Sharing Test Results in the Same Way

Healthy Rhode Island Reform Act of 2008

2008-02-21T19:29:00.000-08:00

Lieutenant Governor Elizabeth Roberts

Healthy Rhode Island Reform Act of 2008

Executive Summary

Overview:

The Healthy Rhode Island Reform Act of 2008 will transform the health care system in our state by putting in place a strong new structure for ensuring that all Rhode Islanders will have access to high quality health care at a price they can afford. This package will immediately start moving to insure over 10% of the uninsured with no new state expenditures, and will establish a serious process for cutting costs and increasing value in our health care system. The legislative package creates a strong and sustainable structure that will make it possible to bring every uninsured Rhode Islander into this new system as money becomes available from the savings accrued through the transformation of the health care system, as well as from other sources. Because the plan focuses on BOTH expanding coverage AND containing costs while increasing value it transforms health care for all of us, not just those who are now uninsured. At its most basic, this legislation is about increasing health care value and access for ALL Rhode Islanders, with the overall result being a transformation of our ailing system into a healthy one.

Aligning Payments to Priorities

In our current system health care providers are paid to perform procedures, not to keep patients healthy. This is bad for patients, bad for doctors, and bad for the system. As we transform our health care system in Rhode Island we need to reverse this and compensate doctors for keeping patients healthy through preventive care and chronic disease management.

The broken compensation system was not built overnight, and it cannot be reformed in a day. However inaction is not an option. In order to ensure real change the Healthy Rhode Island Reform Act of 2008 requires that the state's health planning and accountability advisory council establish a Healthy RI Strategic Plan and Healthy RI Chronic Care Management Program. [Healthy Rhode Island Reform Act of 2008 - Part 1]. The state is a major purchaser of health care on behalf of state employees and Medicaid recipients. This presents a unique opportunity to lead the way in reform initiatives with the health insurance that the state provides. The Healthy Rhode Island Reform Act of 2008 - Part II integrates best practices in insurance coverage, designed to enhance healthy outcomes, into the health insurance that the state provides for state workers and Medicaid recipients effective January, 2009. This means that health insurance provided by the state will include cutting edge chronic disease management, an emphasis on primary care and paying physicians to keep their patients healthy thus leading the way for the state and the nation. Part II of the package goes on to require that all health insurance in Rhode Island integrate these cutting edge practices by January 1, 2010. The Healthy Rhode Island Strategic Plan creates a permanent capacity for the state to incorporate new methods to into a state of the art health system - leaving behind our current "sick care" system. Effective chronic disease management for all Rhode Islanders is only a first step in realizing the potential of this reform.

Organizing Care for Quality and Value

Aligning payments to priorities will go a long way toward bending the health care spending curve downward to a level that is sustainable, but the Healthy Rhode Island Reform Act of 2008 goes further by demanding true cost and outcome transparency and accountability in health care.

One way it does this is through the creation of the Health Care Quality and Value Database within the Department of Health [Healthy Rhode Island Reform Act of 2008 - Part III]. This comprehensive database will shine a spotlight on cost and quality information that has never before been accessible to the consumer or to policy-makers. The Health Care Quality and Value Database brings a laser-like focus on both cost and quality. It creates a user-friendly, online interface that will empower individuals and families to take control of their health care expenditures by providing a tool for them to make rational decisions about many of their health care needs. It will also put in place the resources and tools that will allow policy-makers to access the empirical data that is desperately needed if we are to move toward a rational, evidence based health system.

It is also imperative that our state move ahead to implement Health Information Technology including integrated electronic medical records with appropriate privacy protections. Much work has already been done in this area, and an important piece of the package is legislation that establishes safeguards and confidentiality protections for a Rhode Island Health Information Exchange. The legislation will put in place systems to improve the quality, safety and value of health care, keep confidential health information secure and confidential and use the HIE to progress toward meeting public health goals. Rhode Islanders need to be confident that HIT will be used appropriately and confidentially, and all stakeholders need to work together to ensure that we pass legislation that will earn this confidence.

Covering All Rhode Islanders

13% of Rhode Islanders have no health insurance. This proportion has increased since 2001 and the fastest growing part of this group is working Rhode Islanders. Uninsured Rhode Islanders often have little choice but to access the health care system in the most expensive way: by going to the emergency room. They lack access to preventive care and chronic disease management, so their care ends up being more expensive than it has to be - wrong time, wrong place, wrong cost care. Studies have shown that the uninsured have significantly worse health outcomes than those with insurance, and we also know that the cost of care finally provided in an emergency room is being passed along to everyone else through higher taxes and increased insurance premiums. Uncovered health care costs have become the top cause of personal bankruptcy.

Part IV of the Healthy Rhode Island Reform Act of 2008 creates a structure during 2009 and 2010 will reduce the number of uninsured Rhode Islanders. It does this in a number of ways.

The legislation creates a new public/private partnership called the Rhode Island Health Insurance Access Hub (HealthHub RI). By July, 2009 the HealthHub will allow individuals and small business owners to purchase portable, affordable health insurance for themselves, their families, and their employees. HealthHub RI will allow Rhode Islanders to shop online, on the phone, or in person to choose among competing plans for the one that fits them best. Insurance companies will have to compete for business in a transparent environment, and individuals, families, and small business owners will benefit from the bargaining power of the Hub.

HealthHub RI will also play an important role in aligning payments to priorities. The HealthHub board will begin its work in September 2008. It will set standards for a minimum level of coverage acceptable in plans with the HealthHub seal of approval and will allow insurers to make available innovative plans that emphasize preventive care and chronic disease management. The board will also be charged with ensuring that the plans offered will be affordable, flexible, and robust.

To further jump-start the move toward covering all Rhode Islanders, the legislative package includes a bill that calls on individuals and businesses who can afford insurance to take responsibility for coverage. Part V of the Healthy Rhode Island Reform Act requires all Rhode Island residents whose income exceeds 400% FPL ($40,840 for an individual, $82,600 for a family of four) to purchase affordable health coverage through the HealthHub once the Hub opens for business in July, 2009. The Office of the Health Insurance Commissioner estimates that there are close to 15,000 Rhode Islanders (more than 10% of the Rhode Island uninsured) who would be covered by this mandate. Part VI of the legislative package also whittles down the number of uninsured Rhode Islanders by allowing young adults to stay on their parents' family plan through age 25, regardless of student status.

One of the great strengths of our current system is that the majority of Rhode Islanders have access to health insurance through their employers. In order to maintain this strength, Part V not only impacts individuals but also requires employers, (except those with ten or fewer employees) who do not provide health insurance, to pay a health security assessment to the state. This health security assessment goes to the HealthHub for purposes of providing support for insurance for the uninsured. This requirement, combined with the requirement that individuals with sufficient means purchase insurance, will have a combined effect to reduce the number of uninsured Rhode Islanders. Part VII of the legislative package further expands the options for those Rhode Islanders who still need coverage. By opening up the Rhode Island market through reciprocal licensure for health insurers already licensed to do business in Massachusetts and Connecticut more value-priced options will become available to Rhode Island businesses and individuals seeking new approaches to coverage.

This multifaceted approach to insuring every Rhode Islander does not make sense unless it is matched by a commitment our award winning RIte Care program which is a national leader in covering children. The majority of funds used for RIte Care coverage come from the federal government, so every dollar cut by the state removes over two dollars from the health care system. Cutting RIte Care will force children and parents into the emergency rooms. This will cost everyone more in the form of higher premiums and taxes to pay for the resulting uncompensated care. The proposed RIte Care cuts would move Rhode Island’s health care system in the wrong direction, and thus a key element of the Healthy Rhode Island plan is a focus on ensuring that this does not happen.

Although the Healthy Rhode Island Reform Act of 2008 does not call for the expenditure of any new state dollars at this time, most experts say that covering all Rhode Islanders will require additional shared financing down the road. What makes the Healthy Rhode Island Reform Act of 2008 unique is that it calls upon policy makers, state officials and citizens to work together to put in place the infrastructure for change BEFORE new public funds are invested so that we can proceed cautiously and with full information as new investments are considered and debated. It also combines the creation of this infrastructure with a laser-like focus on reducing cost, increasing value and improving health outcomes in the health care system more broadly. The Healthy Rhode Island Strategic Plan and Chronic Care Management program [Part 1], Health Care Quality and Value Database [Part III] and cutting edge innovations in the health plans for public employees and Medicaid recipients [Part II] will all contribute to bending the cost curve for health care in Rhode Island toward affordability. These innovations are supportive of reducing the ultimate cost for covering all Rhode Islanders when Rhode Island is ready to take that final step.

Planning Forward for Success

Comprehensive reform of the health care system is a challenging and complex undertaking that will require an ongoing commitment from citizens and policy makers. The final element, Part VIII, of the Healthy Rhode Island Reform Act of 2008 is designed to guarantee that the momentum for positive change is sustained beyond this legislative session. Part VIII creates a Joint Legislative Task Force to be co-chaired by a Senator, a Representative and the Lieutenant Governor. This core group of elected policy makers will create and sustain momentum for change and will make recommendations for additional reforms.

THE HEALTHY RHODE ISLAND REFORM ACT OF 2008

AT A GLANCE

Bill	Topic	What it does
Part I	Healthy RI Strategic Plan and Chronic Care Management Plan	Recently created statewide health planning group (2007) establishes and implements a plan for chronic care management plan that will apply to all Rhode Islanders by 2010.
Part II	Cutting edge innovations integrated into publicly purchased insurance (Medicaid recipients and public employees)	By January 2009 designation of a primary care physician will be required, chronic care management plan will be part of coverage, and payment reforms in public insurance plans (i.e. pay for performance) will be instituted for Medicaid recipients and public employees.
Part III	Quality and Value “all-payer” database	Expanded authority for existing Department of Health quality measurement group to analyze health outcome and cost data from all sources in Rhode Island. This is a critical building block to bending the cost curve downward.
Part IV	HealthHub RI	Creates the RI equivalent of the Massachusetts “connector.” Board will begin work in 2008, and affordable products will be offered to individuals and small groups by 2009.
Part V	Individual mandate and Employer “pay or play”	Institutes a requirement for individuals at 400% FPL ($40,840 individual, $82,600 family of four) and above to purchase affordable insurance as of July 2009 (coincides with Hub product availability). Also introduces an employer universal health security assessment, with full offset for employers who provide health insurance. The assessment will be approximately $1000 per full time employee per year, with proceeds going support to coverage for the uninsured.
Part VI	Expand coverage to 25 year for dependent children	Removes the requirement that dependent children up to 25 must be students in order to remain on their parents’ insurance.
Part VII	Reciprocal licensure	Enables insurers licensed in MA and CT to offer products in RI without additional licensing.
Part VIII	Joint Legislative Task Force	Creates task force co-chaired by Lt. Governor, a state senator and a state representative to oversee reform efforts from legislative perspective.

Rhode Island HIE Legislation Underway

2008-02-21T18:44:00.000-08:00

TODAY'S HITS HEADLINES: 2-13-08

Legislators in the Ocean State have introduced the Rhode Island Health Information Exchange Act of 2008 to facilitate secure patient data exchange as providers prepare to launch an HIE.

The legislation addresses privacy and security issues of an information exchange, which has been under development by the Rhode Island Quality Institute since 2004 through a five-year, $5 million grant from the Agency for Healthcare Research and Quality. The institute partnered with the state to develop the act.

Security measures through the act will ensure patients are aware of the exchange and have given permission to share their data.

The exchange is voluntary for both providers and patients, who will have the right to terminate participation at any time, under the new legislation.

Consumers also will be able to obtain reports of what information is shared and who is accessing it, as well as notices of security breaches. -- by Jean DerGurahian/ HITS staff writer

EHRs & PHRs: iHealthBeat
February 14, 2008

Rhode Island Bill Aims To Facilitate Statewide Health Data Exchange

Rhode Island lawmakers this week introduced legislation aimed at addressing privacy and security issues related to the exchange of patient data as the state prepares to launch a health information exchange, Health IT Strategist reports.

The Rhode Island Health Information Exchange Act of 2008 would ensure that patients are aware of the health information exchange and have given permission to share their data. In addition, the bill would make the exchange voluntary for both providers and patients, and they would have the right to terminate participation at any time. The bill also would give consumers access to what information is shared and who is accessing it, as well as reports of security breaches.

Since 2004, the Rhode Island Quality Institute has been working to develop a statewide health data exchange through a five-year, $5 million grant from the Agency for Healthcare Research and Quality (DerGurahian, Health IT Strategist, 2/13).

Readers are invited to send feedback to: ihb@chcf.org

Putting Individuals in Control of American Healthcare

2007-10-06T08:07:00.001-07:00

American Health Care in Critical Condition

The Case for Putting Individuals, Not Employers or Government, in Control of Health Care

By JOHN STOSSEL and ANDREW SULLIVAN

Sept. 11, 2007 —

Most everyone agrees, America's health-care system is a mess.

Millions of Americans lack health insurance and still our annual health-care costs exceed $2 trillion that's about the size of the entire economy of China. For the country with the world's "best" medical care, a lot of people seem unhappy.

Many hate the insurance industry.

Employers have seen insurance premiums rise 87 percent over the last seven years. General Motors now spends more on its employees' health insurance than on steel. Doctors are fed up, too; the average physician's office spends 14 percent of its income filling out paperwork.

No one seems angrier than the patients who have been denied care. Vicki Readling of North Carolina was diagnosed with breast cancer after she had quit her job and lost her employer's insurance. Readling purchased temporary insurance for herself, but when it expired she was told that because of her pre-existing condition, cancer, she would now have to pay $27,000 a year for a new policy. With an income of $60,000 and twin sons in college, she couldn't afford it.

Watch "Whose Body Is It, Anyway?! Sick in America" Friday on "20/20" at 10 p.m. EDT

Insurance industry spokeswoman Karen Ignani is eager to report that most people aren't like Readling. Polls show that while people dislike the insurance industry in general, 87 percent of people with health insurance are happy with their coverage. Only 3 percent of health insurance claims are denied, she says.

In his hit documentary "Sicko," Michael Moore focuses on tragic stories of people whose insurance claims have been denied. His prognosis? He calls for "the elimination of private profit-making health insurance companies" and suggests turning over all health-care spending to the government to provide "free" health care to everyone. He goes to countries like Canada and Britain and implies that their socialized systems are far better than that of the United States.

'What It Costs When It's Free'

There are many problems with health insurance, but that doesn't mean we should put the government in control. If it's decided that health care should be paid for with tax dollars, then it's up to the government to decide how that money should be spent. There's only so much money to go around, so the inevitable result is rationing.

It's just the law of supply and demand. Lowering prices increases demand. Lowering the price to nothing pushes demand through the roof. Author P.J. O'Rourke said it best: "If you think health care is expensive now, wait until you see what it costs when it's free."

When health care is free, governments deal with all that increased demand by limiting what's available.

