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Remarks on Value-Based Transformation and Innovation

Alex M. Azar II
World Health Care Congress
May 2, 2018
Washington, D.C.

The time has simply come. The status quo cannot hold. The way we do business in American healthcare, from insurance and IT to drug pricing and patient billing, must change. Today, we have a president who is unafraid to drive the disruption we need.

As Prepared for Delivery

It’s a pleasure to be here at the World Health Care Congress, and I want to thank Megan [Castilla] for that introduction and for inviting me here today.  

It’s a great privilege to get to share some of President Trump’s vision for healthcare with you and explain how we at HHS are working each day to make it a reality.

We know every one of you here cares deeply about the future of our health system—all of the healthcare professionals gathered here today work to save lives and deliver patients the best care possible. When I say healthcare professionals, I mean everyone: from general practitioners working in rural hospitals to the CEOs of the largest biotech firms. All of you are working to make our country, and the world, a better place.

So today, I want to talk to you about how HHS is working to support you in those efforts.

Earlier this year, I identified four priorities for our department: value-based transformation of our healthcare system, combating the opioid crisis, addressing the cost and availability of health insurance, and bringing down the high price of prescription drugs.

Today, I want to talk about that first priority in particular, how we’re working to transform our healthcare system into one that pays for value. A value-driven healthcare system will look dramatically different from what we have today: Such a system will pay for health and outcomes rather than sickness and procedures. It will deliver better, cheaper healthcare for the people we serve, and it will support the next generation of cures to diseases once considered terminal.  

Value-Based Care

We at HHS know that the idea of value-based transformation is not new. Both the George W. Bush administration, in which I served, and the Obama administration worked to move our system toward paying for value.

I personally spent a great deal of time working through this process under HHS Secretary Mike Leavitt. There has been real progress made, but there is so much further to go. HHS has often lagged behind the private sector, where so many of you have made progress on this front in recent years.

Everyone here understands that the system as currently constructed will not last. Something has to change.

So, during my first 100 days as secretary of HHS, I laid out four areas of emphasis for building a system that delivers value: maximizing the promise of health IT, improving transparency in price and quality, pioneering bold new models in Medicare and Medicaid, and removing government burdens that impede care coordination.

The common thread for these priorities is the recognition that value is not accurately determined by arbitrary authorities or central planners. The best way to identify and reward value is a marketplace of many players—providers, patients, and, where necessary, third-party payers.

Health IT

Progress is already being made on each of these four fronts we’ve identified for value-based transformation. You heard from Administrator [Seema] Verma on Monday about Blue Button 2.0, which will use open APIs to give patients the ability to connect their Medicare data to apps developed by private companies. While replacing Blue Button with Blue Button 2.0 may not sound, on its face, revolutionary, the new system is a major step forward in our work to maximize the promise of health IT by giving patients access to their own data.

 Blue Button 2.0 is part of a larger, administration-wide initiative called MyHealthEData Initiative, run by Jared Kushner and the White House Office of American Innovation. The initiative aims to put health data, as much as possible, in the hands of patients themselves.

We’ve spent more than a decade now talking about the importance of interoperability of health records—I spent plenty of time around Mike Leavitt’s conference room table, alongside our current HHS Deputy Secretary Eric Hargan trying to puzzle out how we could guide the broad universe of health IT actors to agree on one interoperable standard.

Today, progress has been made on interoperability. But more importantly, new technology has made it possible for government to be focused on the what, not the how, of interoperability: Patients ought to have access to their data, period—however you want to accomplish it.


Patients must have access to more than just their own health data, however. For individuals to drive value, they must have access to data on price and quality. Knowledge is power, and knowing prices and outcomes can enable every American to find better, cheaper healthcare.

 I want to share a personal story about this, because I think it speaks to the powerlessness consumers often feel in today’s health system — at a time when, through high deductible plans, we’re asking them to take charge of their own care and decisions.

A few years ago, my doctor wanted me to do a routine echocardio stress test. I figured this could occur within the scope of his practice, which was connected to a major medical center.

Instead, I was sent a few floors down, where I was told to start handing over all sorts of information to a receptionist. Soon enough, I had a plastic wristband slapped on me, and, to my surprise, what I thought would be a simple test had resulted in my being admitted to the hospital.

Now, I had a high-deductible plan, so I would be paying for this test out of pocket. As someone who works in healthcare, I knew that the sticker price on the test had just jumped dramatically by my receiving it within a hospital.

So I asked how much the test was going to cost, and was told that information wasn’t available.

