A conversation with the CEO of Kaiser Permanente.

Question: How did you arrive at Kaiser?

George Halvorson: I’ve been involved in healthcare for more than three decades. I started with the financing side actually, I worked for a Blue Cross plan and I was trained as an underwriter. Slightly more than three decades ago. I evolved from the Blue Cross operation into running a small health plan, one of the first capitated health plans in America. That was HMO Minnesota. We started the health plan with a network of participating clinics. And so, I evolved from the insurance side of the operation into the care delivery side of the operation.

And a little further down the road, I became the CEO of a company known as Health Partners. Health Partners is a particularly interesting organization because it’s a Co-op. It’s owned by the members and Health Partners owns its hospitals and clinics. And so it is a very Kaiser-like organization in that it’s based on focusing on care delivery on the patient and delivering care through our own care network. So, I’ve actually been doing vertically integrated care now for decades and that relatively rare in America because most often, insurance in America is based on wherever Blue Cross model where you just basically pay claims. And I’ve been now for two and a-half decades involved in actually delivering care.

Topic: The Kaiser model

George Halvorson: Kaiser is different than just about everybody else in healthcare because we play all the position in the game. We’re a payer, we are a medical group, we are a hospital system, and we own pharmacies, labs, imaging equipment, the entire spectrum. So, when we think about care delivery we think of it in the total context of everything, and we are pre-paid. We get a budget from our members. They give us a premium and we use the premium to provide care. So we function much like a country. We’re about the size of or bigger than, 140 countries, and 42 states relative to our care population in our infrastructure. We have about 160,000 employees who deliver care with 40,000 nurses who work for Kaiser Permanente and take care of patients.

So when we think about care delivery, we don’t think about billing for individual units of care; we think about how we can function as a team to deliver care in the context of the total revenue stream, and focused on the patient. Which is why we were an early adopter of electronic medical records because for us it made a huge amount of sense to have all of the information about all of the patents all of the time, whereas, the rest of healthcare in this country tends to just have little bits and pieces of data about the care delivered in their site to their patients. What we have is all of the information. So, we put that on the computer and we basically invested $4 billion in putting all of our information on electronic medical records. And it’s working very well. Right now, we have almost a paper-free environment. Our doctors have all of the information about all of the patients all of the time. So when the patient comes in, the doctor has all of the information about the care they have delivered, plus all of the other care that anyone else has delivered. And that’s very useful in making sure that we get the right care for the right patients.

Now, we feed that information into support systems and the support system identifies for giving patients what the appropriate things are that we can do to support that patient. So it’s a connected system in that regard. We’ve also connected with the patients directly by giving the electronic medical record to the patient. So if you were a Kaiser member, you could get your electronic medical record at home. More interestingly, I think, you could also connect electronically with your physician. So you could have an electronic visit. You could send an e-mail to your doctor. Your doctor has all of your information. And we started doing that in a secured messaging environment four years ago. We were up to a million e-visits in a year. Three million e-visits the next year, six million this year, and by two years from now, about 40% I think of our primary care visits will be electronic. Driven entirely by the patients. Patients love being able to do an e-visit.

I had blood drawn a couple of weeks ago, and I had it drawn in a clinic on the way to work. I got to the office, did my job, late in the afternoon I had the e-mail from my doctor and had the lab results on my screen with an e-mail from my doctor interpreting the results. The next day I got an e-mail from my cardiologist interpreting the results. I asked her a question, sent her the information, she sent me back an answer, and we had a dialogue totally electronically, and I ended up getting some follow-up information from her. And in the old world, that would have required multiple face-to-face visits. So, I had to stop in to draw blood because we couldn’t do that electronically. But my doctor is on Alameda Island in San Francisco Bay. And he communicated with me, and my cardiologist is in San Francisco across the bay. Again, three years ago, I would have had to drive to the island and wait in the waiting room and see the doctor and then get a referral to my cardiologist and then go to the cardiologist and wait in that waiting room, and instead I handled the whole thing at my computer. Got my questions answered and I actually had a printout with some information that I needed for follow-up electronically. Our members love that. If you ask Kaiser members who have been doing that to go back to the old system of having to drive in and have the face-to-face conversation with their doctor, we would have a rebellion. And the doctors like it because it is a very convenient way of getting the information to the patient and having a dialogue with the patient.

