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Remarks to the American Hospital Association on Value-Based Transformation

Alex M. Azar II
American Hospital Association
May 9, 2018
Washington, DC

The measures 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 entrenched players. But America’s hospitals have already shown a willingness to change and innovate—that process just needs to accelerate, and we want to work with you to make that happen.

As Prepared for Delivery

It’s a pleasure to be here today. I want to thank Rick [Pollack] for that introduction and for inviting me here to share with you some of President Trump and HHS’s vision for healthcare.

I believe we’re in an exciting moment for healthcare—a time when we all agree that change has to come to this industry faster than it ever has before.

Certainly, American hospitals are in the midst of many changes—and on the cusp of many more. I’m sure some of you recall the headline of a Zeke Emanuel op-ed in the New York Times earlier this year: “Are Hospitals Becoming Obsolete?” I imagine that was at the top of most of your press clips that day.

The peak year for hospital admissions in the United States was 1981. Despite a 40 percent increase in population over the same time, the number of hospitals in America has decreased from just under 7,000 to about 5,500.

Emanuel pointed out a number of factors driving this trend: Technological advances in recent decades have allowed more and more procedures, like chemotherapy, joint replacements, and many cardiac procedures, to be done without an overnight stay or in a different setting.

We’re also increasingly aware of the risks that come with hospital admissions, from healthcare-associated infections to the downsides of spending all that time in bed.

But—and if I’m citing Zeke Emanuel, you know there’s going to be a but—this tale of hospitals becoming less important to our health system is incomplete.

After all, who was it who adopted new forms of chemotherapy? Who paid the pioneering cardiologists who found ways to heal patients without open-heart surgery? Who helped identify the risk of healthcare-associated infections? That’s right—America’s hospitals.

The tale of increasing hospital irrelevance is not borne out in all the data. Consider this: In 1960, the first year that the federal government ran the National Health Expenditures survey, America spent $8.9 billion on hospital charges, or 32.4 percent of the $27.2 billion we spent on healthcare in total.

Fifty-six years later, in 2016, that share of health expenditures spent at hospitals remained almost the exact same. It’s actually a little higher, at 33 percent.

Large-scale hospitals, and especially overnight stays, are taking on more of a specialized role within our system. But hospitals, broadly defined, aren’t growing irrelevant.

As all of you know, they are transforming to provide the cutting-edge services today, in a shifting array of settings. The movement of more and more services outside of the four walls of a hospital has been a positive one. It has, all else being equal, lowered costs and improved outcomes.

But as I said, even as this transformation is going on, we believe it needs to accelerate. That is why I have identified, as one of my four priorities as secretary, the transformation of our healthcare system into one that pays for value.

Today, I want to talk about how we’ll deliver on that priority, and then briefly touch upon how we see a similar need for transformation outside of service delivery—in how we pay for prescription drugs.

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.

Since that time, many of you at America’s hospitals have made real progress on this front. But both our government programs and the private sector have a long way to go.

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.

Progress is already being made on each of these four fronts we’ve identified for value-based transformation. You heard from Administrator Verma on Monday about some of these efforts at CMS. That includes Blue Button 2.0, a system that 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 the MyHealthEData Initiative, run by Jared Kushner and the White House’s Office of American Innovation. The initiative is designed to help patients access and share their medical data throughout their healthcare journey, while ensuring their information is kept secure and private and that they make the decisions about when to share it.

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 important, 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.

I had a recent reminder about why this is a priority, and why the benefits and challenges of health IT are not abstract, but real and significant for patients and providers.

Many of you likely know that I spent some time in the hospital recently—the first lengthy hospital stay of my adult life, in fact.

It’s a particularly interesting experience to go through as a health secretary, with the level of attention involved. My wife got to joking that we practically needed a press secretary just for my colon.

The quality of care I received in the hospital was remarkable—I am so grateful to the staff who cared for me and took care of every need, from the nurses and the techs to the administrative staff and physicians. It was a reminder of how fortunate we are to have access to such high-quality care in America’s hospitals.