The reality of "free" health care is that people wait. In the United Kingdom, one in eight patients waits more than a year for hospital treatment and the British government recently set its goal to keep wait times to less than 18 weeks that's more than four months! In Canada, almost a million citizens are waiting for necessary surgery and more than a million Canadians can't find a regular doctor. In the small town of Norwood, Ontario, a weekly drawing is held in which a townsperson wins the right to access the town's one family doctor.

Governments ratchet down health-care costs in different ways. Doctors went on strike last year in Germany because their government's system pays them less than they thought they deserved and forces them to work thousands of hours of unpaid overtime. In the United Kingdom, one hospital was inspired to save money money by not changing sheets daily. British papers report that instead of washing the linens, nurses were told to just turn the bedsheets over.

Government is less the answer to our health-care crisis than the problem. It was our government that helped to create the absurd system in which two out of three Americans get health insurance through their employer. In a country where four in 10 Americans change their job every year, this system makes little sense; it leaves people like Readling without coverage when they need it most.

The government also makes insurance expensive by mandating the medical services that policies must cover. Required services vary state by state and include massage therapy, pastoral counseling, acupuncture, hair prosthesis and dentures. Such mandates are a reason why an individual policy in New Jersey costs around $4,000 a year while a policy in Iowa costs only a third of that. Yet insurance regulations make it illegal for someone in New Jersey to buy a policy from out of state.

The Way We Pay

Another problem that raises costs, and keeps individuals from controlling their own health care, is the way we pay for medical care. Out of every dollar that the United States spends on health care, only 12 cents comes out of the pocket of patients, according to the Centers for Medicare and Medicaid Services. Most of us have our medical expenses covered by a third party, either an insurance company or the government.

When we pay for health care with someone else's money, it creates nasty incentives. It's good to be covered in case of a medical catastrophe, like a heart attack or cancer, but when patients pay for almost everything from physicals to acupuncture using third-party money, they have no reason to care about cost.

Because the buyers don't care about cost, neither do the health-care providers.

"It's gotten to the point where doctors don't even know how much it costs them to provide this service or that service or how much an office visit should cost. Try asking a doctor how much an office visit costs and watch their face go blank," said Michael Cannon, director of health policy at the Cato Institute.

Our health-care system has become totally removed from the competitive market forces that have improved every other area of the economy. If patients cared about cost, health-care providers would compete to attract patients. They'd do innovative things to keep costs low while increasing quality.

Harvard Business School professor Regina Herzlinger, author of "Who Killed Health Care?", reminds people that "when Henry Ford came around, cars cost more than houses." By competing for profit, Ford revolutionized the auto industry. In eight years, he cut the price of cars in half while improving quality immensely. In nearly every sector of the economy, prices drop over time as technology improves. Not so in health care.

Customer Service, Competition, Control

Can you e-mail or call your doctor to ask quick questions? In the 21st century, when even small children regularly use computers, many doctors and hospitals don't.

"Why would they?" said Dr. David Gratzer, author of "The Cure." E-mail and telephone consultations aren't things most doctors can get paid for. Dr. John Goodman of the National Center for Policy Analysis, said, "The federal government has a list of 7,500 procedures it will pay for, the telephone's not on the list [and] neither is e-mail."

But when patients are in control of their health-care spending, things get better. Lasik surgery isn't covered by most insurance policies, so patients pay for this high-tech procedure out of their own pocket. It's for this reason that laser surgeon Brian Bonanni gives out his cell phone number and e-mail address to all of his patients. He knows that he has to attract patients by making himself available.

Competition has also made Lasik cheaper: While in nearly every other field of medicine, prices have gone up faster than consumer prices in general, the price of Lasik has fallen by as much as 30 percent. The quality of the surgery has also improved. The difference is that people care about prices when they spend their own money, so providers compete to offer services that are faster, better and cheaper.

John Mackey, CEO of the supermarket chain Whole Foods, saw his insurance premiums rise through the roof so he changed the way his employees got health care. He proposed a health insurance plan with a high deductible. To help meet that deductible, the company puts money into a "personal wellness account" for each employee and employees use that money to pay for routine care. The money in the account belongs to the employees and puts them more in control of their health-care spending. Employees pay for the small stuff, like sore throats and sprained ankles, but their health insurance covers them in case of a catastrophe. Accounts like these are typically called HSAs, or Health Savings Accounts.

Mackey saw Whole Foods' health-care costs drop by 13 percent the first year the plan was in place. Some employees objected. They wanted the old "full-coverage" plan back. One wanted "pet bereavement services" covered. Whole Foods then held a vote and "77 percent of team members voted for the health plan that we have today," said Mackey. Today he says most of his employees love the plan because it allows them to spend the money how they want to spend it.

'You and Me'

Whole Foods' health-care costs have been creeping back up lately. Mackey says it's because there are so few people with health plans like his. Only 4.5 million people in America have Health Savings Accounts, according to a 2007 census conducted by America's Health Insurance Plans. That's a tiny fraction of the insurance market, but consumer-directed health plans are a step in the right direction toward placing individuals, not government or insurance companies, in charge of their health-care dollars.

The more people control the money they spend on their own health care, the more people shop around and the more providers compete to attract patients by lowering prices while improving quality. It's putting individuals in control that could turn our health-care sector into the vibrant, competitive marketplace that we see in nearly every other area of our economy.

After all, it's our body and our health. Shouldn't we be in control of how our health-care dollars are spent?

Harvard's Herzlinger said, "Who should decide whether you live or die? Do you want the government to decide? Do you want a health insurer to decide? Who's gonna make that decision? Is it gonna be a government? Is it gonna be an insurer? Or is it gonna be you and me?"

Putting individuals in control of our health rather than our employers or the government is a better way to cure what ails America's health system.

Goal is EHRs; path is state by state

2006-10-06T06:31:00.000-07:00

In the nation's ambitious quest to bring information technology to the practice of medicine, state governments are beginning to play a critical role in shepherding new systems into hospitals and doctors' offices, health experts say.

Governors and legislators, for starters, are embarking on a variety of strategies to encourage the use of electronic health records and other innovations."There is a tremendous amount of focus, and it continues to grow," said Sheera Rosenfeld, a senior manager for Avalere Health in Washington, who helped write a report earlier this year on state initiatives.Read more (registration may be required).
New York Times

Most States Developing Roadmaps to Support Healthcare Quality Improvements Through Electronic Health Information Exchange

2006-10-06T06:17:00.000-07:00

Policies and practices for improving quality, safety and efficiency through HIT will be focus of National Assembly of State Leaders at eHI's Health Information Technology Summit, Sept. 25-27 in Washington, DC

A new eHI report finds that most states in the US are developing roadmaps to support electronic health information exchange (HIE).

Preliminary results from the 2006 Third Annual Survey of State, Regional, and Community-based Initiatives were released in a new report focused on state-level activity.

The 2006 survey takes the pulse of 165 multi-stakeholder efforts across the country, representing initiatives in nearly every state, Puerto Rico and the District of Columbia.

This year's survey also takes a special look at a new, rapidly emerging phenomenon--the role of state leaders in planning, coordinating and implementing policy and in some cases, practical issues related to the use of HIT in improving health and healthcare.

A copy of the Report is available at:
http://www.ehealthinitiative.org/assets/documents/eHI2006ReportonStateActivities.pdf

Key findings from the report will also be discussed at the HIT Summit, hosted by the eHealth Initiative and Bridges to Excellence, which will include a national assembly of state leaders driving improvements in healthcare through HIT and health information exchange who will gather to share insights, learn from one another and inform the policy agenda for the nation. It will also include an in-depth look at rapidly emerging policy changes related to both quality and HIT, touching on financial, organizational, legal, technical, privacy and confidentiality standards and issues. Click here to Read the press release

Rhode Island To Contribute $6M Toward RHIO

2006-07-13T16:56:00.000-07:00

http://www.ihealthbeat.org/index.cfm?Action=dspItem&itemID=123024

The Rhode Island General Assembly has approved a state budget, which includes $6 million to help finance the cost of developing a regional health information organization, American Medical News reports. The money is contingent upon funding agreements from other players who will benefit from the health information exchange.

The initial budget submitted earlier this year by Rhode Island Gov. Donald Carcieri (R) asked the state to borrow the full $20 million needed to build the network. However, lawmakers decided the state should not provide all of the funding because "there's a lot of financial benefit accrued to insurers ... and others should pay their proportional share," said Dr. David Gifford, director of the state's Department of Health.

The state determined the $6 million figure by estimating its "fair share" of the network's start-up capital cost at 30%, American Medical News reports. Rhode Island is seeking funding from insurers to help cover the cost of building the network and to provide the $2 million to $4 million in estimated annual operating costs. The RHIO will not launch for at least another year, according to Gifford.

Health insurers in Rhode Island, such as Blue Cross & Blue Shield of Rhode Island and United HealthGroup, have indicated a willingness to discuss contributing to the RHIO but noted that physicians also will benefit from the network, American Medical News reports. The Rhode Island Medical Society supports the measure. "We're not opposed to paying our fair share," said Steve DeToy, director of government public affairs for the group.

Rhode Island is optimistic that discussions with insurers and other players will be successful, according to American Medical News. Rhode Island's small population provides a "natural advantage" because the state can "get all the players in the health care arena to the table to work on the development of this type of network," said Jeff Neal, the governor's press secretary (Chin, American Medical News, 7/17).

Rhode Island Funds Statewide EHR Repository

2006-06-21T09:41:00.000-07:00

Rhode Island Plans Central Bank of e-Health Records

BY Nancy Ferris
Published on June 15, 2006

Rhode Island's legislature has approved borrowing $20 million to finance the creation of a statewide repository of e-health records, Gov. Donald Carcieri told the Government Health IT Conference today.

Carcieri said his state, like others, is facing rapid escalation of health care costs and is taking steps to hold them down. Medicaid alone now accounts for 24 percent of the state's budget.

"Health care is the No. 1 public policy issue for our nation," he said, and no solutions are at hand. "It falls on the states to do something."

Of all the potential fixes for health care, Carcieri said, health IT holds the most promise in the near term. "Health IT can really squeeze costs out of the system, increase quality and improve outcomes," he said.

The governor said up to $2 billion of the $6 billion spent on health care annually in Rhode Island is wasted because the right information isn't available when needed. For example, he said, 20 percent of the diagnostic tests done on patients are unnecessary.

The compact size of Rhode Island, which has about 1 million residents and only two major health insurers, may make it easier to fix the health care system, Carcieri said.

The health records bank recently approved by the General Assembly will hold digitized patient records and make them available to authorized individuals.

Carcieri said it should be established as a public-private partnership. "There needs to be public oversight" to increase public trust in the data bank, he said.

Although the bond issue authorized by the legislature will pay for establishing the databank, the governor said the method of financing operations hasn't been decided yet. He favors charging a small fee for each transaction, he said, but getting such a system in place will not be easy.

Asked how his state's program meshed with federal health IT activities, Carcieri acknowledged the potential value of a national health information network. But, he said, "If we wait for the federal government to come up with a whole large scheme, there are so many interests" it could take years.

Massachusetts Hospitals Leading the Way on Healthcare Quality

2006-06-21T09:29:00.000-07:00

Leading the way on healthcare

By Cleve L. Killingsworth | June 21, 2006

IMPROVING the quality of health care saves lives. That's the lesson behind last week's announcement by the Institute for Healthcare Improvement that more than 120,000 such lives were saved nationally because hospitals followed proven interventions that deliver safer and more effective care.

All 72 Massachusetts acute care hospitals participated in this campaign. Their success -- together with the state's landmark health care reform law that will focus on many of the best practices used by the institute through the Massachusetts Health Care Quality and Cost Council -- puts the state in a unique position to lead the country in delivering top-quality health services.

Don Berwick, president of the Cambridge-based institute, explained that, over the past 18 months, a national effort by 3,000 hospitals across the country prevented the unnecessary deaths of more than 122,300 patients.

The effort supports interventions that make a real difference for patients. In many cases, that just means getting hospitals and front-line health workers to agree to follow practices that have been shown to eliminate error and save lives.

Some policies and procedures that the institute and the participating hospitals have put in place are relatively simple. For example, they are committed to giving patients who are at risk for heart attacks aspirin and beta-blockers. They are making sure that patients on ventilators have their heads raised between 30 to 45 degrees at all times to prevent them from developing pneumonia. They are implementing rapid-response teams at the first sign that a patient's condition is worsening. And they are making sure that doctors and nurses working with patients who are receiving medicines and fluids from central lines clean the patients' skin with a certain type of antiseptic.

While these procedures are not revolutionary in concept, they require significant collaborative effort and commitment. Taken together, these everyday actions can represent a sea change in patient outcomes for hospitals. Because of the size, diversity, and complexity of the health care system -- with all its insurers, providers, caregivers, and facilities -- it is difficult to disseminate best practices that improve patient health. And yet the success that the institute has fostered shows that it can be done.

It is fitting that every acute-care facility in the state is participating in this process. Massachusetts has already shown it can lead the nation in achieving better health care. Passing the legislation that made universal access to health care the standard wasn't easy. It took bringing together political leaders from all sides, business leaders, consumer and patient groups, insurers, hospitals, doctors, and nurses.

And there is more that can and must be done. The state Health Care Quality and Cost Council, established by the landmark legislation, can further improve the delivery of medical care and do so in a way that restrains the growth in spending. The success of the institute's effort shows what can be accomplished when all insurers and hospitals collaboratively choose concrete goals that improve the safety and effectiveness of care.

Massachusetts has the best health care system in the country -- but it can get better. Given the high caliber of the hospitals and medical schools, the commitment of doctors and nurses, and the pioneering spirit of organizations such as the institute and others that are willing to point out where the system is failing and fix it, Massachusetts is in a unique position to fundamentally transform it.

The institute has shown that improving the system will save lives. And so with the wind of reform at our backs, universal health coverage within reach, and progress not only possible but demonstrable, now is the time to commit to making Massachusetts the standard bearer for quality health care for all.

Cleve L. Killingsworth is president and CEO of Blue Cross Blue Shield of Massachusetts.

Massachusetts Health Plan for 500,000 Uninsured to Define Provider Networks

2006-06-21T09:17:00.000-07:00

State plan may curb hospital choice

Insurance authority looks at ways to keep premium costs down

By Jeffrey Krasner, Globe Staff | June 8, 2006

At yesterday's first meeting of the state authority charged with crafting affordable health insurance, a state Medicaid official said restricting patient access to a limited network of hospitals could help keep premiums down.

Brian Wheelan , assistant director of Medicaid, spoke before the board of the Commonwealth Health Insurance Connector Authority, which was created under the healthcare reform bill intended to extend coverage to the roughly 500,000 Massachusetts residents without health insurance.

As an example of the differences in hospital costs, he said that Cambridge's Mount Auburn Hospital, a Harvard-affiliated teaching hospital, charges $1,800 to deliver an underweight infant, while Massachusetts General Hospital, also a Harvard-affiliated teaching hospital, charges about $5,300. Brigham and Women's Hospital, another teaching hospital that has a reputation for quality maternity services, charges $3,200, he said.