Question: How has Kaiser’s use of technology led to efficiency?

George Halvorson: Well there’s significant time saved because the physician actually can do several e-visits in the time that it would take to do one face-to-face visit. It’s immensely efficient for the patient because you don’t have to go in. I love Alameda Island, but there’s a draw bridge. So, if I’ve got to go to my doctor in Alameda, I’d have to give myself time to get there – you know all the logistics. Get there, park, wait, go in the room, go through the registration, go through the whole process, and then meet the physician, go out to leave, schedule the follow-up, and that whole process used to be done very manually.

Now every single part of that I can do electronically. I can set up the visit, I can schedule a visit, and if I need to do an appointment I can schedule an appointment while I’m in. If I go to see my physician face-to-face, my physician at Kaiser can not only have all of my information, but they can also schedule me for a referral right there, or even better contact the referral doctor if they need to talk to an allergist, they can contact the allergist and the allergist, might be in Modesto, can get on the phone with my primary care doctor, they can both look at the same screen at the same time and have a dialogue with me in the room and handle follow-up. So, it’s a far more efficient system. And our patients like it a lot.

Question: Where are the inefficiencies coming from other companies?

George Halvorson: Well, right off the bat, if you just take the examples I was just talking about, we had 6 million electronic visits. If we would have been a fee-for-service traditional care delivery model, that means we gave up 6 million opportunities to bill. So, the rest of the world is not rushing down that path. The rest of the world is not saying we also want to give up our opportunities to bill patients. And if you look at the billing amount per patient, that’s $80 to $150 per bill that the rest of the world would give up. But because we are prepaid and we have the entire amount of money to work with, and it’s our job to manage that money interest of the patient, we don’t care about the billing opportunities in the middle. The rest of the world does.

The same thing is true in something like orthopedic. We put a program in place to deal with broken bones in our seniors. And we focused on seniors at high risk of breaking bones and made sure they had the right medication, the right counseling, the right training, the right therapy, the whole process supported by the computer, supported by nurses and doctors as a team, and we cut the number of broken bones by 37%. We gave an award to the physicians who put that program together and they joked that they were in danger of losing their standing with their professional association because everybody else would have preferred to have 37% more broken bones to deal with.

Likewise in the hospital side, for us it was just fine not to have all those admissions. Every other hospital in the world is out working to maximize admissions, which is why the American healthcare delivery system cost twice as much as any other delivery system in the world. I believe we have a non-system for American healthcare and it's twice as expensive as the rest of the world because we not only have the perverse incentives to do multiple units of care. We also have the highest fee schedule in the world in America.

Question: What general misalignments exist in the system?

George Halvorson: A couple of numbers stand out. The fact that 32% of the cost of Medicare come from diabetics, that's a huge percentage of Medicare cost. And yet we only get care rate for diabetics in this country about 8% of the time. So if we took that 8 to 80 we could cut the complications of diabetes in America and a half. And yet nothing is being done to move in that direction. Another number that stands out: 2% of hospital patients in California have sepsis. When you look at the senior population and why people are dying in the hospital, 23% of the seniors in California died of sepsis. Two percent of the patients, 23% of the deaths. And no one is focusing on that and no one is doing anything about it.

So those are the kinds of things, you look at the total data set and you say, somebody should be thinking this through. Somebody should be trying to figure out the right thing to do. Somebody should be focusing on the opportunities and putting programs in place. Inside Kaiser Permanente, relearned with sepsis issues were, we focused on sepsis and we reduce the deaths by about 40%. I think ultimately it will reduce by 50, but that's because we take in a systematic approach to doing this. The rest of the country should do it. We should not have 23% of any population dying of sepsis. It's wrong. But in every other hospital with sepsis patients generate huge bills, hundred thousand dollar bills. So there is a perversity to the process that not only are there twice as many people with the condition of hospital staff of those patients are actually billing a lot of money for those cases.