But the experience did bring home for me how challenging it is to be a patient—and just how much information and data are required to deliver the right treatment.

Even though I stayed within the one hospital for inpatient, outpatient, specialist, primary care, and diagnostics, lack of interoperability between multiple EHR platforms meant that I had to relay my medical history, my medications list, and the like to each new doctor or nurse who attended to me.

Now, consider that I found this a stressful experience when I have years of experience in the healthcare field. I consider myself relatively young and active—imagine if I’d been a much older patient, or one with no familiarity with how health systems work or what information my doctors might need to know.

Today’s compartmented system is a burden on both patients and providers. Imagine if I could have shared my medication list just once. Imagine if, instead of running through my story with each new contact, I could have told it just once.

Think about the opportunities for mistakes and inaccuracies that would eliminate—and think about the time that would free up for seeing more patients, offering them the care and attention they need.

Now, think about that not just in the context of one guy with an angry colon, but across 330 million Americans: It is amazing what freer exchange of information would mean for our whole system.

That is the promise of interoperability. That’s why I shared my personal experience—not because I want to call out any particular hospital system or their EHR vendors, but to reflect on how important it is to make progress. We at HHS don’t want to micromanage how the system gets to interoperability, but we are going to provide the right incentives to make it happen.

More broadly, patients must have access to more than just their own health data. For individuals to drive value, they must have access to data on price and quality.

Knowing prices and outcomes can enable every American to find better, cheaper healthcare. 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.

But there is a significant body of academic work, in fact, on how price transparency can reduce costs while maintaining quality. 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.

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.

Last month, for instance, in Medicare’s 2019 proposed hospital inpatient payment rule, CMS unveiled new steps to drive greater price transparency.

As of January 2019, for instance, hospitals will now be required to post a list of their standard 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? But surprise billing is really just one piece of a much bigger problem of opacity in healthcare pricing. It’s not exaggeration to say that just about every hospital bill in America, today, is a surprise bill.

I believe you ought to have the right to know what a procedure is going to cost, and what it’s going to cost you, out of pocket—before you get it.

We want your input on the best way to make this a reality, and we will applaud those who make this vision a reality on their own.

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. Late last month, CMS took action on both of those, too.

To start, they released the more than 1 thousand 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 about testing the concept of direct provider contracting within Medicare. Contracting 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 testing ways to reduce 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 2018, CMS has been able to pare back regulations to 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. CMS also has a much larger regulatory reform package in the works, which I believe will represent a major step forward for patients and providers.

A final point about the nature of government burdens: We are mindful of how they could be driving consolidation in the marketplace. As a matter of principle, we want to move to a system where our regulations and payment systems are agnostic about ownership structures. Economics and competition should drive markets, not us. 

One place we believe that could be especially useful is in coordinating care in rural settings. This week, CMS unveiled its first-ever rural health strategy. We know rural hospitals in particular are a lifeline for the nearly one in five Americans who live in rural areas, and we’re committed to maximizing the promise of technology and building new partnerships to improve care across our country. This will require novel approaches to care delivery and coordination, and we must ensure we are not standing in the way of needed innovation.

Before closing, I want to touch on another priority I’ve laid out as secretary: bringing down the high price of prescription drugs. President Trump believes it is a top priority to build a system that puts American patients first, and HHS is focused on solving a number of the problems that plague drug markets. These include the high list prices set by manufacturers; seniors and government programs overpaying for drugs due to lack of the latest negotiating tools; rising out-of-pocket costs for consumers; and foreign governments free-riding off of American investment in innovation.

HHS’s blueprint for addressing these issues will build on the proposals put forth in President Trump’s 2019 budget, but he wants to go much, much further. As you likely know, the President will be delivering a speech on this topic on Friday, so stay tuned.

I want to conclude today by laying out why I’m so optimistic that we can bring transformation to all these aspects of healthcare under this administration.

First, the time has simply come. The status quo cannot hold. The way we do business in American healthcare 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 entrenched players. But America’s hospitals have already shown a willingness to change and innovate. That process just needs to accelerate, and we want to work with you to make that happen.

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 9, 2018