly assumed nearly all the risk, having no tools nor technology to understand let alone manage the population they just assumed all the risk for. Patients felt the conflict, and it eventually drove a knife right through the trusted relationship from which most primary care “gatekeepers” have never fully recovered.

Microcapitation holds the promise of more accurately delivering a defined outcome for a defined population in an area of medicine that is fairly well described, understood, and their is sufficient experience / capacity to deliver. Given our understanding of the disease process, it is reasonable to create a microcapitated rate for a specific disease condition – say, diabetes for example – wherein the physician agrees to provide a bundle of services for a defined price over a defined period of time. Within the payment structure for the bundle of services, the physician can innovate in anyway she wants – including adding all kinds of features, benefits, and add-ons that increase value to the patient but that still allow the physician to be profitable.

This aligns incentives, eliminates paperwork, incents communication, and ultimately drives better performance by increasing value [outcome/price].  Simple. Elegant. Beautiful.

Here is are the two case studies referenced in the report:

CASE I: How “Episode-of-Care” Payment Would Work

Ms. Brown falls and breaks her hip and goes into the hospital for surgery to implant a prosthetic hip. Each of the hospitals in the community has defined a price that it will charge Ms. Brown’s insurance company for performing the surgery and providing all of the postoperative care for a woman of Ms. Brown’s age and health status. That price will cover Ms. Brown’s hospital care, her surgeon’s fees, the cost of her prosthetic hip, her care by any other physicians who are involved (e.g., anesthesiologists, intensivists, etc.), her post-hospital rehabilitation and any home care she may need to make sure she can return home safely. The hospital will be responsible for dividing up the payment among all of those providers. If Ms. Brown develops an infection in the hospital following surgery, the hospital and its physicians will be responsible for treating that infection at no additional charge.

The insurance company measures the outcomes (e.g., mortality rate, complication rate, infection rate, range of motion following rehab, etc.) that the hospital achieves for hip replacements on patients similar to Ms. Brown. It then adjusts the payment to the hospital up or down by a certain percentage based on whether its outcomes for Ms. Brown are above or below the standard it has established.

Ms. Brown will be responsible for paying for a portion of her care. The amount she pays will be lower if she selects a hospital that charges a price lower than the average of other hospitals in the area and/or with quality ratings above the average for the region for patients similar to her.

Ms. Brown receives a small rebate on her share of the costs of her care if she achieves the rehabilitation goals and complies with the post-discharge plan that she develops jointly with her physicians.

CASE II: How “Condition-Specific Capitation” Would Work in a Hypothetical Case

Mr. Jones has diabetes. His insurance company pays his primary care provider a monthly comprehensive care payment to help him manage his diabetes and address some of the complications that might arise from his condition. Mr. Jones’ primary care provider has physicians, nurse practitioners and other staff working as a team to help with Mr. Jones. In addition, they have relationships with other health care providers that will need to provide some aspects of Mr. Jones’ care, such as laboratories and ophthalmologists.

Mr. Jones’ primary care provider works with him to develop a plan of care that defines the actions that he can and will take (e.g., exercising, managing his diet, taking medications, etc.) as well as the actions that the provider will take (e.g., contacting him regularly by phone to see how he is doing, seeing him periodically to check his blood glucose and hemoglobin levels, checking his feet at every visit, etc.) in order to successfully manage his diabetes. Mr. Jones understands that he does not need to see a doctor each time he comes to the office for checkups, since a nurse practitioner can perform all of the necessary checks and call in a physician when needed.

The costs of blood tests and any visits to specialists that Mr. Jones needs, such as periodic eye examinations by an ophthalmologist, are all paid by his primary care provider from the monthly comprehensive care payment.

Mr. Jones pays no co-payments for his regular checkups or routine testing. He receives a small cash payment from his insurance company if he meets the goals established in his care plan as measured by objective test results, such as hemoglobin A1c levels. His primary care provider also receives a financial bonus from the insurance company if Mr. Jones meets the goals in the care plan.

The insurance company measures the number of hospitalizations that occur related to diabetes for Mr. Jones and other patients like him who are under the care of the primary care provider. If the rate of hospitalizations is below a predetermined target level, the primary care provider receives a financial bonus, since they have saved the insurer money.

Mr. Jones is free to switch to another primary care provider at any time if he isn’t happy with the care he is receiving. However, if he switches to a provider that has significantly poorer outcomes, rates of hospitalizations and/or higher prices for care, his insurance company  will require him to pay more in order to use that provider.

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Filed under Health Finance, Innovation, Quality, Rational Choice, Value