Question: What are the elements of a perfect system?

George Halvorson: A perfect system is patient-focused. It's not built around the caregivers, it's not built around opportunities, it's not built around revenue streams, it's built around the patients. The perfect system focuses on the patient. And the perfect system has all of the information about each patient so that knowledgeable caregivers working with the patient can figure out the optimal care pattern for that patient is. And if you're a healthy person and pre-diabetic, the right plan for you is to avoid diabetes. If you have diabetes and you've got co-morbidity, the right plan for you is a plan that links your caregivers and manages the complications. And everybody has different perfect outcome, everybody should have care plan. Everyone should have somebody working with them, a care team, a support team working with them to optimize their care. The perfect system can do that.

In an imperfect system, patients stumble into the Emergency Room, that’s unconnected to anything else they do, they get care for their asthma in one place and get care for their kidney failure in another place-- completed unrelated care. An imperfect system is built around the individual provider business sites and not around care. The perfect system has a data flow, has information going to the patients, has patients able to make informed choices. So, when you’ve got one hospital that has a death rate for heart disease of three or four times the next hospital over, patients should know that. There should be an informed set of choices for patients. There are huge differences in oncology outcomes. If you have stage 3 cancer, you’re likelihood of living six months is significantly different depending on the oncologist you chose. Nobody knows that. If you have a mammogram read, the accuracy of the mammogram varies significantly based on the reader. Some readers have twice as many mammograms getting to stage 3 and death as other readers. And nobody knows that. People don’t know that. So, people assume, “I had a mammogram and are protected.” The perfect system would keep track of mammogram success rates, cancer survival rates, bone surgery success rates. If you sort through the process – heart surgery success rates. And make that information part of the data flow that patients can use.

So, you need the right data, you need the right incentives, you need patient-focused care plans and you put all that together and combine that with the current medical science and there’s a great opportunity to do some really wonderful things for people.

What we have instead is a silent system. At Kaiser Permanente, because we are vertically integrated, can do a lot of this work now and we are doing it. The rest of the world isn’t vertically integrated, so it’s harder to do a lot of those pieces. But what the rest of the world can do is virtual integration. If you can’t be vertically integrated, you can still create integration links using the computer, care registries, data flows, and create care plans for patients and then provide feedback to that from other sources, like the claims processing system.

If you go to the doctor and you have a claim filed on our behalf by the doctor, there’s the diagnosis, there’s the treatment, there’s the cost of care, there’s the person who did it, the timeframes. Most of the information that’s in a medical record is in the claim. It’s not timely, the accuracy level is a little lower, it’s not real time, but it’s there. And so, if you’re having asthma attacks, multiple asthma attacks will show up on both of the electronic medical record and the claims database. And right now, the electronic medical record can use it to make an improvement of care. The claims database is wasted. That data is not being used and it could be used and should be used. So, part of the American Health Care Reform agenda should be to create access to that database and require everybody who pays for care in America to use that database and focus on issues like asthma care to make sure every asthmatic basically ends up with at least a computer tracking their care and some kind of a care plan that will improve asthma care.

Question: Should we pursue realignment where care providers and insurers combine?

George Halvorson: It makes huge sense to have as much alignment as you can possibly get between the revenue stream and the care delivery. We need to reward the best providers for being the best providers. Some processes are into very individual, like knee surgery, topically involve the knee surgeon and the patient and doesn’t involve quite a few other areas, although there are therapists involved in the recovery. Other conditions like diabetes take an entire team of caregivers. And so you need team coordination, team dataflow, team reward system. The very best payers ought to reward a partner with teams of caregivers for the chronic conditions and then create a marketplace that rewards the best performance by the individual performers. And if you did both of those things, you would have better knee surgery, and better diabetic care. And if the insurance company stands back from that whole process and isn’t part of it relative to the benefit package or dataflow, information flow, channeling patients to the best providers, I think that does the patients a disservice because the teamwork should be there and that partnership should be there.

