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2nd Annual National Accountable Care Organization Summit

June 27, 2011
Washington, DC

Remarks as prepared for delivery

Thank you, Mark, for that kind introduction. Few people have done as much to improve America’s health and health care as Mark has over the last decade. Every day, we build on the foundation he left at CMS. And I’m especially grateful to Mark and Brookings for their work on Accountable Care Organizations – a concept they helped invent and have done as much as anyone to develop and promote.

I also want to thank everyone who’s here today, especially the hospital and physician leaders. Having all of you here in this room is a powerful sign of how committed America’s health care providers are to improving care.

Finally, I want to acknowledge all those from the Health IT conference next door who are here for the opening session. It’s fitting that we’re here together this morning because electronic health records can play a key role in almost everything Accountable Care Organizations hope to accomplish, from measuring and improving quality to helping providers work together more effectively.

We’re gathered this morning at a time when two trends are converging. On the one hand, there is new urgency about rising health care costs.

It’s coming from working families who have had to give up raises in order to avoid health insurance cuts. It’s coming from small businesses that have had to choose between offering health coverage to their current employees and adding new ones. It’s coming from states where rising costs in Medicaid are crowding out investments in better schools and new roads. And it’s coming from Medicare where the program’s trustees recently found that, even with Affordable Care Act reforms that added eight years to the life of the trust fund, it is still on pace to become insolvent in 2024.

At the same time, we have a growing understanding of how to bring down costs by improving care. A recent study found that as many as one in three hospital patients are harmed by their care. But I’ve visited innovative hospitals across the country that are showing that much better results are possible. At Seton Medical System in Austin, they told me how they had reduced emergency room visits by a third and hospital stays by two thirds for a group of patients with asthma by providing better preventive care. At Henry Ford Health System in Detroit, they told me how they had cut major categories of harms by 25 percent by improving communication between providers. I’ve seen similar results everywhere from Norfolk to Denver to San Francisco.

Improving care is clearly the best approach to addressing rising costs – especially compared to recent proposals that would simply cut Medicare and Medicaid, without doing anything to address underlying growth in health care spending. But it’s also clear that we are not improving fast enough. So our challenge is to speed it up.

To do that, we need to change one of the unique facts about health care, which is that it’s a field in which innovators are actually punished financially. In a system where empty beds don’t generate revenue, a hospital that provides excellent follow-up care to keep a patient from being readmitted may actually lose money. In a system that primarily rewards procedures, there’s little reward for a physician practice that invests its time in helping its patients manage their diabetes. This doesn’t make sense, and that’s where the Affordable Care Act comes in

This is a law that has three simple goals: better care, better health, and lower costs. It achieves these goals in a variety of ways from strengthening our health insurance market to investing in prevention. But it also contains more than 80 tools to help providers reinvent health care to make it more effective and affordable. One of those exciting tools is Accountable Care Organizations.

The idea behind these organizations is very powerful. By giving hospitals and physician’s groups a share of the savings when they reduce costs by improving care, we can start to reward innovation just like other fields do. All of a sudden, there is a clear financial incentive to prioritize primary care and prevention. Innovative programs for providing follow-up care to discharged patients and helping people manage their chronic conditions are no longer money-losing luxuries. Patients can feel like they have active partners in getting and staying healthy, while still being able to see any doctor they choose.

Many of you know this already. But I repeat it now because I hope that as you have your discussions today, you will keep in mind both of the powerful urgency behind change and the enormous possibilities of a health care system in which payers, doctors, and patients all benefit when health improves.

As you know, our department issued proposed rules to guide the creation of Accountable Care Organizations at the end of March. These rules were carefully written by our staff, led by Dr. Don Berwick who many of you know as our nation’s leading expert on health care improvement. He is the right leader in the right place at the right time, and in writing these proposed rules, he and his team carefully weighed the interests of hospitals, doctors, patients, and other stakeholders – but the emphasis here is on the word “proposed.” These rules were a first draft, and even as we were writing them, we were looking forward to receiving comments that we knew would make these rules even stronger.