"Don't let anyone tell you there aren't huge savings in cost while maintaining quality," he said at the meeting held at One Ashburton Place.

Wheelan said defining provider networks, which mandate which hospitals patients can use, could generate enormous savings as the Connector seeks to craft an affordable insurance plan for individuals that features a target premium of $300 a month. Some board members seemed open to that approach.

"If you have to restrict something, I'd rather restrict the breadth of the network rather than cut benefits," said Dolores L. Mitchell , who also serves as executive director of the Group Insurance Commission, which provides insurance for state employees and retirees.

David Torchiana , chief executive of the Massachusetts General Physicians Organization, acknowledged that costs are higher at his hospital, but he warned against restricting access. Residents of Everett, Chelsea, and other areas rely on Mass. General as a community hospital, he said.

Jon M. Kingsdale , the former Tufts Health Plan executive who is executive director of the Connector, said he will rely on insurers to craft low-cost offerings, which might include a restricted network. ``We want to be open to what health plans bring us," he said. ``I suspect if there is substantial value in limited networks, we'd be open to them."

Kingsdale is being offered a three-year contract with a $225,000 annual salary, although final details have not been worked out.

The issue of restricting networks was one of many addressed yesterday . The new authority is chaired by Thomas Trimarco, secretary of health and human services, but will operate largely independently. It will develop a low-cost insurance plan that is intended to be a key part of the state's reform effort. The state will also expand Medicaid, the federal and state program that provides healthcare to low-income residents, and will provide subsidies for residents who earn less than three times the federal poverty rate, about $60,000 a year for a family of four.

The authority's decisions will determine what is covered by the affordable health insurance plan, called Commonwealth Care. But it is also operating under a tight deadline.

"We'd like to be enrolling people in Commonwealth Care by Oct. 1, less than four months away," said Kingsdale.

Along with limited provider networks, the state highlighted other approaches to low-cost insurance, such as eliminating some healthcare mandates. For instance, Massachusetts insurers now must cover assisted reproductive techniques like in vitro fertilization. Wheelan said the Connector should look at suspending some of those benefits for its low-cost product.

He also discussed using tax-advantaged health savings accounts, which enable employees to set aside pretax dollars for out-of-pocket expenses. Such accounts are typically linked to health plans with high deductibles. Wheelan said preventive services like routine checkups could be exempted from the deductibles.

Another approach would be to charge higher premiums for residents who smoke, similar to the way life insurance companies charge higher rates for smokers, he said.

Charles Joffe-Halpern , executive director of Ecu-Healthcare Inc. of North Adams, which provides access to healthcare for Berkshire County residents, said he was wary of so-called consumer-directed healthcare plans, which feature high deductibles and copayments.

"It's a slippery slope when you start to talk about consumer-directed healthcare," he said.

Jeffrey Krasner can be reached at krasner@globe.com.

Consumer-driven Health Plans Membership Continues to Grow

2006-06-21T09:06:00.000-07:00

UnitedHealth sees explosion in HSA and HRA enrollments

San Francisco Business Times - June 16, 2006

by Chris Rauber

Minnesota-based UnitedHealth Group said membership in its consumer-driven health plans continues to soar, both in California and nationwide.

Membership nationally has surpassed 1.75 million enrollees, UnitedHealth said June 8. In California, that translates into 118,000 people enrolled in so-called "CDHPs", up more than 74 percent from the prior year, said Cheryl Randolph, a spokeswoman for UnitedHealth's Cypress-based PacifiCare unit. She said the company doesn't break out those numbers by region.

Of those 118,000 enrollees, she said, 25,000 have signed up for a health savings account or HSA and 93,000 for a related health reimbursement account.

Nationally, membership in its HSA and HRA plans jumped 75 percent from June 2005, with more than 750,000 new individuals participating in the last year.

"Consumers are becoming much more comfortable with account-based plan designs," said Mike Tarino, CEO of Definity Health, the UnitedHealth unit that manages these health plans. "More than 13,000 employers have already turned to us to incorporate a consumer-driven design into their benefits strategy, and our CDH membership among large, national employers alone recently topped 1 million."

Still, all is not rosy in the consumer-driven health plan world. Other sources say that nationally, only about 1 in 4 enrollees in such plans actually opens and funds an HSA, although the data is a bit murky. Without a linked HSA or related account, a consumer-driven plan is just a high-deductible insurance offering by another name, critics say. PacifiCare's Randolph cautions that it's just five and a half months into the year, however, "and believe it or not some people simply don't get around to opening the account right away."

The company's data on companies with 100 to 5,000 employees shows that when the employer contributes to the HSA, 89 percent of employees open an account, and 60 percent fund it.

Chris Rauber can be reached at (415) 288-4946 or crauber@bizjournals.com

Encouraging Results of Incentive-based Health Insurance Plans

2006-06-12T08:55:00.000-07:00

Wellness pays as health costs shift
Consumer-directed insurance plans use education, rewards to change lifestyles

By Ann Meyer
Special to the Chicago Tribune
Published June 12, 2006

Pedometers, workouts and wellness points are the topics of casual lunchtime conversations at the DuPage Credit Union in Naperville now that the company offers a consumer-directed health insurance plan that rewards employees for healthy behavior, the company said.

"I'm watching team members come together and really motivate one another to be more healthy individuals," said Lori Mecca McGrath, human resources manager.

The wellness focus has been building since October 2004, when the credit union nixed the standard PPO plan it had offered for years in favor of a lesser-known, $1,000-deductible consumer-directed health plan with lower premiums and a health reimbursement arrangement to which the company contributes $600 per employee, she said. If workers don't spend the $600, it is theirs to keep, McGrath said.

Besides encouraging employees to spend wisely, the company's new plan from Destiny Health rewards employees with "Vitality Bucks" for engaging in health-oriented activities such as health screenings, fitness workouts and smoking-cessation programs. Bucks can be exchanged for merchandise.

"It gives you an impetus to pay a little more attention to your health care," McGrath said.

While many businesses are turning to high-deductible health plans to curb double-digit premium increases, experts say the plans must encourage healthier lifestyles for them to be effective long term.

"Without that component of prevention it's more of a short-term savings than long term," said Kenneth Olson, president of Horton Benefit Solutions in Orland Park.

By encouraging workers to control behavior that otherwise can lead to expensive health care, a company also can control its premium increases, Olson said. In the past couple of years, he said, companies are beginning to see a greater spread between premiums of standard PPO plans and those of consumer-directed plans.

"This is very encouraging," he said.

But encouraging workers to change their habits requires a major educational push, and many small businesses simply do not have the resources to deliver it themselves.

The wellness concept makes sense to David Johnson, director of human resources at Beckett Associates, a Bedford Park distributor of trading cards and collectibles that gives its 140 employees a choice of three Blue Cross plans: a PPO, HMO or high-deductible plan tied with a health savings account.

"A healthy workforce is a reliable, dependable workforce," Johnson said. "We're looking for people able to come to work not encumbered by maladies and diseases. You want people to feel well and to be healthy."

While some of the company's workers play basketball or soccer on their lunch breaks, to administer its own full-blown wellness program with something for everyone would be too big a task, Johnson said. So the company is considering adding a program administered by Blue Cross.

Blue Cross offers Blue Care Connection, with an online personal health manager who provides guidance on exercise and nutrition based on members' personal data and goals, said Debbie Halan, senior manager of product management. Members start by taking the Mayo Clinic health risk assessment online.

From their answers the online program provides advice on eating healthier, setting up an exercise program and sticking with it.

Members report their progress daily and are sent reminders to encourage follow-through.

"If you didn't walk your mile today, it's like having a personal trainer there reminding you," Halan said.

Another component provides information about treatment costs and hospital comparisons. Members with questions about a condition or treatment can contact a Blue Cross nurse for additional guidance.

Besides concerns about escalating health-care costs, more companies are embracing wellness programs to keep their workers healthy and productive, said Kirk Pion, director of strategy innovation and delivery at Blue Cross and Blue Shield of Illinois.

"It's a bottom-line savings," Pion said.

Meantime, Humana Inc. offers several consumer-directed health plans and is slated to roll out its Virgin Life Care wellness offering in the Chicago market by 2007, said David Reynolds, vice president of sales for Humana in Illinois. That plan, available in several other markets, rewards members with HealthMiles for exercising, tracking blood pressure, body fat and weight, and achieving health and fitness goals. Reward points can be redeemed at stores like Best Buy, Home Depot and Target

Currently, Humana has 421,000 members in its consumer-directed plans, representing about 13 percent of its total membership. But Reynolds noted that the Chicago market has not been as quick to embrace them as other areas of the country.

"In Chicago, there's a great HMO presence and an industrial economy. There's a history of offering very rich benefits," he said. "We're having to open people's eyes to new possibilities."

But education will gradually change that, Reynolds said.

"What really helps is once people get into these plans and start to see the behavior change, it changes the claims trend," he said.

By encouraging employees to use more preventive health services, they often need fewer after-the-fact interventions like hospital stays, according to Humana's three-year study of 155 companies representing 13,000 consumers.

The study indicates customers using Humana's consumer-directed health plans saw annual claims-cost increases of between 5 percent and 6 percent, compared with double-digit increases in other plans in recent years.

Most savings came from changes in behavior instead of shifting costs, as many consumers used preventive services and avoided the need for hospital stays, the company said.

Meantime, Destiny Health recently reported disappointing financial results for the six months ended Dec. 31, 2005, stemming in part from trouble gaining traction in the Chicago market.

Still, Destiny is considered a leader in the area of incentives, and many other insurers are taking note of its Vitality rewards program, particularly as it contributes to smaller premium increases. Destiny offers discounts on premiums when employer groups achieve certain goals, said Patty Peterson, vice president of marketing.

"Long term, the healthier people get, the better health-care costs will be in check," Peterson said. "It's better for the system and the small employer."

Copyright © 2006, Chicago Tribune

Market-oriented Healthcare Insurance Reforms in Massachusetts

2006-06-09T07:50:00.000-07:00

State plan may curb hospital choice

Insurance authority looks at ways to keep premium costs down

By Jeffrey Krasner, Globe Staff | June 8, 2006

"Don't let anyone tell you there aren't huge savings in cost while maintaining quality," he said at the meeting held at One Ashburton Place.

``If you have to restrict something, I'd rather restrict the breadth of the network rather than cut benefits," said Dolores L. Mitchell , who also serves as executive director of the Group Insurance Commission, which provides insurance for state employees and retirees.

Kingsdale is being offered a three-year contract with a $225,000 annual salary, although final details have not been worked out.

The authority's decisions will determine what is covered by the affordable health insurance plan, called Commonwealth Care. But it is also operating under a tight deadline.

"We'd like to be enrolling people in Commonwealth Care by Oct. 1, less than four months away," said Kingsdale.

Another approach would be to charge higher premiums for residents who smoke, similar to the way life insurance companies charge higher rates for smokers, he said.

"It's a slippery slope when you start to talk about consumer-directed healthcare," he said.

Jeffrey Krasner can be reached at krasner@globe.com.

Market-oriented or Government-dominated U.S. Healthcare Reform?

2006-01-16T10:56:00.000-08:00

Bush Sets Focus For 2006 Healthcare Agenda
By JOHN D. MCKINNON and SARAH LUECK
Staff Reporters of THE WALL STREET JOURNAL

January 12, 2006; Page A3
WASHINGTON -- President Bush, searching for a way to ease Americans' anxiety about the economy and to respond to business and consumer alarm over health costs, is gearing up to focus on health care as a centerpiece of his 2006 domestic agenda.

The White House is unlikely to propose major new federal spending. Instead, it is considering expansions of several earlier proposals aimed at using market forces to improve the quality and restrain the rapidly rising cost of health care.

The White House has been frustrated that the president isn't getting more credit for an economy marked by steady growth, low inflation and falling unemployment. Talking more about health care is part of its response. "Health care is obviously a big challenge, and ... creates angst on the part of the American people," Mr. Bush's economic adviser, Allan Hubbard, said in an interview this week. "Employers are spending more money on health care, and that's robbing people of wage increases," he said.

The president is likely to sound similar themes in the State of the Union address later this month. In Louisville, Ky., yesterday, Mr. Bush called health care "an unmanageable cost" for businesses. Rejecting government-directed care as a solution, he said the ideal health system "is one in which there is a direct connect between provider and customer, [and] where there's transparency in the pricing system." In a likely signal of what is to come, the president urged Congress to expand health savings accounts, or HSAs. Created in 2003, HSAs allow Americans to set aside money tax-free to pay health costs if they choose high-deductible health insurance.

Among the proposals Mr. Bush is considering are:

Providing bigger tax breaks for Americans who buy their own health insurance to balance tax breaks available to workers who get health insurance through employers.
Encouraging broader use of HSAs in the hope that giving consumers more control over their health-care spending will make them more cost-conscious.
Helping consumers get more information about health-care providers' prices and performance to make them better shoppers.

Building on past Bush proposals, the new White House focus on health -- beyond the government's Medicare program -- is intended to give Republicans an election-year answer to many of the worries that voters have about the fast-changing economy. In many voters' minds, those worries appear to be overshadowing the good economic news about the pace of growth and falling unemployment.

Opinion polls show health care near the top of Americans' concerns. Last month's Wall Street Journal/NBC News survey, for example, showed health care ranking behind only the war in Iraq on the list of issues the public wants the federal government to address. While 41% identified the war as a top priority for Washington, 33% identified health care, exceeding the 28% who pointed to job creation and economic growth.

While many experts and a growing number of business executives see reason to restructure the health-care system, politicians have shied away from wholesale changes since the failure of the Clintons' initiative in the 1990s.

The Bush White House is unlikely to repeat what is widely seen as the Clintons' overreaching, but the outlines of the health-care system it envisions are becoming clear. It would rely less on generous insurance provided by employers that insulate individuals from the cost of their choices. Instead, it would rely much more on;
(1) market forces,
(2) provider competition,
(3) using the Internet to provide consumers with more, better data about the care quality and prices charged by doctors and hospitals, and
(4) individual (as opposed to employer-provided) insurance,
(5) tax credits to help the uninsured.

Improved information about the quality of doctors and hospitals would be valuable to people with HSAs, who according to some surveys, "don't feel like they've got enough useful information to make the best decisions about their care," said Mark McClellan, a former White House adviser who now oversees Medicare. He has been pushing the giant program for the aged and disabled to link government payments to the quality of care, instead of the volume of care. Medicare, for instance, is experimenting with paying hospitals a bonus if they perform well on preset quality standards.

A slim new book, "Healthy, Wealthy & Wise," by former Bush advisers R. Glenn Hubbard and John F. Cogan, along with Daniel Kessler of the Hoover Institution, outlines the case for moving in the direction that the Bush administration is heading. It argues that "the unintended consequences of a handful of public policies" -- including tax and health-insurance rules -- "are in large part responsible for the problems of the health-care system" because they hinder "the proper functioning of markets." (See excerpts and more information¹.)