So the ideal model going forward is a linked model. And also there are quite a few vertically integrated care systems in America that ought to be thinking about stepping up to the plate and taking prepayments, much like Kaiser. And I think as we go forward, depending on how healthcare reform shakes out, that could happen.

Question: What are the solutions that will be ideal for the long term and not just stop gap measures?

George Halvorson: I think there is an understanding on the part of President Obama and some of the key Senate leaders, and some of the key House leaders that the care delivery system is not organized optimally right now and that we ought to be working toward a better model. And I think there is an appreciation of team care, and I think there is an appreciation of data flows, datasets, data tracking, informed patient choice. I think all of that is in the air, but it’s not sufficiently in the bills. And so we’ve had discussions, conversations, hearings about those kinds of issues, and then when the bills finally got written, some of those pieces didn’t get incorporated. Even when Senator Backus did his hearing the other day, or his press conference, and he talked about how he would like to see healthcare organized in the future, one of the things he cited was us, Mayo, Cleveland Clinic, Geysinger, some of the other care systems, and said it would be good for America to reorganize and to move down those paths.

I think though that the way America can get there is not by trying to reorganize the system from that perspective. It’s by saying, we need to fix a couple of things in this country. We need to have half as many kids with asthma attacks. We need to figure out how to put all of the pieces in place to get there. And if we set a goal like that, diagnose every kid, make sure that every kid has a treatment plan, make sure there is a database, make sure you’re tracking what happens to every kid, when you put all of those pieces in place they lend themselves to a system because you can’t achieve those things unless you have tools, data, information, somebody accountable. And if we set a few goals for the country and then work backward from the goals to the plan and take that very seriously and have reward systems based on achieving those plans, I think what will happen then is there will be a natural gravitation of caregivers into more tightly organized and coordinated care teams. But that’s not going to happen until there is a reason to do it.

A caregiver is not going to reorganize just for the theory of it, or because somebody gave a nice speech and it sounded good, or because Mayo has a great brand, or we have a great brand. They’re going to do it because doing it makes it more likely that they will cut the number of heart failure attacks in half. And if they do that, and if they band together to do that and they are rewarded for doing that, that model will work. So, I think we’ve got to get there; goal first, rewards, tools, and then I think there will be an aggregation that will come out of it, but it will be an aggregation that results from the goal, not one that creates the outcome.

And if you look at any other business, if you look at any – if you go to a factory, there are no factories in the world that will build a tool and throw the tool randomly into the factory and hopes that somebody picks it up and uses it in some smart way. Every factory says, this is a product we want, we want to produce this hubcap, we want this hubcap to have a 99.9% degree of variability. To do that, what are the tools have to be. And then they work backward from the hubcap to the tool kit. Healthcare is the only thing that throws a new wrench in and says, “I hope somebody in there uses it and somehow in the end the hubcap is better.” It doesn’t work. So we have to start. We have to start with the hubcap, we have to start with the outcome, we have to cut the number of congestive heart failure patients, or the number of asthma attacks and then build the toolkit from that and then the benefit package, that Blue Cross pays has to reward those outcomes. Because if they ignore the outcomes, or do as we do now and actually reward perverse outcomes, care delivery will not change.

Topic: Easing the transition to another model

George Halvorson: Healthcare in this country responds very quickly to incentives. So, if you created a care environment where the care teams who cut the number of asthma attacks in half win; get more money, get more patients benefit. If you create a situation where the care teams that have half as many kidney failures win, everybody will gravitate to that model. Healthcare providers are very, very smart. You don’t get through medical school or hospital administration school without being very smart. So, everybody very carefully studies the compensation system and understands exactly what is rewarded and what’s not. And if you try to force people on just for the sake of putting them into teams and there is no reward involved and there is no positive outcome, people won't go to teams. But if you create a reward system that rewards the result of teams then people will figure 15 very creative ways to the form teams. And so it has to be in the results. You've got to build the architecture as every other market does a product that is sold.