Fortunately, I didn’t just fall off the turnip truck, so I persisted, and, eventually, the manager of the clinic appeared and gave me the answer. The list price was $5,500.

I knew that wasn’t the right answer either. The key piece of information was what my insurer would pay as a negotiated rate, or what I’d pay with cash.

That information didn’t come easily, but eventually, I was told it would be $3,500.

I happened to know where you could research typical prices for such procedures, so I looked up what it would have been if I’d received it outside of the hospital, in a doctor’s office. The answer was $550.

Now, there I was, the former deputy secretary of Health and Human Services, and that is the kind of effort it took to find out how much I would owe for a procedure.

What if I had been a busy parent who had never worked in healthcare, who just trusted the system? Or a 20-something with a high-deductible plan?

But the problem is not just that patients shouldn’t have to put up with being so powerless. It’s also that, if we do empower them with useful information, they’ll probably get the test where it’s available for $550. Even if I hadn’t been on the hook for that test, imagine the savings that would have accrued to the entire system if I could have easily found out where to get it cheapest.

There is a significant body of academic work on how price transparency can reduce costs while maintaining quality. It may seem rather obvious, but there are plenty of naysayers out there who protest that healthcare is different, that market forces simply don’t apply. We know, empirically, that when we empower healthcare consumers, market forces work.

One of the largest studies on this issue looked at more than 500,000 patients whose employers built a price transparency platform to inform them about the cost of various healthcare services. When patients used this platform to research prices, costs dropped significantly—up to 15 percent lower for lab tests, and up to 16 percent lower for imaging.

Another study found that a different price transparency initiative, this one initiated by insurers, reduced costs by $220 a test, a nearly 20 percent savings. Even patients using insurers who weren’t participating in the transparency initiative saw savings, likely because providers were now trying to compete on price.

Happily, we have this evidence because the private sector has already taken the lead on transparency in many places. But HHS can play a role in driving broader change. And in many cases, such is the scale of our programs, if we’re not serving as an innovator, we may be standing in the way.

So as you heard from Administrator Verma, last week, CMS unveiled new steps in the 2019 proposed Medicare payment rule to drive greater transparency in hospital inpatient services. We’ve proposed that hospitals now be required to post a list of their standard list of charges on the internet and in a machine-readable format, rather than just being required to make them publicly available in some form.

We know that real transparency will require going a lot further, so we included a request for information in the rule on a number of other transparency issues: For instance, how can we address the problem of surprise billing? How can we ensure that patients are told how much a procedure is going to cost before they receive it?

That ought to be a patient’s fundamental right. We want your input on the best way to get there.

Models and Barriers

The final two areas of emphasis for value based transformation are pioneering new models in Medicare and Medicaid and removing government burdens that impede care coordination. Last week, CMS took action on both of those, too. It’s been a busy couple weeks.

CMS released the more than 1,000 comments we received from stakeholders regarding a new direction for the Center for Medicare and Medicaid Innovation. While this new direction will involve collaboration and close consultation with stakeholders, we are also going to think big and bold.

Alongside these comments, we released a new request for information regarding the concept of direct provider contracting within Medicare. Arrangements like direct primary care have generated tremendous interest from both patients and providers. They can offer the opportunity for seniors to receive convenient, accessible primary care from a physician they know at a predictable and affordable cost. Better access to primary care, as we all know, can prevent more serious and costly ailments.

We look forward to consulting with all of you on how this might work, because it would be a significant step, representing the kind of fundamental rethinking of provider compensation that may be necessary to deliver value.

The direct provider contracting proposal also reflects our interest in reducing burdens on providers, especially those that may be impeding care coordination. As you heard from Administrator Verma on Monday, we are well aware of the huge burden that regulation places on so many healthcare professionals, and we are working to reduce that burden where we can. Just so far in 2017, CMS has been able to pare back regulations that will save providers more than 4 million hours of paperwork. As just one example, we’ve been able to do away with some quality measures that were burdening clinicians while no longer telling us any meaningful information.

Drug Pricing

We also want to employ this same kind of thinking to lower the high prices of drugs that burden far too many Americans. As part of President Trump’s bold plan to put American patients first, HHS is focused on solving a number of the problems that plague drug markets, including high list prices; seniors and government programs overpaying for drugs due to lack of negotiating tools; and rising out-of-pocket costs for consumers; and foreign governments free-riding off of American investment in innovation.

HHS is currently working with the President on a comprehensive strategy to solve these problems. We’ll be building on the proposals in the President’s budget, but he wants to go further.