Mr. Bush's proposals are likely to draw fire from conservatives for not going far enough. And they will draw fire from Democrats and unions, who fear the administration would undermine the employer-based system and, by making individuals pay for more of their own health, discourage people from getting preventive health care. "I think this is a classic risk shift onto individuals that is both unpalatable to people and bad policy," said Jared Bernstein of the Economic Policy Institute, a liberal Washington think tank.

Analysts on both sides express skepticism that Mr. Bush, unable to persuade Congress to embrace his Social Security proposals, can make much headway this year.

Write to John D. McKinnon at john.mckinnon@wsj.com⁴ and Sarah Lueck at sarah.lueck@wsj.com⁵

Citizens Healthcare Working Group Consumer Survey

2006-01-16T10:20:00.000-08:00

Reforming Our Health Care System Is a Huge Challenge That Requires New Thinking and Creative Solutions:

Many of you may know from first-hand experience what we have been talking about — a health care system troubled by sharply rising costs, unreliable quality, and, for some people, poor access to care. Many people either have no health insurance, or they do not have enough insurance coverage. These problems are complicated and they affect each other.

Lots of new ideas are being explored by governments, businesses, and others. Examples include:

Creating new state and local programs that expand insurance coverage and at the same time control costs and improve quality and access to care.
Having employers and employees work together to expand access by holding costs down and getting the right care at a good price.
Using new health information technology. The goal is to provide more information to providers and patients, improve quality, reduce medical errors, and reduce waste.
Encouraging people to use less expensive, yet equally effective health care options. For example, people can often use generic drugs instead of more expensive brand-name medications.
Providing more information to doctors, nurses, hospitals, insurance companies, employers, and consumers about higher quality, more efficient care. One way is to use a type of “report card” to rate the care provided by different types of health plans, hospitals, nursing homes, etc.
Adjusting payments to doctors, hospitals, or other health care providers based on the quality of care they provide.
Improving people’s access to care and insurance coverage through a more effective use of current public programs, such as Medicaid, or new programs that will allow more employers to offer coverage.

While some of these ideas may appear promising, not all are being used widely. Some need careful evaluation. Few of them have been easy to do. Some will prove themselves, but others just won’t pan out in our complex health care system. We need lots of ideas. We still have some hard work cut out for ourselves.

Now it’s time to hear from you. You can help shape our health care system in the future — and, hopefully, allow us to create one that works for all Americans.

We need to know about your concerns. We also need your ideas about where we go from here. Let us know what you think.

What concerns you most about the health care system in America today?
Our current way of paying for health care includes payments by individuals, employers, and government. Are there any changes you think should be made to this system?
What trade-offs should the American public be willing to make in either benefits or financing to ensure access to affordable, high-quality health care coverage and services?
What is your single most important recommendation to make to improve health care for all Americans?
What health care benefits and services should be provided?
How should health care be delivered? How should it be paid for?
What have you seen in America’s health care system that works well?

These are just some of the questions that we need to answer. We’ll be formulating others as we grapple with problems and solutions.

So here’s what to do next:

Find out more about health care. Keep this booklet handy, so you can refer back to the key facts and issues. Learn more from the free information – a detailed report and slideshow – available online at http://www.citizenshealthcare.gov/.
Tell us what you think about what works and what does not.

RESPONSES OF BOB COLI, MD TO THE ONLINE CONSUMER SURVEY BY CITIZENSHEALTHCARE.ORG: 1/14/06

What concerns you most about health care in America today?

The government’s long-standing failure to ensure the creation and maintenance of a truly competitive (i.e. “free”)* healthcare marketplace in each state and nationwide.

A slim new book, "Healthy, Wealthy & Wise," by former Bush advisers R. Glenn Hubbard and John F. Cogan, along with Daniel Kessler of the Hoover Institution, argues that "the unintended consequences of a handful of public policies" -- including tax and health-insurance rules -- "are in large part responsible for the problems of the health-care system" because they hinder "the proper functioning of markets." (see next post above)

*A truly competitive or free market is a business governed by the laws of supply and demand, not restrained by government interference, regulation or subsidy. It is a market in which supply and demand is unregulated except by the country's competition policy, and rights in physical and intellectual property are upheld.

A free market economy is one where scarcities are resolved through changes in relative prices rather than through regulation. If a commodity is in short supply relative to the number of people who want to buy it, its price will rise, producers and sellers will make higher profits and production will tend to rise to meet the excess demand.

If the available supply of a commodity is in a glut situation, the price will tend to fall, thereby attracting additional buyers and discouraging producers and sellers from entering the market. In a free market, buyers and sellers come together voluntarily to decide on what products to produce and sell and buy, and how resources such as labor and capital should be used.

A free market can be contrasted with a controlled market, where prices are determined by a regulatory or administrative authority and do not respond flexibly in the face of varying demand and supply conditions. Controlled markets are characterized by rationing, if production falls short of demand, or a buildup of unsold stocks if production exceeds demand.

Our current way of paying for health care includes payments by individuals, employers, and government. Are there any changes you think should be made to this system?

The solution for the escalating cost and quality dilemma for all 297 million Americans, including the approximately 46 million currently without any health insurance coverage, is clearly NOT replacing the current “employment-based and insurance-funded,” health coverage system in the U.S. with universal health coverage based on “single-payer reimbursement and tax-based funding.”

Until someone can convince me that the coercive power of government has or can ever allocate resources better than well-informed individuals with multiple choices using reliable information in a competitive market, I will continue to believe that our intractable uncontrolled costs and variable quality of care are based on a combination of flawed incentives and monopolies ⁽¹⁾, oligopolies ⁽²⁾ and monopsonies ⁽³⁾ doing what they do best---wielding their anti-consumer economic power.

This conclusion is not just based on economic theory. It is solidly based on my personal experiences as a provider of professional healthcare services. Over the last four decades, the evolution of the healthcare industry in Rhode Island has irrefutably demonstrated the substantial value, in terms of cost, quality and access of well-informed consumer choices and lively competition between vendors of both products and services and the adverse effects of their absence.

(1) Exclusive control by one group of the means of producing or selling a commodity or service: “Monopoly frequently … arises from government support or from collusive agreements among individuals” (Milton Friedman).

(2) A market condition in which sellers are so few that the actions of any one of them will materially affect price and have a measurable impact on competitors.

(3) A market situation in which the product or service of several sellers is sought by only one buyer.

What trade-offs do you think the American public is willing to make in either benefits or financing to ensure access to affordable, high quality health care?

If the problem was clearly framed in the mass media as market failure that is based primarily on government's chronic (and bi-partisan) failure to create and maintain a competitive market for all healthcare goods and services, the American public would embrace market-oriented, consumer-driven healthcare reform as much as the do sub-$500 PCs and competing online bids for their auto insurance and mortgage business.

What is your single most important recommendation to make to improve health care for all Americans?

From my perspective as a former physician in private, office-based practice since 1967, the root cause of the escalating prices and quality problems in the $2 trillion United States healthcare industry is the government’s implicit (not readily apparent) failure to create a truly competitive marketplace for healthcare services and products.

A truly competitive market can be hard to achieve in the real world and is non-existent to date in the $2 trillion American healthcare industry because such a market must be based on three specific characteristics:

(1) Consumers of its services and products must have immediate access to perfect information on prices and quality,

(2) No provider of services or products should have enough market share to be able to dictate prices, and

(3) There must be no barriers to market entry or exit.

The core problem with actually achieving this economic textbook definition is that only the federal and state governments can ensure that these characteristics exist and are maintained. And until now, government has failed to do its job, locally, regionally and nationally.

In spite of our extremely dysfunctional healthcare market nationally and in Rhode Island, recent market-oriented reforms at the national level that are being adopted in all of the states could start disrupting the intransigent status quo.

Despite skepticism about “consumer-directed” health benefit plans in some quarters, I believe the infrastructure or “scaffolding” on which a much more competitive healthcare market can be built and maintained is feasible if three important new trends that began in 2003 take hold and achieve widespread long-term success. These are:

(1) Health Savings Account (HSA) consumer-driven health plans (Enacted by Congress in December, 2004. See: http://www.hsainsider.com)

(2) Widespread creation, diffusion and use of Integrated EMRs/PMSs, EHRs/PHRs, interoperable HIEs and ultimately the NHIN (A transferable electronic medical record for every American was first established as a national goal by President Bush’s Director of HHS in July, 2003).

(3) Leveraging physician office and hospital-equipped EMRs/EHRs to transform reimbursement now based primarily on volume with enlightened P4P (Pay-For-Performance) methods.

Fortunately for Rhode Island’s one million citizens, as evidenced by his healthcare reform plans recently published in the Providence Journal and on his Web site, I believe our Governor Don Carcieri supports this market-oriented approach and not the “heavy foot of government solution” to this chronic economic problem that affects all of us sooner or later.

President to Push Medical Record Computerization

2006-01-08T18:25:00.000-08:00

BY MEGHAN CLYNE - Staff Reporter of the NY Sun
January 6, 2006

URL: http://www.nysun.com/article/25457

WASHINGTON - President Bush is readying a major push to computerize the nation's medical records, including what is expected to be between $100 million and $200 million in funding for the program in the federal budget he will propose next month.

Two likely 2008 presidential contenders and leaders of their respective political parties, Senator Frist, a Republican of Tennessee, and Senator Clinton, a Democrat of New York, teamed up last year on legislation to try to encourage doctors to replace pen-and-ink scribbles with a sophisticated network of electronic medical records. Yet despite the high-profile bipartisan backing, Congress has failed to agree on standards for the technology or how to fund it.

Advocates say electronic medical records could save $140 billion a year in health care expenses on things like file clerks and space for file cabinets, while also saving tens of thousands of lives each year by reducing medical errors.

"We're really ready to step up in 2006 for a pretty aggressive agenda," the Bush administration's national coordinator for health information technology, David Brailer, told The New York Sun on Wednesday.

"The president loves this topic," added Dr. Brailer, who was appointed to his post at the Department of Health and Human Services in 2004 under an executive order to achieve "widespread deployment" of electronic medical records within 10 years.

Dr. Brailer told the Sun that later this month the administration will start by unveiling "breakthrough" health information technology initiatives that may be completed by year's end, increasing the issue's visibility among the American public. The initiatives include nationwide computerized personal medication histories, so that a doctor anywhere in the country can know what medications a patient is taking before treating him; providing "secure messaging" to allow for private e-mail and other electronic correspondence directly between doctors and patients, and "bio surveillance," which uses computerized records to monitor disease outbreaks and provide earlier detection and better treatment of pandemics or bioterrorism attacks.

A Washington-based health care administrator who advises the White House on health information technology, Barth Doroshuk, said the administration is expected to seek between $100 million and $200 million for the technology initiative in this year's budget, to be announced in February.

At least some doctors' offices, however, are moving ahead on their own.

One example is a practice founded and partly owned by Mr. Doroshuk, Washington ENT, one of a variety of "paperless" practices around the country. The downtown office of the six-year-old ear, nose, and throat practice has no filing cabinets. There are no rooms full of shelves lined with manila folders stuffed with charts. Instead, patients' insurance, medication, examination, and treatment records are maintained on eight Dell servers stacked in a large closet.

Washington ENT's doctors use software provided by A4 Health Systems of Cary, N.C. - one of around 1,200 companies nationwide currently specializing in electronic health records - that organizes and updates their schedules, patients' medical histories, patient correspondence, examination notes, and lab results. Washington ENT's records are backed up at a separate location, protecting the data. The system also allows doctors to view the information from home, and when their pagers buzz in the middle of the night with a medical emergency, each physician has the patient's entire medical record instantly accessible.

"I would never go back to the old system," one of Washington ENT's head and neck surgeons, Dr. Catherine Picken, said.

Doctors' computers are also connected to Washington ENT's laboratory, and every half hour the computers check automatically for updates and alert the doctors when new test results are in. Mr. Doroshuk said the technology dramatically reduces the time between a patient's initial consultation with a physician and his receiving treatment, allowing each of Washington ENT's four physicians to see between 30 to 35 patients a day.

The practice's technology also improves the quality of doctors' service, Mr. Doroshuk said. When a patient's symptoms are entered into the computer, for example, the practice's software maps out all the possible ailments those symptoms might indicate. When a patient comes in with a runny nose and headache during allergy season, Mr. Doroshuk said, many doctors might automatically identify as an allergy what may in fact be a sinus infection. The software, Mr. Doroshuk said, helps doctors "think outside the box," increasing the likelihood that a patient will get an accurate diagnosis sooner.

Analysts say the use of electronic records significantly reduces redundant and improper treatments, and cuts back on potentially fatal medical errors resulting from incomplete or erroneous information in a patient's medical file. According to the Institute of Medicine, between 44,000 and 98,000 Americans die each year from medical errors.

Another significant motivation for going "paperless," Mr. Doroshuk said, is money. The federal government estimates that nationwide electronic health records would save the health care industry $140 billion a year.

At a forum in Cleveland early last year, President Bush put the estimated savings at around 20% of the health care industry's total expenses (an estimated $2 trillion U.S. healthcare spending in 2005 X 20% = $40 billion in savings a year).

Because of Washington ENT's sophisticated computer system, Mr. Doroshuk said, "there are functions that don't exist in this office" that represent significant costs for traditional medical practices.

"There are some offices that have chart rooms with chart staff, and that's all they do is assemble charts. We don't have anything like that," Mr. Doroshuk said. "When you're talking about 1,000 square feet on K Street that you wouldn't have to rent a year, and $50,000 a year on transcription that you wouldn't have to spend, and you start adding those chunks of money up, you're literally coming up with millions of dollars in savings."

One of the most significant savings, Mr. Doroshuk said, is in staff salaries. According to the Medical Group Management Association, the average support staff to physician ratio for a multispecialty physician practice is almost 5 to 1. At Washington ENT, Mr. Doroshuk said, the ratio is less than 2 to 1.

According to the MGMA, support staff salaries represent the largest operating cost for multispecialty physician practices, at a median level of about $176,000 annually a physician, followed by building and occupancy costs, at about $40,000 a physician. Both expenses, Mr. Doroshuk said, are significantly reduced by going "paperless." According to government estimates, these savings could translate into around $700 shaved off every American family's annual health insurance bill.

Despite the benefits, physicians represent one of the largest obstacles to full implementation of electronic records, analysts said. The up-front costs of purchasing and implementing the technology dissuade many doctors from computerizing their records. According to an HHS-funded MGMA survey published in September, medical practices that implemented electronic records last year spent about $33,000 for each physician on the technology, with maintenance costs of about $1,500 a month for each physician. The initial costs for the computer system at Washington ENT, Mr. Doroshuk said, were around $300,000. Starting up the practice cost about $750,000, he said, compared to the $500,000 price tag he estimated for a paper-based office.

On a national scale, "We're more than $100 billion from here to where we need to end up," Dr. Brailer said. Another likely 2008 presidential contender and a former speaker of the House, Newt Gingrich, has advocated spending $7 billion a year on computerized medical records.