Now think about cell phones. The cell phone market is based on the product that’s sold. You will not sell a cell phone today of the kind that we used three or four years ago in the market because that's not what people want to buy today. And so the cell phone market is constantly changing, constantly improving because they are rewarded by the change. They're not changing because they like to change—they’re changing because they trying to get to that next market share than because there is a win for them by coming up with a better phone, engineering a better phone. There is no win in healthcare right now coming up with a better outcome. There is none. There's actually a loss. And so you've got to change that; that has to change. Healthcare people are just as smart as cell phone engineers. So if you change that then the entire system will follow that and that's what the change has to happen. And it's got to be in rewarding a different set of outcomes and then people will organize differently and put toolkits in place to get to those outcomes.

Question/Topic: How should consumers be included in the picture?

George Halvorson: I think consumers need to be brought into the picture in a couple areas. One of them is when you're looking at something like knee surgery or back surgery, even cancer survival rates, if you've got consumers armed with sufficient data to make an informed decision about the best caregivers, they will make those decisions. If you have stage three lung cancer and you knew there was a difference in survival rate between three different oncology groups in town, would you or would you not use that data to pick an oncology group. Of course you would. And what would happen if that happened? That oncology group would get better than the other ones would catch up. And you'd have a different market than oncology. Right now you have no clue. If you have stage 3 lung cancer you don't have a clue, you don't know who to pick you know who's got the best reputation, but you don't know if we have the best outcomes in study after study has shown that organizations who could best reputations often don't have the best outcomes. Some heart surgery survival rates show that the institutions that everybody thought the absolute premiere institutions have a death rate was double, triple than some of the others. So you need the data and if you've got the data you make an informed choice that's part of the market.

The second thing is, if you've got a chronic condition, you need to have appropriate incentives to go to the right team of caregivers and work to with those caregivers in getting your care. That's where the benefit package needs to reward you and incent you and channel you to the best caregivers. And caregivers should then be rewarded for the best care. And if you put those two pieces together you get people to the very caregivers. Right now, there are no incentives, no channeling, no direction, no data, nothing is pushing people towards this caregivers. And so people who want the best caregivers don't even know where to go. And part of the problem with medical savings accounts, at the very bottom level – the concept of having people make value-based choices is not a bad concept; the problem is people have no data years. They don't know this but I give them the best knee surgery, they don't know this but I give them the best of anything, there is no data. And so the medical savings accounts as an incentive for better care of pretty much failed. As an incentive to get people not to buy certain kinds of things they've had some success in the challenges that if you've got somebody with a chronic condition who is not getting their appropriate treatments because of the deductible, well that’s a very bad thing. And so there is architecture to that process that needs to be done really well.

But medical savings accounts on their own didn't create informed decision-making on the part of consumers because there's no information. I mean, if Medicare, with all of its information can't make informed decisions about the best care givers, why would a consumer with a $1,000 deductible suddenly be magically empowered to make that decision.

Data. We actually need data. We need to track outcomes. We need to track care delivery. We need information about the entire care delivery infrastructure. We need to know which kids are having asthma attacks. Ideally, you’ve got electronic medical record in real time. What we do at Kaiser Permanente, we have electronic medical records. It’s real time in the doctor’s office. When I had the x-ray on my shoulder, I walked down the hallway, by the time I got to the end of the hallway, the doctor already had the x-ray up on the screen because it was all digital and it was enlarging it and showing me the little bone spur on my shoulder. I mean, that kind of thing is optimal. The rest of the world isn’t going to be there for awhile, but what the rest of the world can do is take that electronic claims database and follow-up on the patients with chronic conditions and identify who is having complications, and then make sure the ones with complications are channeled into care teams. And use the benefit packets to channel people into care teams.