Action is desperately needed: There’s little difference for a sick patient between a miracle cure that hasn’t been discovered and one that is too expensive to use. I believe we can help lower the cost of medicine while still promoting research that will transform the future of care. Doing both is the only way forward.

Promoting Research and New Ways of Thinking

Beyond the market power HHS has through our health programs, the federal government has other important roles to play in healthcare innovation: one, as a steward of the largest collection of healthcare data on the planet, and two, as the world’s largest funder of biomedical research.

Last week, CMS took a historic step in maximizing the usefulness of all the data we have under our roof. This year, Administrator Verma announced, CMS will be releasing Medicare Advantage encounter data to researchers for the first time. MA data are not perfect, but we have determined that the value researchers can derive from them far outweighs any concerns we have about the quality of the data.

We look forward to the insights that academic researchers and private innovators can derive from examining Medicare Advantage encounter data—and we’re not stopping there. CMS will also be releasing anonymized Medicaid and Children’s Health Insurance Program data in 2019.

Together, these data sets will represent millions of patients, billions of care encounters, and trillions of dollars in spending.

We believe the insights gleaned from this data could fundamentally change how patients interact with our healthcare system. Inside each finding derived from this data, there’s an opportunity for a provider to rethink how they deliver care, or a business opportunity for a payer or start-up to better coordinate that care. Silicon Valley has been begging us to give them these data, and now, we look forward to seeing the insights and opportunities it will reveal. 

All of Us

One of the unique aspects of the data CMS has is that the sheer scale enables us to understand healthcare encounters in a way not previously possible, by looking at narrower and narrower populations.

A similar opportunity is presented by the immense scale of a new, historic effort launched this week at HHS: the National Institutes of Health’s “All of Us” Research Program.

This weekend, led by Director Francis Collins, NIH will be opening national enrollment for this program, which aims to enroll 1 million Americans.

This is the largest health research effort of this kind ever mounted. It dwarfs previous longitudinal studies.

By gathering data on everything from lifestyle and nutrition to genetics and healthcare outcomes, All of Us will provide unprecedented levels of information about the determinants of health. With this data, we can explore new frontiers of prevention and treatment—for Americans from all backgrounds.

All of Us will set a new standard for interaction between researchers, medical professionals, and participants. Cognizant of the great responsibility NIH is taking on, the program aims to work together with all our partners to inform the program’s directions, goals and practices for responsible handling of research information.  In particular, this effort includes the hard work of building trust among populations historically underrepresented in research.

There will be significant benefits to these efforts. Enrolling more than 1 million Americans will enable NIH to oversample communities that have been underrepresented in current research. This will be not just the largest collection of this kind of data in history, it will also be by far the most diverse.

Think of your typical health study like a Gallup poll—a few thousand respondents, so accurate enough to determine some national trends, but not much else. All of Us will be more like a census—so much data that trends and connections among small or unique populations may become apparent.

Given what we already know about how effective it can be to tailor some treatments to individuals’ genetic makeup, this kind of data could revolutionize how we treat a range of diseases and conditions. This project would not be possible without advanced health IT and represents one kind of possibility that technology can bring us.

This weekend, the official launch of All of Us will take place at community events in seven cities across the country. There will be opportunities to sign up online as well, and volunteers will be joining the 25,000 participants already in as part of a year-long beta-test phase. I encourage everyone here to consider enrolling in All of Us if you can—those 18 and older, regardless of health status, can join.


This project, this unprecedented gathering of knowledge, has the potential to transform medicine as we know it. Value-based care, after all, is not just about lower cost, it’s also about higher quality, and projects like All of Us have the potential to deliver huge advances in the coming years.

I want to conclude today by laying out why I’m so optimistic that we can bring this long-awaited transformation to healthcare under this administration.

First, the time has simply come. The status quo cannot hold. The way we do business in American healthcare, from insurance and IT to drug pricing and patient billing, must change.

Today, we have a president who is unafraid to drive the disruption we need. President Trump is a man of courage and vision. He has seen and heard how the high cost of healthcare is burdening so many Americans; he understands that our system too often fails to deliver value; and he has given us a mandate to do something about it.

The measures I outlined today will get us part of the way toward a system where the power of informed individuals will deliver high quality, affordable healthcare.

Getting to that system won’t be the most comfortable process for many entrenched players. But those who are interested in working with us to build a new system will have unprecedented opportunities at hand.

We all know change represents opportunity. So I exhort all of you to engage with us on the efforts I’ve discussed today and take advantage of the opportunities they represent. Because I assure you, in American healthcare, change is possible, change is necessary, and change is coming.

Content created by Speechwriting and Editorial Division 
Content last reviewed on May 2, 2018