Altogether, we received more than 1,200 comments on everything from how to measure quality, to which metrics to use, to how the details of the shared savings will work, and we’re currently reviewing them carefully to see where we can make improvements.

As we do, we have one goal: how can we best refine these rules so that physicians, hospitals, nursing homes, payers and consumers can get much better support when they come together and take steps to improve care and slow spending growth? And that means finding the right balance.

For example: how do we balance returning dollars to the Medicare trust fund with giving providers enough of an incentive to participate? How do we balance the urgency of stabilizing health care costs with giving providers enough time to learn and adapt to a new model for delivering care? How do we balance protecting patients while also ensuring that providers are not overburdened with quality metrics?

I’m confident that we can answer these questions in a way that makes Accountable Care Organizations an appealing model for many providers across the country who want to start being rewarded for what they’ve trained and worked their entire lives to do: keeping their patients healthy. And our hope is to provide enough flexibility so that providers with all levels of experience can participate.

For the hospitals and practices that have the most experience with these kinds of reforms, we recently announced the Pioneer Accountable Care Organization program. Through this program, we’ll allow these organizations to take the next step, becoming role models for their peers who are not as far along.

But there will also be room for those organizations that are just beginning to talk about these changes with the potential for upfront payments from the shared savings to help them invest in the infrastructure needed to transform their organization.

We know that there’s no one path that will work for everyone. Different hospitals and communities need the flexibility to adapt this model to the specific needs of their communities. But even as we take different paths, we must all be moving in the same direction – towards patient-centered, high-quality, high-value care for every American.

As we move forward, we can take some encouragement from a CMS pilot program that was started by Dr. McClellan. In five years, all ten of the sites that participated in the Physician Group Practice Demonstration Project met at least 29 of 32 goals for quality. And six of those sites produced savings, totaling $78 million.

That’s a promising first step and there are plenty of reasons to believe that today, we can do even better. We have better metrics for measuring quality than we did when that demonstration started. We have better knowledge of best practices for improving care and more examples from across the country for how to put them into action. There are more private payers experimenting with similar models.

And critically, it’s easier than ever before for hospitals to take one of the most important steps for being a successful Accountable Care Organization – adopting electronic health records. Thanks to a historic health IT investment in the Recovery Act, doctors and hospitals can now get an incentive payment for adopting electronic health records and using them to improve care.

And we’re already seeing the results. When President Obama came into office, only two in ten physicians and one in ten hospitals used even a basic electronic health record system. But when physicians and hospitals were recently asked whether they planned to apply for the new incentive payments by 2015, more than four out of five hospitals and more than two out of five office-based physicians said yes.
If those numbers hold, this would be the fastest growth in health information technology that we’ve ever seen in this country – or in any other.
But even with all these elements in place, there is still one more ingredient we need to make Accountable Care Organizations and the broader transformation of our health care system successful, and that’ s leadership. When I travel around the country and visit the health systems that have been most successful at improving care, improving health, and reducing costs, most of them have sophisticated electronic health record systems. Most of them have adopted certain best practices that help reduce common harms. Many of them put a focus on improved care coordination.

But the one thing they all have in common is leadership. They all have people in charge who have the vision to imagine a better way to deliver care and the determination to achieve it, knowing that the benefits might not be immediately apparent. This doesn’t require blind faith. We can see examples of successful innovations across the country. What it does require is seriousness and a real commitment to the hard work of changing old habits and systems. Accountable Care Organizations cannot just be the status quo by another name. They must represent a real transformation in how we deliver care.

This will not be easy, but the potential payoff is enormous. A health care system that embraces the values of Accountable Care Organizations would be a place where hospital administrators could afford to implement a proven program for reducing hospital readmissions or improving communication between care providers. It would be a place where doctors would have more time to spend with their sick patients and to focus on keeping them well. It would be a place where patients are full partners with providers working to keep them as healthy as possible.

It will take time. But we are headed in the right direction. And our department is committed to listening to you and working with you every step of the way.

Thank you.