One of the things that some people experimenting in India have done that has been very successful is, instead of changing the benefits, because you don’t want to give a person who is not getting their chronic care needs met a higher deductible because then they are just less likely to get it met. But if you say to the person, which they’ve done in India, “You’re not doing the right things for your chronic care needs and therefore, the amount we take out of your paycheck is going to go from $40 to $80. And it’s going to stay at $80 until…” The model in India was, until people had their blood sugar managed appropriately. Anyone whose blood sugar went beyond a certain percentage, if you were a diabetic, paid double the premium until the blood sugar came back in line. And guess what, the blood sugar came back in line because people didn’t like to have the money taken out of their paycheck.

I’m not sure we could do that type of thing explicitly in America, but it is that kind of thing that you need to be doing to get the patients who have those conditions into the right care settings and then reward those care settings with both volume and fair payment. So that’s the business model of American healthcare. We need to change the business model of American healthcare to produce what we want it to produce.

Topic: Creating a national culture of health

George Halvorson: We need a national culture of health. We need to say, we need people to eat differently, we need a higher activity level, we need people to smoke less. There are certain things we know will really have an impact on health. The numbers are overwhelming. The relationship between obesity and heart disease and diabetes is stunning. And now there’s really good evidence that your likelihood of having Alzheimer’s doubles if your cholesterol level is high in your forties. And so, if your Alzheimer’s risk goes up, if your heart disease risk, there’s all kinds of reasons pushing us toward healthier attitudes.

Finland, a decade ago had the worst health in Europe. Highest cholesterol levels, most obesity, most heart attacks, most diabetes. Finland was absolutely the least healthy country. They adopted a national culture of health. Their leaders promoted it, their schools promoted it, their businesses promoted it, they changed eating habits, they went through a whole series of things. They are now 20% below the European average on those issues. They’ve gone from the top, to way down on the bottom just by, as a country, being absolutely conscious about it, talking to everybody about it, making it a national goal. It’s a very small country, but it’s a really impressive result. And if you look at the lines. I think the last chapter in my book has the Finnish success chart and shows what an incredible difference they have made in that country by making that a national initiative.

If President Obama and the Congress said, we are going to create a national culture of health in America and we are going to cut the number of diabetics in America in half in five years or 10 years, we could do it. The biology is there, the science is there, the approaches are there. It’s not rocket science. We wouldn’t have to inject everybody with something. We could get there. But we are not going to get there unless it becomes a national initiative and unless somebody calls for us to go down that path. But we should. And it would be a huge mistake not to.

Question: What are the steps we need to take to arrive at this perfect system?

George Halvorson: I think that we need two steps in the current process. I don't think we should think of it as just one big leap from here to where we are going. It's a two-step process. And the first step is: we have to get everybody covered. We have to have universal coverage; we have to have all the kids of America in a database where we can deal with asthma issues. We have to have everybody insured. Now that's the first stage. And we have to make them affordable.

And the second thing, and we have to do this very quickly, is we then have to improve care. Because we cannot afford the care of trajectory were on. We can't afford to have twice as many people with kidneys failing; we can't afford to have 23% of the people dying of sepsis in hospitals. That's the trajectory we can’t afford. We've got to fix that second. One bill can't fix both. One bill can't do all the insurance reform and to the care improvement reforms. So it's got to be a bill and a bill. It's got to be the bill and an agenda. Fill in a leadership and that is the model we have to use. And you can't get there just in one jump.

The hearings a year ago in the Senate were trying to deal with both of those issues at the same time and there were some very good conversations going on about the chronic care issues in America and the need to fix chronic care. And then there was a sense of who we're trying to figure out what step one and step two – that we have to get to step one as being the insurance part of the agenda, the coverage. Step two is to follow immediately thereafter. They can't follow two years from now or five years from now-- it has to follow months from now. And we need to jump on the agenda and fix a couple of those key issues and get people to pay out to do that. And I think America is ready for that. I think America is ready get healthier, but we have to be led there.

Question: What’s the logic in putting universal coverage first rather than first fixing the framework?