Physician behavior and pay incentives, too, are halting the further spread of health information technology. One observer noted that since most physicians are paid based on the number of procedures they perform, computerized records' reduction of unnecessary procedures could slash doctors' revenue. Doctors could also lose some revenue by spending time learning the new technology instead of seeing patients. Analysts expect that larger health care providers, which have greater access to capital and can guarantee doctors' salaries during transition phases, will lead nationwide private sector conversion to electronic records. One government official cited as an example one of America's largest health care providers, Kaiser Permanente, which will complete the switch to electronic records for its 8 million patients later this year.

In Washington, the biggest dispute over the health care industry's switch to electronic records is whether the government should finance or merely regulate it. If Washington bankrolls the upgrade, further disagreement arises over what form financial assistance to doctors should take.

There is bipartisan agreement that the federal government needs to set standards for the technology. When it comes to funding, however, Democrats typically advocate the use of direct grants and Republicans an incentive based approach, said a spokesman for the Senate Health Committee, Craig Orfield. Among the senators most active on the issue, Senators Frist and Clinton have advocated direct government grants. The two leading members of the Senate's Health Committee, Senator Enzi, a Republican of Wyoming, and Senator Kennedy, a Democrat of Massachusetts, have pushed for loans, according to Senate staff. Senator Grassley, a Republican of Iowa, and Senator Baucus, a Democrat of Montana, joined Messrs. Enzi and Kennedy to press for incentives for computerized medical records as part of Medicare payments.

Dr. Brailer cautioned that ultimately the American public would be paying for the technology, either as taxpayers or consumers. The main question, Dr. Brailer said, was through whose hands the money would be funneled - the government's, doctors', employers', or health insurance plans'. "Therein lie all the political questions," he said.

Congressional staff said two other key political questions must be answered before Congress officially embraces electronic health records. One is vocal concern from "privacy advocates," including the American Civil Liberties Union and the AARP, about the security of the electronic records and the rules governing access to them. While most state laws prohibit the health care industry from sharing patient information for commercial purposes, it is less clear whether the technology companies managing the electronic records would be covered by the same laws.

Federalism, too, is a nettlesome issue, staff said. The privacy and other regulations that govern health records are set state by state, and the creation of a national electronic health records network might require the federal government to override states' own regulations, spurring concerns among some representatives that the computerized records initiative may spur Congress to exceed its authority over the states.

After Senate passage of health information technology legislation in November, these "political questions" now belong to the House of Representatives. Late last year, the approach backed by Messrs. Grassley, Baucus, Enzi, and Kennedy was rejected by the House. Meanwhile, a House version of the Frist-Clinton-Kennedy-Enzi bill - the Wired for Health Care Quality Act, which directs the Department of Health and Human Services to spend $125 million on electronic medical records - rests with the House Energy and Commerce Committee after introduction in December by Rep. Darrell Issa, a Republican of California.

Another House bill pushing electronic medical records is being sponsored by Rep. Nancy Johnson, a Republican of Connecticut, who is chairwoman of the Health Subcommittee of the House Ways and Means Committee, which has oversight of Medicare. Ms. Johnson, one of the House members most active on electronic health records, told the Sun Wednesday that she was optimistic the House will soon finalize the push for electronic records, before recessing for the congressional elections later this year. She cautioned that the House was less inclined to finance the initiative with taxpayer dollars than the Senate, but said implementing health information technology enjoys enthusiastic support from the Speaker of the House, Dennis Hastert, a Republican of Illinois, who she said is "very determined" to pass computerized-records legislation.

"For those of us who understand the need for the health sector to adopt modern technology, we certainly feel an urgency," Ms. Johnson said. "This is a time where we can all have a little window of opportunity, in early 2006.

2005 Brought Healthcare IT into Sharper Focus

2006-01-03T20:19:00.001-08:00

Beyond the Headlines >>

Written by Andis Robeznieks / HITS staff writer

Story originally published January 3, 2006

The use of "robust" to describe the adoption of health information technology in 2005 was very robust, and a tipping point seems to have been reached in the use of the term "tipping point," and -- if your focus was on the federal government and industry advocacy groups -- it appeared that widespread adoption of HIT was inevitable.

On the other hand, concerns over cost, implementation downtime, technical support, interoperability and mixed research results kept popping up, offering a cold dose of reality.

Tracking the significant HIT stories of 2005 meant analyzing trends and taking note of individual events.

While federal legislation and initiatives from the Bush administration helped introduce the public to the concept of electronic medical records, the devastation caused by hurricanes in the Southern states helped illustrate how EMRs can make a positive difference.

In the aftermath of Hurricane Katrina, thousands of patients lost their medical histories and often had to rely on memory to get prescription drug regimens started again. However, thanks to its extensive history of using EMRs, patients within the Veterans Affairs Department health system survived the storm with their medical records intact. Word about other healthcare institutions whose use of EMRs kept their patients records accessible helped add to the good press HIT received.

"Hurricane Katrina created concerns about data backup and galvanized the notion that electronic medical records are important," said Girish Kumar, founder and vice president of sales and marketing for eClinicalWorks in Westborough, Mass. "From a vendor's perspective, it was validating what we already knew: that we are on a journey and we're traveling in the right direction."

Edward L. Fisher, the new vice president and chief information officer for Norman (Okla.) Regional Hospital, said Katrina showed the necessity of using EMRs. "I'm in a university town with 20,000 covered lives from all over the place," Fisher said. "It would be nice to know something about them if something happens."

Another major story of the year, Kumar said, was the Bush administration's push for EMR interoperability and certification standards, which he believes will mature and come to fruition in 2006. He added that the efforts show how government and market forces can work together and indicate that there was a demand and a need to move forward in this area.

Dan Michelson, chief marketing officer for the Chicago-based IT vendor Allscripts, noted the "bipartisan star power" behind federal legislation, which included senators Bill Frist (R-Tenn.) and Hillary Clinton (D-N.Y.), Rep. Patrick Kennedy (D-R.I.), and GOP heavyweight and former Speaker of the House Newt Gingrich.

Not all was positive on the government front. The CMS again extended the delay in releasing an EMR system developed by the VA until the end of 2006 because the software is not ready for mass distribution. Release of the system for physician offices -- known as Vista Office Electronic Health Record (VOEHR)-- originally was scheduled for July 2005 before being delayed until August. Instead of a full public release, the software was originally shipped to about 10 trial sites for beta testing under the CMS' control.

Kumar said there were also rumors circulating that the CMS might mandate the use of the VOEHR system and those rumors helped momentarily slow HIT adoption progress. "There was a time of about two to four weeks where deals went into a freezer and some of them never came back," Kumar said. "I hope we don't have anything on those lines next year."

Another major story was how insurers and employers put major weight behind HIT as part of pay-for-performance programs and other quality-improvement initiatives. "It's very clear that the biggest driver for change in healthcare is reimbursement," Michelson said. He said that HIT is factoring into proposed reimbursement changes in two ways:

(1) the use of EMRs to document that clinical measures mandated by pay-for-performance programs were utilized, and

(2) "pay for use" in which physicians are offered financial incentives to use EMRs.

Kumar said that payers are not just pushing for individual HIT applications such as electronic prescribing, but instead are pushing for "full-blown EMRs," and that he thinks this will be an important catalyst to spur adoption.

"Large corporations are like self-insurers and they are pushing EMRs because they think it's going to reduce their price," he said. "Some are actually providing funding because it will help them with workforce productivity and lower healthcare costs for retirees."

Fisher, Kumar and Michelson all agreed that a somewhat unhyped news story of the year was the evolution of the HIT market and changes within physician thinking about using technology.

"We don't have to sell the concept of electronic health records anymore," Michelson said. "We have to sell our product over somebody else's product."

He added that physicians are not looking at IT "in a substitutive way" anymore, meaning they are changing the whole way they practice medicine, instead of just continuing to do what they did on paper in an electronic format.

Kumar said that physicians are no longer just buying individual components and are instead looking to implement an entire suite of applications and adopt fully inter-operative systems.

Fisher agreed. "The day of buying 'best of breed' and trying to stitch them all together is going by the wayside," he said. "It used be 'This is the best prescribing system and it ran on this platform and this is the best lab system and it ran on that platform,'" Fisher explained. "These applications now have to be on the same platform."

What do you think? Write us with your comments at hitsdaily@crain.com.

Rhode Island Health IT Newsletter: December, 2005

2005-12-30T09:11:00.000-08:00

Vol.1; Issue 2
Presented by Quality Partners of Rhode Island
****************************************************************************************
Calendar of Events:
SAVE THE DATE: Quality Partners to host a DOQ-IT Dinner Meeting: "Winter Workflow Workshop: Evaluating Your Readiness for EHR" on January 25th from 6-8 PM ~ This workshop is geared toward Office Managers/EHR Project Managers and will focus on office workflow processes. Priority is given to DOQ-IT practices.

SAVE THE DATE: 2nd Annual Rhode Island Health IT Fair; sponsored by Quality Partners, Rhode Island Medical Society, and MGMA, to be held in March 2006...stay tuned for more details!!
**************************************************************************************** Rhode Island Health IT Project:
There have been several key accomplishments this past month with the AHRQ Health IT project. A Request For Proposals (RFP) has been drafted for a technical model and will be sent to interested Vendors at the beginning of 2006. Rhode Island attended, with fellow grant recipients, the "AHRQ State and Regional Demonstration Contractors" Conference in Utah where the primary topic was the business case for Health Information Exchanges.

Upcoming plans include completing the RFP development, finalizing key contracts within the grant and continue to develop the Rhode Island Quality Institute Consumer Advisory Committee and Administrative Data Exchange Committee.

The Physicians Advisory Panel met on December 7th and received an overview of the proposed technical solution. The group meets again on January 18th, 2006 to continue with recommendations on the proposed model. The panel is comprised of 14 physicians representing primary care, pediatrics, internal medicine, OB/GYN, and surgical specialities.

Rhode Island is one of the Recipients ~ Grants to Boost Public Health I.T. A new grant program from the Robert Wood Johnson Foundation will help public health agencies participate in regional health information organizations and other health information exchanges.

The foundation has awarded 21 grants of up to... http://www.healthdatamanagement.com/html/PortalStory.cfm?type=trend&DID=13332

Rhode Island Featured in a Web Portal that Tracks Health IT Interoperability Projects:

The HIT Dashboard, a Web portal that tracks more than 500 health IT interoperability projects across the country, was launched this month as part of an effort to educate policy makers, health care executives and technology vendors, Health-IT World News reports. To read more:
http://tmlr.net/jump/?c=17194&a=296&amp;m=3491&p=1705874&t=164

To view the portal go to: http://www.hitdashboard.com/ and click on "Launch HIT Map" to view Rhode Island activities.
**************************************************************************************** The DOQ-IT Project:
Presently, 24 practices have been recruited to participate in the DOQ-IT project. The recruitment phase is complete. However, Quality Partners invites interested practices (both specialties and non-specialties) to be part of our learning group. The learning group offers practices information on EHR selection and planning, as well as, open learning sessions and our monthly e-newsletter. Please contact Mary Ellen Casey at mcasey@riqio.sdps.org for more information.

For practices who have already implemented an EHR please read on to learn more about the Rhode Island Chronic Care Collaborative.

Invitation to Participate in the 3rd Rhode Island Chronic Care Collaborative
Quality Partners of Rhode Island and the Department of Health Diabetes Prevention and Control Program invite primary care physicians who have implemented an electronic health record (EHR) to participate in our 3rd Rhode Island Chronic Care Collaborative (RICCC) that will begin in the spring of 2006.

The RICCC is a systematic, evidence-based approach to redesigning and improving healthcare delivery for diabetic patients. It is based on the Institute for Healthcare Improvement's (IHI) Breakthrough Series model.

Participating practices will: · Learn to use the functionality of your EHR for care management processes · Learn to develop your own chronic disease program · Streamline clinical functions · Improve patient diabetic outcomes · Learn and Implement a proven quality improvement method · Share experiences, materials and lessons learned with peers

To enroll or learn more about this no cost initiative, please contact Lauren Pond, project coordinator at lpond@riqio.sdps.org.
***************************************************************************************
Gingrich Sees R.I. as Springboard for Nationwide Healthcare Reform
CHT Founder Newt Gingrich joins Governor Donald Carcieri and Congressman Patrick Kennedy at a bipartisan leadership conference in Providence, R.I.

The former House speaker says the nation's smallest state is a perfect place to be a model for saving lives and costs. "America must remake its convoluted and inefficient system of health care or countless lives will continue to be lost and billions of dollars will continue to be wasted", Newt Gingrich, former Republican House speaker, said yesterday. To read more: http://www.projo.com/news/content/projo_20051217_health17.22199054.html
**************************************************************************************** Rhode Island e-Prescribing Update:
The Institute of Medicine (IOM) and others have recommended the utilization of electronic prescribing (E-Rx) as technology to improve quality of care and reduce errors related to medication prescribing.

Under the guidance of the Rhode Island Quality Institute, RI has partnered with SureScripts to implement statewide E-Rx. Phase I of this effort focused on getting a majority of pharmacies connected and early physician adopters to implement E-Rx in their practice.

After two years, 22% of office-based physicians in RI have registered with SureScripts to use E-Rx in their practices and 82% of pharmacies in RI accept electronic prescriptions. Currently, 1.6% of all prescriptions filled in RI are transmitted through SureScripts.

Achieving statewide adoption of E-Rx is the goal for RI moving into Phase II. The specific goals include:
· By the end of 2007, 75% of all prescriptions for residents of RI will be completed electronically
· By the end of 2007, two-thirds of all RI clinicians (i.e. physicians, nurse practitioners, physician assistants) will utilize an electronic prescribing mechanism for either new or renewal prescriptions
· By the end of 2007, 100% of pharmacies will be capable of accepting electronic prescriptions in accordance with NCPDP standards **************************************************************************************** HL7, NCPDP Collaborate on e-Prescribing Mapping Project
Members of the National Council for Prescription Drug Programs and Health Level Seven have completed the first phase of a standards coordination project to facilitate e-prescribing messaging capabilities between prescribers, pharmacies and payers, according to HL7....

Visit http://www.AISHealth.com/EHealthBusiness/121305.html#story5 to read the entire story
**************************************************************************************** CCHIT Publishes Proposed Final Criteria for Ambulatory EMR Certification:
The Certification Commission for Healthcare Information Technology has published its proposed final criteria for certifying ambulatory electronic medical records systems, Health Data Management reports.
http://www.ihealthbeat.org/track/url.cfm?u=31475&rurl=www%2Eihealthbeat%2Eorg%2Findex%2Ecfm%3FAction%3DdspItem%26itemID%3D117304
**************************************************************************************** WASHINGTON DC USA -- HEALTHCARE UPDATE NEWS SERVICE(TM):

NOVEMBER 30, 2005: A report released by the Center for Health Transformation (CHT) and IDX Systems Corporation outlines achievable recommendations to spur the adoption of electronic health records and regional health information organizations (RHIOs), based on the best practices of successful health data exchanges.