Halvorson: Well, number one; we’ve got to get those issues out of the way. If we try to fix diabetic care for the country, and we’ve got 30 million people, many of whom have high diabetic needs, not covered, we can’t do it. If we’ve got all those kids who have horrible asthma care not covered, in a care system, out of a care system, in an insurance plan, out of a care system, we can’t fix asthma care. We can’t do step two until we do step one. We’ve got to get everybody covered. Everybody in this country has to have access to care, and then we need to fix the care. But we need to fix it now. We needn’t fix it 10 years from now. And we know now what needs to be done for asthmatics. We know what needs to be done for people with congestive heart failure. We know what those issues are, we just have to get to them, but we can’t get to them until everybody has insurance. If somebody does not have an insurance plan and they have congestive heart failure, who, or what could possibly make their care better? Nothing. You’ve got to step one, step two. And if you think we’re going to somehow, playing with a horrible handicap, playing left-handed and blindfolded without everybody covered, we’re going to fix care, then after we fix care we’re going to come back and fix insurance. Anybody who thinks that way has never actually been involved in any care delivery or care financing. At Kaiser Permanente, we can’t fix care for the people who don’t have coverage. But we can do a lot for the people who do have coverage.

Question: How should employers be treated in the model?

George Halvorson: Most of Europe provides universal coverage and uses private health plans in an employer based system. So, if you’re in the Netherlands, a percentage of your paycheck goes to your healthcare benefit and you choose from 120 health plans. And you pick the health plan and that health plan must take you. It’s an individual mandate. The heath plan must take you. No health screening. If you are in Switzerland, your employer deducts part of your paycheck and you get a health plan, and there are 70 health plans in Switzerland and you get to choose among them. Germany has 300 health plans. Everybody in Germany picks private plans. Those countries have no government system of any kind. They do not have anything resembling Medicare or Medicaid, anything. They just basically have private health plans and an employer-based system. And the employers use their leverage as purchasers to get better deals for their workers and also to get health improvement agendas and health spas and that type of thing. So, if you are in Germany, the employers will negotiate spa treatments on top of the basic health benefits for workers. So involving employers in the model works just fine as long as care is affordable.

All those countries deduct from the paycheck even if you go to France, where they have a mixed system. The France system looks an awful lot like the Medicare, Medicare supplement model in the U.S. Everybody has a basic benefit package from the government, but it’s low, so 92% of the people buy private insurance and that private insurance pays the difference between what the government pays and what the doctor’s charge. And again, that model is done by employer. And France actually has many healthcare coops and many employers and municipalities will get together and create a coop, libraries will get together and create a coop. There are a whole bunch of coops in France and the French coops purchase care for workers, but again it’s a worker-based system-- everybody pays a portion of their paycheck to buy it. So, most of Europe is a payroll deduction, just like Medicare in the U.S. Social Security in the U.S. They used the same model in those countries, and then you get to choose between health plans.

So, having employers in the link can be done and it works just fine. The problem in the U.S. the reason it’s failed here is because, in those countries, every employer must be in. In the U.S., it’s optional. Some are in, some are out. Workers don’t know if they’re going to have health coverage. There’s an inconsistency in the American model that doesn’t exist in those other countries. But having employers in can be done just fine.

Question: Is there a foreign model that should be held up as a paradigm?

George Halvorson: You know, I’ve spent a lot of time looking at foreign models. I actually chaired this year, the Health Governors of the World Economic Congress in Davos, and I’m the current chair of the International Federation of Health Plans. And that’s health plans from 80 countries around the world. And so I meet all the time with health plans from those other countries. And I have been looking hard to figure out which attributes of those plans would fit in the U.S. and one of the things I’ve learned from working from all of those countries is that every single one does it a little differently.

So, the model in Germany looks a lot like the Netherlands, but it’s not quite the same. Austria, different than both of those, but quite similar. In fact the model that Governor Schwarzenegger proposed in California last year looks suspiciously like the Austrian model. Every country does it slightly differently.