Drawn from discussions among technology experts, public policy analysts, and leaders of thriving regional networks at the CHT Connectivity Conference (Oct. 18, 2005), the white paper, "Accelerating Transformation through Health Information Technology," highlights proven and practical strategies for healthcare providers, federal and state policymakers and other stakeholders. The complete report is available online at:
www.idx.com.
**************************************************************************************** Health IT can help raise quality:
Health information technology is a "remarkable asset" in the drive to improve healthcare quality, said Institute for Healthcare Improvement President and Chief Executive Officer Donald Berwick, M.D. For full story, use link below:
http://e.ccialerts.com/a/tBDoF3eAIyhSgAa0kNPAS38Gv.Aa0kvLHY/mhc11
**************************************************************************************** A reminder and a measuring stick ~ By incorporating clinical measures into their EHRs some physician groups can simultaneously collect data and improve patient care.

As the nationwide campaign to improve healthcare quality gathers steam, some physician groups are starting to build performance measures into their electronic health records. By embedding the measures in their EHR templates and computer prompts, these groups are making dramatic improvements in some areas of patient care:
http://www.memag.com/memag/article/articleDetail.jsp?id=197566
*******************************************************************************************
The AAFP published an article titled, "Why it's Time to Purchase an Electronic Health Record System"
"If you're like me, you've been intrigued by the idea of an electronic health record system (EHR) for years but figured that it would be too costly and disruptive to your practice to actually buy one. You suspected that it would slow you down and force you to interact more with a computer than with the patient in front of you. You assumed that EHRs made sense only for technophile types who didn't mind typing or fiddling with programs, and you were right - until now. My history with EHRs...."http://www.aafp.org/fpm/20041100/43whyi.html
**************************************************************************************** "50 reasons to get an EHR" If a normal home life strikes you as a compelling reason to buy an EHR, we can give you 50 more good business reasons. We collected them from EHR users like Arlene Brown as well as a few IT experts...read on: http://www.memag.com/memag/article/articleDetail.jsp?id=179083
**************************************************************************************** Vendor Corner:
Rhode Island doc groups team up for EMRs from ModernHealthcare.com December 6, 2005 ----- Four Rhode Island physician groups have formed a company called Electronic Health Records of Rhode Island, which aims to help physicians in the state select and implement an affordable, interoperable electronic health record system, Modern Healthcare reports.

"The dream here is to have every doc in the state on one IT system," says Mark Jacobs, physician chairman of Electronic Health Records of Rhode Island's board of directors. To read more about this topic go to:
http://www.modernhealthcare.com/article.cms?articleId=37864
**************************************************************************************** **************************************************************************************** Medicare AMA Sends Letter to CMS Administrator McClellan, Congress Opposing Medicare Physician Rate Reduction With Pay-For-Performance System:
American Medical Association Executive Vice President and CEO Michael Maves on Monday sent a letter to CMS Administrator Mark McClellan saying that the group will oppose efforts to adopt a pay-for-performance Medicare reimbursement system unless Congress acts to permanently reverse payment cuts to doctors:
http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=34177
**************************************************************************************** RIMS Flash: Congress Averts Medicare Payment cut for 2006
House vote eliminates plan to cut payments by 4.4%; 2006 rates will stay at 2005 levels.

As part of a frantic end-of-the-session budget debate that will likely continue into Wednesday, both the U.S. Senate and the House of Representatives have agreed to scrap a planned 4.4 percent reduction in Medicare reimbursement that would have taken effect on January 1, 2006. Both chambers have voted to extend 2005 payment levels for another year.
American Medical Association President J. Edward Hill, MD lauded the payment freeze and credited the AMA's extensive grassroots effort to raise awareness for Medicare reform as a force behind the recent vote.

"Over 360,000 physicians and patients told Congress that the cuts were unacceptable - andCongress listened," he said in a statement.

Please visit the http://www.ama-assn.org/ AMA website for more information A final vote on the 2006 budget is currently scheduled for Wednesday, December 21.
****************************************************************************************
To subscribe or unsubscribe to this newsletter please email: mcasey@riqio.sdps.org To submit items please contact Mary Ellen Casey, Project Coordinator at: 401-528-3231 or email: mcasey@riqio.sdps.org

Mary Ellen Casey, RN, BS, M.Ed, COS-C Project Coordinator Quality Partners of Rhode Island 235 Promenade St Suite 500, Box 18 Providence, RI 02908 Phone: 401-528-3231 Fax: 401-528-3210 E-mail: Mcasey@riqio.sdps.org www.qualitypartners.org

EMR vs. EHR vs. PHR: There is a Difference

2005-12-29T20:16:00.000-08:00

HITS: Beyond the Headlines >> Written by By Andis Robeznieks / HITS staff writer

EMR vs. EHR: Yes, there is a difference
Story originally published December 29, 2005

As President Bush's program to spur adoption of heath information technology gained momentum in 2005, the debate over what to call the electronic products being promoted became louder and more intense among participants in the field -- while the general public responded with either apathy or confusion.

The "electronic health record" vs. "electronic medical record" issue appeared to reignite this past year. The results were some painfully earnest arguments that were sometimes difficult to penetrate and often resulted in glazed looks on the faces of people listening or reading them.

"The public hasn't made a distinction" between EHRs and EMRs, said Pat Wise, R.N., a retired U.S. Army colonel and the Healthcare Information and Management Systems Society's vice president of EHR initiatives. "They probably think they're synonymous."

She added that most physicians don't know the difference either, explaining that HIMSS recently convened focus groups of 10 to 12 physicians in paper-based practices and "not one of them knew what an electronic health record was."

Promising to offer concise definitions, Wise said that EHRs "are what the nation aspires to and what President Bush calls for," but EMRs are mostly what we have right now.

She explained that an EHR is made up of two components: a personal health record which includes patient-inputted information on symptoms or disease-management data; and an EMR or an EMR summary.

"An EMR (Electronic Medical Record) is owned by the organization, practice or corporation that you received your healthcare from -- be it St. Elsewhere, County-Municipal, or Doc Smith," Wise said. "You don't want every little bit or byte they have on you. You want summary data, and that summary becomes part of your electronic health record." Explaining further, Wise said an EMR can contain episodic information from your two-week stay in a local hospital or the visit to an emergency department in another state after you bumped your head on vacation. "When you're discharged from St. Elsewhere, you know they don't hit the 'delete' button and wipe out everything," she said. "And, while that information is theirs to own, it's also expected that it's theirs to protect."

An EHR is a cradle-to-the-grave summary record that may not contain all the information collected over a lifetime of receiving healthcare, but it can contain pointers to where more information can be found, Wise said.

Two factors are now helping to add confusion to the EHR-EMR debate: the federal government and computer spell-check programs.

Wise said the federal government erred when it granted a $7.5 million contract to the Certification Commission for Healthcare Information Technology to evaluate certification criteria for electronic health records. "In all actuality, they're certifying vendors' ambulatory-care EMR products, because there is no real EHR yet," Wise said. "So now the marketplace is totally confused."

Spell-check programs are giving the term "EMR" some staying power as well, because many computers will automatically change "EHR" to "HER," forcing people who don't know how to override their spell-check function to use EMR by default.

"My job title is 'vice president of EHR initiatives,' imagine how long it took to get spell check to ignore that," Wise said. Dan Michelson, the chief marketing officer for Chicago-based IT vendor Allscripts, said it's such a common problem that the company has produced a set of standard instructions which it sends out to people as a public service.

Here is a copy of those instructions:

"It sounds funny, but it's safe to say we have all made the mistake by now of having 'HER' show up instead of 'EHR' in a Word document, PowerPoint, e-mail, etc. It's not just Allscripts (of course), it's a problem for everyone in the industry. Pretty silly thing, but pretty embarrassing.
So ... here's how to keep it from happening for all Microsoft Office applications:
· Open any Microsoft Word file.
· Go to "Tools" and then select 'AutoCorrect.'
· In the window where it says 'Replace,' enter 'EHR'.
· Once you enter 'EHR', you will see an entry below it that has 'EHR' in column 1 and 'HER' in column 2. Click on this row and then select 'Delete' at the bottom.
· Then, where it says 'With,' enter 'EHR' and click on 'Add.'
· Click 'OK.'
This will fix the problem for all Office applications ... but hold on!
To fix this in Outlook, you need to take two more steps:
· Open Outlook and write a message and include 'EHR' in the content.
· Turn on spell check (if it isn't on already) and when 'EHR' comes up as a spelling error, select 'Add' to put this in your dictionary.
"There. That's it. This will keep 'HER' from showing up."

What do you think? Write us with your comments at hitsdaily@crain.com.

HIT Strategist Health Business: :12/29/05
New IT system features 'e-office visits'
By ASTARA MARCH

WASHINGTON, Dec. 28 (UPI) -- Fifty-four thousand patients in a large medical practice near San Francisco are logging on to a Web site to get lab results, renew drug prescriptions or cancel a doctor's appointment, showcasing a successful health IT microcosm that computer experts hope the entire nation can eventually emulate.

The patients in that California practice are using a nascent system called the Personal Health Record (PHR), a system that will introduce next year the "virtual office visit" for simple ailments like the common cold in place of a trip to the doctor's office.

Paul Tang, vice president and chief medical information officer for the Palo Alto Medical Foundation who helped develop the system, told United Press International that PAMF created the tool to give patients more transparent access to their personal health information and help them become more active participants in the healthcare process.

"The healthcare system needs to take advantage of electronic tools," Tang told UPI. "It will allow us to make better decisions and help patients become more actively involved in managing their own health. If we can make electronic health records and personal health records universal, we can transform healthcare and really improve the wellbeing of the U.S. population," he said.

Tang noted that fast access to lab results has especially drawn accolades from patients with chronic conditions. "It's one of the features patients tell us they like best," Tang said. "Access to their lab results gives our patients feedback on how their behavior and lifestyle choices affect their condition and tells them how well they are managing their diseases. If they don't have this feedback, a good proportion will only take half of the pills they've been prescribed," he said.

Other patient favorites include being able to communicate with a doctor through online secure messaging and having access to information on diagnoses, medications, immunizations and health maintenance schedules, such as mammograms, Tang noted. With patients' permission, ER physicians and doctors' offices around the country can obtain this information as well, he added.

Tang noted that PAMF keeps the doctor/patient lines of communication open 24 hours a day.
"Patients find the convenience of being able to send us a message anytime and from anywhere particularly useful," he commented. "They can send their doctor a question whenever the question occurs to them, 24 hours a day. Most of the time the doctor gets back to them in half a day, although we say that we'll respond within one to two business days."

He added that the PHR's range of capabilities is still evolving, with two new features to be launched next year.

So-called "e-Visits" will allow patients to interact with their doctors online for simple problems such as colds and allergy symptoms instead of having to come to the office.

The online disease-management feature will involve patients with conditions such as diabetes sending data from home monitoring instruments to their doctors on a frequent basis and getting feedback on the next steps they should take to maintain their health, Tang said.
"Online disease management will be more convenient and our patients will get better care than if they came to the office every three to six months," Tang said. "Their conditions will be much better controlled and they will have fewer complications because we can track their progress more closely and catch problems early."

Currently, PHRs offer a range of other functions, such as allowing patients to ask billing and non-medical questions; view a personal health summary of all their interactions with PAMF since their first visit; see what tests have been ordered; see graphs of their progress controlling weight, cholesterol, diabetes, high blood pressure or other chronic conditions; and check their risk of developing acute problems such as heart attacks or strokes.

Tang said that, although paper-based practices can use PHRs, the system works best when a practice already has an electronic health record system and all the relevant patient information can be linked.

He added that the government's Office of the National Coordinator of Health Information Technology, headed by David Brailer, is developing infrastructure that will connect PHRs nationwide.

When the system is complete, patients will be able to allow doctors in any emergency room or office in the nation to access records from all their physicians and will be able to see an overview of all their caregivers' results and conclusions, Tang said. He said he believed privacy issues will be handled via a password system.

© Copyright 2005 United Press International, Inc. All Rights Reserved

Six Key References for 2005

2005-12-26T16:14:00.000-08:00

From my perspective, of the hundreds of articles published this year that directly relate to our collaborative efforts in the last quarter of 2005 trying to acquire multiple royalty-generating patent licenses for DIS(SM) Co., the six key ones at both local and national levels are the following:

Gingrich sees R.I. as Springboard for Nationwide Healthcare Reform (Providence Journal 12/17/05)
R.I. Doc Groups Team Up for EMRs (HIT Strategist 12/6/05)
HIMSS’ HIT Interoperability Project Dashboard (HIT World 12/22/05)
Six Keys to Building New Markets by Unleashing Disruptive Innovation (Harvard Business Review 3/10/03)
GuideWorks: Comcast’s $250 million On-screen TV Program Search Technology (Wall Street Journal 10/13/05)
In High Definition DVD Format Split, Paramount Goes Two Ways (NY Times 10/3/05

Gingrich sees R.I. as springboard for nationwide health-care reform
The former House speaker says the nation's smallest state is a perfect place to be a model for saving lives and costs.

01:00 AM EST on Saturday, December 17, 2005

BY G. WAYNE MILLERJournal Staff Writer

PROVIDENCE -- America must remake its convoluted and inefficient system of health care or countless lives will continue to be lost and billions of dollars will continue to be wasted, Newt Gingrich, former Republican House speaker, said yesterday."It's literally a matter of life and death," Gingrich said.

That was the grim assessment at a morning-long bipartisan conference of government, business and civic leaders at the Rhode Island School of Design. But there's a silver lining, Gingrich and other officials agreed: With its small size and growing consensus that inaction is unconscionable, Rhode Island has the rare chance to serve as a national model for change. "There's a real opportunity here not just for business but the entire community," Gingrich said to the news media after the conference. "We can have a more effective and less expensive system."

Yesterday's session was organized by Governor Carcieri and Rep. Patrick J. Kennedy, who was busy in Washington with end-of-year business but sent a videotape outlining his views.

Also attending were Lt. Gov. Charles J. Fogarty and some 40 heads of business, including Alfred J. Verrecchia, president and CEO of Hasbro, and Howard G. Sutton, publisher of The Providence Journal. Rhode Island School of Design president Roger Mandle, a participant, welcomed the conferees to the school's Museum of Art.

Gingrich, who was speaker of the House from 1995 to 1999, has made what he calls "transformation" of the nation's health care his new cause. Gingrich is the founder of the Center for Health Transformation -- a role that belies the hard-bitten image of his days in Washington. He took up the health-care crusade, he told The Journal, because he wants to save lives and money -- and he believes that change is feasible, if difficult.