But if I were going to pick a model that I think would transplant well, it’s actually the Dutch model. I think the Dutch have done some really good things. And the thing that they have added to their model more recently is a risk adjuster between the health plans. So, when the health plans go out and recruit members and enroll people, the government in the end does an assessment of who got the healthy people and who got the less healthy people. And if any health plan got a disproportionate number of healthy people, they have to actually pay some money back into the pool. And any health plan that got too many sick people they get more money from the pool. And so what that does is strongly encourage, as we were saying earlier, the health plan to go after the sicker people and do a really good job taking care of sick people because they know in the end they get a risk adjuster from the other plans that enrolled healthier people. So, I think the Dutch model of having payroll deduction, individual choice health plans and then a risk adjuster in the back end has a lot to offer.

It’s a federal model. They basically, in the end of the year, run the core information about each health plan, about how many diabetics do they have, how many congestive heart failure patients, how many asthmatics. They sort through the whole thing and then basically run a formula and if you have enrolled a disproportionate number of people with those expensive diseases in a high level of morbidity, they increase your payment, or if it’s a low level, they decrease your payment. And actually, we do that to some degree in this country on our Medicare Advantage program. We have a risk adjuster formula that works in America, it’s a pretty good formula, it’s not perfect, but it’s a lot better than no formula, and so we already have a history of doing that. We could adapt to the Dutch model fairly easily.

Question: As you look to the future, what do you think provides the most encouragement?

George Halvorson: I think the fact that we now understand how important it is for caregivers to be connected, and that we now have the toolkit necessary to do that. A few years ago, you couldn’t connect anyone because there were no linkages. The internet didn’t exist; the ability of information to flow freely didn’t exist. And I think right now, there’s a sense that if you do the right job for patients with co-morbidities, you can seriously make their lives better. And there’s a toolkit that exists to do that and I think that it’s very exciting.

The other thing that I am really excited about is the fact that medical science is going to get a lot better with data. We now know that patients who had a certain type of belly fat 25 years ago are more likely to have Alzheimer’s. We know that certain cholesterol levels have a long term impact of Alzheimer’s. We know who – there are a whole series of things that we now know from looking at databases that we could not have possibly known before we had the longitudinal database. And we are going to be taking DNA and we’re going to have one of our projects is going to have DNA on about 500,000 people. So, it’s going to be a huge database. We’re going to tie the DNA database to the electronic medical record and if we are going to start looking for correlations, we’re doing to discover things and we are going to learn things right now that we don’t even suspect. There is going to be a learning that is going to come out of that and I think it is going to be extremely powerful. And when that happens, then we can start focusing on optimal care on patients in a very important way.

So, that gives me great confidence and it is very exciting and I think we are very close to a golden age. We’ve very close to a medical science golden age that is only empowered by data. Most medical research projects right now have 200 patients, 300 patients, they run for three years, and they stop. If you look at the kind of medical research that’s out there, it’s tiny samples for short timeframes. And we’re going to have the ability to do massive samples, in extended timeframes, and figure things out that you can’t figure out without that. So, that’s very exciting.

Question: What is some advice you have for CEOs?

George Halvorson: A couple of pieces of advice. One is, pay attention, understand very, very clearly what is happening, in your environment and in our organization. Don’t work out of theory, or past practice, or history, but have a really clear sense of what is actually happening right now and make sure that if there are any barriers to the truth getting to you that you knock them down, or get them out of the way. So, that’s one step.

The second thing is you should always be looking out to the horizon. You should be looking out over the horizon and have a three to five year planning horizon and know that if things go well, here’s where we want to be five years from now. And to get there, here are the things we have to do in four years, three years, two years. And then build your agenda around that, and don’t build it around being responsive to the crisis of now. You have to deal with the crisis of now. The crisis of now is now. And so that has to be dealt with, but if you are dealing with the crisis of now and you know where you want to be in five years from now, you may go this way instead of that way to get around it. And that’s critically important.

So, yeah, you need to understand where you are going and you need to pay attention. So, if I were giving people advice, those would be the two pieces of advice I would give.

Recorded on: September 21, 2009