Gingrich told conferees that true reform must be built on a triad of changes:

Prevention and "wellness" programs, so that people remain healthier longer, thus reducing -- or never needing -- high-cost treatments. As an example, he pointed to childhood obesity, which predisposes many youngsters to diabetes, a potentially deadly and often costly disease. Said Carcieri: "We've got a 'sick-care' system, not a health-care system." The governor in October launched a series of initiatives to improve the health of all state residents.
State-of-the-art information technology, to bring together all of a person's records in one digitized, easily accessible source. Too often now, records are scattered among various doctors, hospitals and providers -- none of whom readily communicate, to the detriment of all. Gingrich compared health information to FedEx, the Atlanta-based shipper whose automated tracking system revolutionized the delivery business. "We know more about where a package will be in a few days than we do about our health care," Gingrich said.
"Individual-centered" care, which would allow consumers to be better informed. Thus "empowered," Gingrich maintained, consumers could make more knowledgeable decisions, thereby bettering their health. Although he does not advocate a government-run universal health-care program likeCanada's, which is frequently criticized as delay-plagued, Gingrich says that all of America's nearly 300 million people should have coverage, from private or public sources, or a mix of the two.

Carcieri gave business leaders three charges:

enroll every employee in a wellness program;
participate in the recently established CEO Council of the Rhode Island Business Group on Health; and
support, with money and participation, the Rhode Island Quality Institute, a nonprofit health-care study group formed by former Attorney General Sheldon Whitehouse.

"This is the number-one policy issue in the country," Carcieri said. "My goal is to make Rhode Island the model for the nation for health care."

According to Gingrich, health-care costs represent about 15 percent of the nation's domestic economic output, making change an enormous challenge. "When you're trying to move 15 percent of the economy," he said, "it's a big project."That makes starting in Rhode Island sensible, Gingrich said. "It's about the right size for everyone to talk as a community."

Although the news media was not invited to yesterday's conference, officials answered questions and provided copies of the documents that were presented.

Visit Gingrich's Center for Health Transformation at http://www.healthtransformation.net/
G. Wayne Miller can be contacted at gwmiller@projo.com
Story Online at:

http://www.projo.com/news/content/projo_20051217_health17.22199054.html

Rhode Island doc groups team up for EMRs
Health IT Strategist: Beyond the Headlines
Written by By Joseph Conn Story originally published December 6, 2005

Four physician organizations in Rhode Island have formed a for-profit corporation to promote a deceptively simple solution to some of the knottiest healthcare IT problems facing physicians today: selecting an electronic medical records system, getting EMRs in the hands of outpatient physicians at an affordable price and finding a way to make the installed EMRs interoperable with each other and local hospitals.

The company, Electronic Health Records of Rhode Island (EHRRI)corporated on Oct. 17, 2005, according to the Rhode Island secretary of state's office.

"The dream here is to have every doc in the state on one IT system," said Mark Jacobs, physician chairman of EHRRI's board of directors. The company is completing negotiations with a single EMR system vendor that Jacobs says will be identified in a week or so.

There are 4,091 physicians in Rhode Island, according to the American Medical Association's data book. The four founding groups or EHRRI account for about 1,400 of them. Jacobs also is the president and chief executive officer of Coastal Medical, Inc., an 80-physician, multi-specialty medical group based in Providence that is one of the four EHRRI founding physician organizations.

The other member groups are Lifespan/Physicians Professional Services Organization based in Providence with about 800 physicians; the physician-hospital organizations at Women and Infants Hospital in Providence and Kent County Memorial Hospital in Warwick, which are part of the Care New England integrated healthcare system and have about 400 physicians; and Thundermist Health Center, a two-facility community health center in Woonsocket with 20 physicians.

Jacobs said he is in negotiations with a candidate to become the company CEO. The new executive should be on the job in January 2006. Rollout of the first EMRs will begin in 2006.

"I think we're looking at 125 docs in year one," said Jacobs, adding that while the estimate of first-year physician adoption "is conservative, it's conservative for a good reason. The learning curve is steep. We're obviously going to learn from the early adopters. But I think there is going to be a cascade effect here."

First in line:
Jacobs, who uses an e-prescribing system, but not an EMR, said he is going to be one of EHRRI's first customers. He was a member of an advisory committee of the not-for-profit Rhode Island Quality Institute that set up a statewide e-prescribing initiative with software vendor SureScripts. While the institute is not a partner in EHRRI, he credits it with being "a good convener" that brought the founding groups together.

Coastal started looking at EMR systems to buy about 14 months ago, Jacobs said, but 10 months ago it joined the collaborative that led to the formation of EHRRI. The Office of the National Coordinator for Health Information Technology in September contracted with the Certification Commission for Healthcare Information Technology to come up with a vetting process for EMR systems, but by pooling their expertise, Jacobs says the doctors at EHRRI already have done what the commission will do and what few physicians would have the time or the desire to do on their own.

"I've seen, personally, demos on a dozen products," Jacobs said. "The company itself has seen in-depth demos on a half a dozen products. We narrowed them down to three finalists and then narrowed it down to one.
"The last three electronic health-record systems were all very good. Where one of them fell down very badly was (its) practice management system. It was just very weak. Where the two more robust systems differed was price and the IT platform itself."
In addition to gaining price leverage, a large group purchase will shrink the problem of developing interfaces between physician EMRs and the IT systems in the state's 11 acute-care hospitals.

ASP model:
According to Jacobs, EHRRI will offer both a stand-alone EMR to physicians who are married to their existing electronic practice management systems, as well their vendor's suite of both systems (i.e an integrated EMR/PMS).

EHRRI also will offer the EMR in an application service provider, or ASP, model, in which, for a monthly fee, physicians can buy the software, maintenance and data storage provided via a central server and data connection.

Initially, the IT vendor EHRRI selects will supply most of the installation services and software support, but EHRRI will begin to take over those functions as the new company gets off the ground in mid-2006, he says.

Jacobs says the company is not yet disclosing price points on the EMR and practice management systems because it is trying to negotiate with the state's major payers and medical malpractice insurance providers for subsidies that will lower prices to physicians.

Cedric Priebe, MD, chief medical information officer at Care New England, is not a board member of EHRRI, but considers himself to be "a spiritual founder" of the physician-led effort. Priebe has served as a physician-executive in IT at IDX, Allscripts and McKesson before coming to Care New England in 2004. He said he likes the idea of a physician-centric approach to solving their own IT adoption problems, particularly in Rhode Island, where the vast majority of physicians practice in groups of three or fewer. Various IT studies have pointed to low EMR adoption rates in small groups.

"I've seen lots of different relationships between competing hospitals and physician organizations and this is really unique," Priebe says. "If we can prove this can be done here in the small doc market, it will be a message that if you decrease the number of options out there, you can do more with interoperability. There are several vendors out there who could do this well."

What do you think? Write us with your comments at hitsdaily@crain.com.

HIMSS HIT Dashboard Tracks Interoperability Projects:

By Neil Versel, HITWorld contributing editor December 22, 2005:

A new Web portal is tracking more than 500 health-IT interoperability projects across America in an attempt to inform policy-makers, healthcare executives, and technology vendors, organizers say.

The HIT Dashboard, a joint project between the Health Information and Management Systems Society (HIMSS) and the Center for Health Information and Decision Systems (CHIDS) at the University of Maryland's Robert H. Smith School of Business, went online this month.

(See: http://www.hitdashboard.com)

"We saw that there was a lot of cataloguing activities going on, but nothing really comprehensive," explains David Clark, director of integration and interoperability for HIMSS."It's good for both state legislatures and governors to know what's going on in their states," Clark says.

The HIT Dashboard tracks projects in seven categories:
1. Grants from the federal Agency for Healthcare Research and Quality (AHRQ);
2. the Doctor's Office Quality-Information Technology (DOQ-IT) program;
3. the Medicare Health Support program;
4. regional health information organizations (RHIOs);
5. health information exchanges (HIEs);
6. the Bridges to Excellence initiative; and
7. private health-IT projects.

Essentially, RHIOs are the umbrella organizations for coordinating and managing data exchange, while HIEs (or “HIXs”) represent the actual technical infrastructure for moving information, according to Clark. Some constituencies have taken the two terms to be synonymous, he says.

The first posting of data, based on more than a year of research, is current through September, according to Clark, and the information will be updated quarterly. HIMSS is preparing a second posting now.

Although Clark promises that the second release will be "more robust," he says that the effort does attempt the virtually impossible task of listing every project underway across the country. "There is a new RHIO starting up practically every day," he says. "It's more meant to be an information resource on what those projects are doing and where they are at," Clark explains.

There are three iterations of the database,
1. one for the public that simply shows project icons on a U.S. map,
2. one for HIMSS members that gives project name and location, and
3. a subscription version that offers access to all available data on each project.

So far, HIMSS has just a handful of paying members. "It seems like the pharma and life sciences companies are quickest on the uptake," Clark says.

A4 Addition:

In other RHIO-related news, A4 Health Systems (Cary, N.C.) claims to have the first EMR to give physicians access to lab results, radiology reports, and transcribed encounter notes from a regional clinical messaging system.

A4's HealthMatics EMR now allows physicians to pull electronic, patient-specific data from at least 17 hospitals in Ohio, Kentucky, and Indiana and insert the information directly into a patient's electronic record, via HealthBridge, a budding data-exchange network in the greater Cincinnati area, the company says.

Six Keys to Building New Markets by Unleashing Disruptive Innovation
Harvard Business School Publishing: Date: Mar 10, 2003
by Clayton M. Christensen, Michael E. Raynor, and Scott D. Anthony

"All Innovative ideas start out as half-baked propositions."
"Managers must be patient for growth but impatient for profitability."---Clayton M. Christensen, Michael E. Raynor, and Scott D. Anthony

Managers know they need growth to survive—but innovation isn't easy. In this Harvard Management Update article, HBS professor Clayton Christensen and co-authors detail the six keys to creating new-growth businesses.

Managers today have a problem. They know their companies must grow. But growth is hard, especially given today's economic environment where investment capital is difficult to come by and firms are reluctant to take risks. Managers know innovation is the ticket to successful growth. But they just can't seem to get innovation right.

When companies keep improving their existing products and services to meet their best customers' needs, they eventually run into the "innovator's dilemma." By doing everything right, they create opportunities for new companies to take their markets away. Established companies historically have struggled when trying to create new markets. Success seems fleeting and unpredictable.

Recent research indicates these problems are systemic. Most companies that are started fail. Of those that succeed, most cannot sustain robust growth for more than a few years. Companies need a way to unlock the process of innovation and create innovation-driven growth businesses again and again. How can managers increase the probability that their decisions will lead to success? Now more than ever, managers need robust theories—statements of what causes what, why, and in what situation—to guide their decision making around innovation.

Managers typically grow impatient when we tell them this. "Theory?" they say. "That sounds like theoretical. That sounds like impractical." But theory is eminently practical. Managers are the world's most voracious consumers of theory. Every plan a manager makes, every action a manager takes, is based on some implicit understanding of what causes what and why.The problem is, managers all too frequently use a one-size-fits-all theory. But the ground beneath them inevitably shifts. Strategies that worked so wonderfully in the past no longer suffice.

Drawing on the work of a number of thoughtful researchers as well as our own work, we are exploring a set of theories that can help managers respond to the ever-changing circumstances in which they find themselves. Specifically, these six lessons will help managers make the right decisions to successfully build new-growth businesses.

1. Disruptive innovations spur growth. Companies have two basic options when they seek to build new-growth businesses. They can try to take an existing market from an entrenched competitor with sustaining innovations. Or they can try to take on a competitor with disruptive innovations that either create new markets or take root among an incumbent's worst customers. Our research overwhelmingly suggests that companies should seek out growth based on disruption.

Sustaining innovations, whether they involve incremental refinements or radical breakthroughs, improve the performance of established products and services along the dimensions that mainstream customers in major markets historically have valued. Examples: a microprocessor that enables personal computers to operate faster and a battery that lets laptop computers operate longer.

Companies march along a performance trajectory by introducing successive sustaining innovations—first to remain competitive in the short term. But, as noted in The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Harvard Business School Press, 1997), firms innovate faster than our lives change to adopt those innovations, creating opportunities for disruptive innovations. Although sustaining innovations move firms along the traditional performance trajectory, disruptive ones establish an entirely new performance trajectory.

Disruptive innovations often initially result in worse performance compared with established products and services in mainstream markets. But disruptive innovations have other benefits. They are often cheaper, simpler, smaller, and more convenient to use.
Consider the small off-road motorcycles introduced by Honda in the 1960s, Apple's first personal computer, and Intuit's QuickBooks accounting software. These innovations all initially underperformed the mainstream offerings. But they brought a different value proposition to a new market context that did not need all of the raw performance offered by the incumbent.

They all created massive growth; to flip Joseph Schumpeter's famous phrase, creative destruction, on its head, this is creative creation. After taking root in a simple, undemanding application, disruptive innovations inexorably get better until they change the game, relegating previously dominant firms to the sidelines in often stunning fashion.

Incumbents almost always win battles of sustaining innovations. Their superior resources and well-honed processes are almost insurmountable strengths. Incumbents, however, almost always lose battles where the attacker has a legitimate disruptive innovation. To create a new-growth business, companies—established incumbents and start-ups alike—must be on the right side of the disruptive process by launching their own disruptive attacks.

2. Disruptive businesses either create new markets or take the low end of an established market.
There are two distinct types of disruptive innovations. The first type creates a new market by targeting nonconsumers, the second competes in the low end of an established market.

In a new-market disruption, attackers take root in a new "plane" of competition or a new context of use outside of an existing market. Consumers historically locked out of a market because they lacked the skills or wealth welcome a relatively simple product that allows them to get done what they had always wanted to get done. These markets typically start out small and ill defined. They don't meet the growth needs of large companies. And the incumbent feels no pain at first. Because it creates new consumption, the disruptor's growth doesn't affect the incumbent's core business. But as the innovation improves, it begins to pull customers away from the incumbent. And the incumbent doesn't have the ability to play in this new game.

Transistors were a disruptive innovation. Mainstream suppliers of tabletop radios, which were made with vacuum tubes, couldn't figure out how to use transistors because they couldn't initially handle the power requirements of these components. Then in 1955, Sony introduced the pocket radio. It was a static-laced product with horrible fidelity. But it enabled teenagers to do something that they couldn't before—listen to rock'n'roll out of their parents' earshot. Had Sony targeted consumers in established markets, the pocket radio would have bombed. But for teenagers, the alternative to a Sony pocket radio was no radio at all. By competing against nonconsumption, Sony set a very low technical hurdle for itself: The product just had to be better than nothing in order to find delighted consumers.

The second type of disruptive innovation takes root among an incumbent's worst customers. These low-end disruptions do not create new markets, but they can create new growth. The disruption of integrated steel mills by steel minimills demonstrates how low-end disruptors harness what we call “asymmetries of motivation.”

Minimills first took hold in the steel industry in the mid-1960s. They were very efficient. They had a 20 percent cost advantage over integrated mills. But the quality of the steel they produced was inferior. The rebar market at the bottom rung of the industry (rebar is small steel bars made from scrap and used to create reinforced concrete) was the only market that would accept the minimills' steel.

As the minimills entered the rebar market, the integrated mills were happy to exit it. Their gross margins in the rebar business were a mere 7 percent, and rebar accounted for only 4 percent of the industry's tonnage. So the integrated mills decided to focus on higher-profit steel products. The minimills made boatloads of money until they finally drove the last of the integrated mills out of the market—and then the price of rebar dropped 20 percent, because rebar had essentially become a commodity market. The minimills' reward for victory was that none of them could make money.

To make attractive money again, the minimills had to figure out how to make better-quality steel in larger shapes—not only angle iron but also thicker bars and rods. Profit margins in this market tier were 12 percent, almost double those of the rebar market; the overall market was also twice as large. So the minimills invested in equipment to make the larger pieces and worked to improve the quality and consistency of their steel. As the minimills began making inroads with better and bigger steel, the integrated mills were happy to exit this market tier to concentrate on more profitable products. When the last integrated mill left the market, the price of angle iron collapsed. Once again, the minimills had to move up to the next tier of the industry in order to survive. And so on.

At each stage of the minimills' climb up-market, an asymmetry of motivation was at work. For the minimills, the need to enter a more profitable market provided the motivation to solve the technological hurdles preventing them from producing higher-quality steel. The integrated mills were happy to leave these markets because the lower tiers in their product mix were always less profitable than products targeting higher-end customers. Eventually, of course, the integrated mills ran out of markets to flee to.

3. Disruptive opportunities require a separate business-planning process. All innovative ideas start out as half-baked propositions. They then go through a shaping process as they wind their way through the organization to reach senior management. When firms have a single process for all the various forms of innovation, what comes out the other end of the process looks like what has been approved in the past, and it all looks like sustaining innovations.

Consider IBM's efforts to introduce voice-recognition software. Early iterations of IBM's ViaVoice software package featured IBM's "ideal" customer on the front: an administrative assistant sitting in front of her computer, speaking into a headset. It is easy to see why IBM targeted such customers. They constituted a large, obvious market, well aligned with IBM's needs and capabilities. But think about IBM's value proposition to this woman. She types 80 words a minute and almost never makes a mistake. IBM was telling her, "Why don't you change your behavior and use a system that gives you lower accuracy and slower speeds. We promise future releases will get better." The only way to attract great typists would be for voice recognition to be faster and more accurate than typing. This is a very high technical hurdle.

Where has voice-recognition technology begun to take off? Kids love the ability to tell their animated toys to "stop" or "go." "Press or say one" menu commands are another obvious application. In these contexts, people are delighted with a crummy voice-recognition product. Another good market for the technology may be all those executives you see standing in airport lines, trying to punch messages into their BlackBerries. Their fingers are too big to enable accurate typing—they'd be more than happy with a voice-recognition algorithm that's only 80% accurate.

Not surprisingly, disruptive ideas stand a small chance of ever seeing the light of day when they are evaluated with the screens and lenses a company uses to identify and shape sustaining innovations. Companies frustrated by an inability to create new growth shouldn't conclude that they aren't generating enough good ideas. The problem doesn't lie in their creativity; it lies in their processes.

Only by creating a parallel process for developing and shaping disruptive ideas—one that acknowledges their distinctive features—can companies successfully launch disruption after disruption. Such a process relies more on pattern recognition than on data-driven market analysis. After all, markets that do not exist cannot be analyzed. Even when numbers are available, they are never clear.

An intuitive process can still be rigorous if managers use the right tools. For example, discovery-driven planning lets you create a plan to test assumptions; aggregate project planning helps you allocate resources between sustaining and disruptive opportunities; the "schools of experience" theory informs hiring decisions.

4. Don't try to change your customers—help them. Faulty market segmentation schemes help to explain the stunningly high rate of failure of new-product development. Most companies define markets in terms of product categories and demographics. We just don't live our lives in product categories or in demographics. When companies segment markets this way they often fail to connect with their customers.

How do we live our lives? During the course of the day, problems arise, jobs we need to get done. We look around to hire products to get those jobs done. Products that successfully match the circumstances we find ourselves in end up being the real "killer applications." They make it easier for consumers (including physicians) to do something they were already trying to accomplish.

Some manufacturers pushed digital cameras based on the value proposition that they made it easy to edit out the red eyes from all your images and create an online album of your best photos. Research shows, however, that 98 percent of all photos get looked at only once. Only the most conscientious of us prioritized editing images or creating albums. Where digital camera makers found success was in marketing their products to consumers who used to order double prints of their photos and mail them to relatives. The digital technology enables consumers to use the Internet to do more easily what they already wanted to do.

A business plan predicated upon asking customers to adopt new priorities and behave differently from how they have in the past is an uphill death march through knee-deep mud.
Instead of designing products and services that dictate consumers' behavior, let the tasks people are trying to get done inform your design.

5. Integrate across whatever is not good enough. One critical decision firms face when creating an innovation-driven growth business is determining its optimal scope. Specifically, which activities need to be managed internally and which can be safely outsourced?

The answer often is driven by the fad of the day. During the 1960s, everyone thought IBM's integration was an unassailable point of competitive advantage. Because IBM controlled such a wide swath of the industry's value chain, it could make better products than anybody else. So companies copied IBM and tried to integrate. In the 1990s, everyone thought that Cisco's disintegrated business model that made extensive use of outsourcing was an unassailable point of competitive advantage. So companies jumped on this new bandwagon and sought to disintegrate.

The critical question is: What are the circumstances in which my firm should be integrated and what are the circumstances in which my firm can be a specialist? Integration provides advantages whenever a product is not good enough to meet customer needs. Proprietary, interdependent architectures allow companies to run multiple experiments, pushing the frontier of what is possible. Engineers can reconfigure their systems to wring the best performance possible out of the available technology.

Think about the computer industry. In its early days, you simply couldn't exist as a specialist provider. There were too many unpredictable interdependencies across every interface in the first mainframes. The manufacturing process depended on the design of the computer and vice versa. The design of the operating system affected the design of the logic circuitry. IBM had to be integrated across the entire value chain to produce a mainframe that came close to meeting its customers' needs.

By contrast, the modular architectures that characterize disintegration always sacrifice raw performance. Stitching together a system with partner companies reduces the degrees of design freedom engineers have to optimize the entire system. But modular architectures have other benefits. Companies can customize their products by upgrading individual subsystems without having to redesign an entire product. They can mix and match components from best-of-breed suppliers to respond conveniently to individual customers' needs.

But even in a modular architecture, successful companies still are integrated—just in a different place. Consider the computer industry in the 1990s. The computer's basic performance was more than good enough. What did customers want instead? They wanted lower prices and a computer customized for their needs. Because the product's functionality was more than good enough, companies like Dell could outsource the subsystems from which its machines were assembled. What was not good enough? The interface with the customer. By directly interacting with customers, Dell could ensure it delivered what customers wanted—convenience and customization. Value flowed to Dell and to the manufacturers of important subsystems that themselves were not good enough, like Microsoft and Intel.

In short, companies must be integrated across whatever interface drives performance along the dimension that customers value. In an industry's early days, integration typically needs to occur across interfaces that drive raw performance—for example, design and assembly. Once a product's basic performance is more than good enough, competition forces firms to compete on convenience or customization. In these situations, specialist firms emerge and the necessary locus of integration typically shifts to the interface with the customer.

6. Be patient for growth but impatient for profitability. Managers inside new-growth businesses often feel tremendous pressure to quickly ramp up sales volume. But disruptive businesses can't get big very fast. The only way to make them grow quickly is to cram them into large, obvious markets. In established markets, customers don't care about the disruptive innovation's strengths. They only care about its weaknesses. This is a recipe for disaster, and one reason why company-backed disruptive ventures can have a leg up. Venture capitalists have become increasingly impatient for businesses to get huge. As long as their core businesses are growing healthily, companies will find it easier to wait for the disruptive businesses to find a foothold market and slowly build commercial mass.

Managers must be patient for growth but impatient for profitability. When you are willing to put up with a lot of losses before a disruptive business turns profitable, that means you are trying to lay the foundation for a huge new business. Insisting on early profitability pushes the new disruptive business to find the markets where its unique capabilities will be uniquely valued. Forced to keep its fixed costs low, the new business can serve small customers who would not meet the needs of a high fixed cost structure.

Managers in large companies who read The Innovator's Dilemma may have finished the book thinking they're destined to fail, no matter what they do. We hope to shift their sentiment from despair to hope. If managers understand the theories of innovation, they have the ability to create new-growth businesses again and again.

Reprinted with permission from "Six Keys to Creating New-Growth Businesses," Harvard Management Update, January 2003.

BUSINESS INTELLIGENCE
Mission: Turn the ad paradigm on its head
Coauthors say marketing misses the mark on catering to real needs
By Robert Weisman January 1, 2006

Harvard Business School professor Clayton M. Christensen is trying to shake up the marketing establishment with a deceptively simple proposition that flies in the face of conventional wisdom: People hire a product to get a job done.

(For the complete article as posted in Boston.com, see:

http://www.boston.com/business/articles/2006/01/01/mission_turn_the_ad_paradigm_on_its_head?mode=PF )

To Ward Off New Competitors, Comcast Builds a Mini Internet
The Threat of Being Bypassed Prompts Talks With Google About Investment in AOL and Watching 'Lost' on an iPod

By PETER GRANT Staff Reporter of THE WALL STREET JOURNAL October 13, 2005; Page A1

Here's one reason why the nation's largest cable company needs to reinvent itself: CBS is developing an online service for people to watch as an alternative to the early evening news.

"We call that the cable bypass," said Leslie Moonves, co-president of CBS's parent, Viacom Inc., at a recent investor conference.

Just 10 years ago, the cable industry had a virtual monopoly on the $56 billion market for piping TV into subscribers' homes. Now, a host of new technologies is threatening that business. In addition to battling the old enemy of satellite TV, cable operators are up against Internet companies, telephone operators and even television programmers, who, in various ways, are exploring how to sell TV to consumers.

Their efforts suggest the possibility that soon, consumers will be able to watch whatever they want, when they want, without the help of the local cable company.

To protect its turf, cable giant Comcast Corp. has 400 software engineers building what amounts to a TV version of the Internet, stocked with movies, archived television programs and other interactive features, including a search function.

Now, to push into the online-video business, among other reasons, the company is in talks with Google Inc. about teaming up to buy a stake in the Web operations of Time Warner Inc.'s America Online.

TV Program Search Technology:
Comcast is also pouring money into new technology to allow subscribers to search through its television-program library.

Just 18 months ago, Comcast's interactive TV guide consisted of little more than a grid showing channels and times on a tan background. About one-third of the screen was an ad. Unlike other guides, viewers couldn't watch shows while browsing through the grid.

Comcast has added that feature, dropped the ad, expanded the grid and organized on-demand offerings under headings such as movies, news, kids and teens and lifestyle.

Last year, Comcast paid $250 million for a majority stake in the on-screen guide business of Gemstar-TV Guide International Inc. Gemstar, which publishes TV Guide magazine, is 41%-owned by News Corp.

Renamed GuideWorks, the on-screen unit now employs 160 of Comcast's new software engineers. Its $26 million research budget is more than double what Gemstar-TV Guide was spending.

A soon-to-be released version of Comcast's interactive guide borrows from the experience of navigating the Internet. When the TV is turned on, most viewers will see a home page with choices, including "On Demand" or "Main Menu." A group of four screens will show what's happening on different channels.

Comcast executives acknowledge that their search technology is still limited. You can't pick the channels airing on the four screens -- technicians in Comcast's Denver network center control what's appearing. Typing names of shows using a remote is awkward.

In future versions, GuideWorks is looking at ways to recommend shows based on a favorites list. Comcast subscribers may also be able to do keyword searches for TV shows on their computers and have the results communicated to their TVs. Comcast won't say when this could be available.

Earlier this year, Comcast cut a deal with Motorola Inc. that gives Comcast more control over the development of its set-top box. The company has also acquired two software companies and cut a deal with TiVo Inc. to customize its digital video recorder service for Comcast subscribers.

In DVD Format Split, Paramount Goes 2 Ways:

By KEN BELSON

October 3, 2005 NY Times

Recognizing that a split over the format of the next generation of digital video discs is deepening, Paramount Pictures said yesterday that it will make DVD movies in the Blu-ray format as well as in the HD DVD standard.

Paramount is the first major studio to say publicly that it will produce DVD's in each of the two formats, which both promise high-definition pictures, enhanced audio and five or more times the storage space on a disc.

Until now, the big Hollywood studios have supported one format or the other.

However, the chance for an agreement to use one format dimmed earlier this year when negotiations stalled between Toshiba*, which makes the HD DVD standard, and Sony, Panasonic and others in the Blu-ray group. Since then, companies on both sides have promised to start selling DVD players that use their respective formats as early as this winter.

The studios, retailers and others had hoped to avoid a showdown between the competing formats because it is costly to make and sell two sets of discs.

Other studios may follow in Paramount's path. In addition to Paramount, Warner Brothers and Universal have backed the HD DVD format, while Sony Pictures, Disney, 20th Century Fox and Lion's Gate have come out in favor of Blu-ray.

The plans to produce two types of machines and movies for both formats suggests that there may not be a clear resolution to the battle anytime soon, according to industry executives.

The president of Paramount Pictures, Thomas Lesinski, said in a statement that Sony's inclusion of Blu-ray technology in its PlayStation 3 videogame console when it is released next spring was an important factor in his studio's decision. With that technology inside, the game machine will effectively double as a Blu-ray DVD player.

Mr. Lesinski called this a "key advantage" for the Blu-ray group. He added that the studio made its decision to produce Blu-ray DVDs based on "new data on cost, manufacturability and copy protection solutions." Paramount, Warner and Universal, as well as Microsoft, Intel and disc manufacturers, have said that the HD DVD discs can be produced more cheaply and more reliably than Blu-ray discs. Disc manufacturers have also said privately that the HD DVD format discs are far closer to being ready for mass production than Blu-ray discs.

In response to Paramount's announcement, Toshiba said it remained committed to bringing HD DVD to market. In a statement, the company said that the Blu-ray group "still needs to answer the tough questions about how they plan to deliver on their promises." This includes whether it will allow all manufacturers to make Blu-ray players and whether the Blu-ray group will set a date for delivering their high-capacity discs.

Paramount did not say how many movies it initially plans to release in the Blu-ray format, or which titles.

*Toshiba currently receives $0.50 in royalty payments for the use of its technical format standard on the sale of every first generation DVD worldwide. Similarly, Dolby Laboratories receives a $0.75 royalty upon the sale of every consumer electronic product using its global audio algorithm standards.

Even micropayments can produce large annual revenue streams when they are applied to millions of product sales (including patient diagnostic tests). For example, sales of more than 18 million Dolby audio-equipped iPods in 2005 will produce $13.5 million in royalties for Dolby Labs.

In the United States in 2005 with its population of 296 million,total private and public spending on healthcare exceeded $2 trillion. A significant portion of this sum was based on the more than 40 billion diagnostic tests carried out annually on patients in 5,800 hospitals and thousands of ambulatory testing facilities.

Quest Diagnostics Inc., one of the largest clinical labs performs over 250 million tests annually (about 0.00625% of the total tests performed). A Diagnostic Information System(SM) patent license with Quest that paid $0.01 for each test Quest reported in the standardized cumulative format to physicians and their patients would generate $2.5 million in annual royalties.