Payment Innovation

10 Questions with Former FDA and CMS Chief Mark McClellan

mcclellanm_hires2Once commissioner of the Food and Drug Administration (FDA) and administrator of the Centers for Medicare & Medicaid Services (CMS), Dr. Mark McClellan is currently a senior fellow and director of the Health Care Innovation and Value Initiative at the Brookings Institution. Earlier last year, Dr. McClellan was interviewed by our journal about his new role, accountable care organizations, and payment reform. We have chosen to reproduce this interview as it holds important messages for all physicians and health services researchers who are interested in improving health care delivery.

ON HIS NEW ROLE

Brian Powers: You held several senior positions in the federal government before coming to Brookings. When transitioning from federal service why did you choose Brookings?

Mark McClellan: I thought about several options, but my roots are in academics. I did not want to move far away from that, but I had really enjoyed working on implementation issues with people in government and the private sector. Brookings seemed like a good balance of the two. I can continue to do policy analysis and research, but also stay closely connected to political developments and support public-private collaborations.

Do you ever miss being in an implementation role?

In some ways we are not too far from it at Brookings. For example, a lot of our work relates to having impact on current legislative and regulatory issues such as Accountable Care Organization (ACO) implementation, physician payment reform, drug development and surveillance.

Quote1One of the hardest things about being in an implementation role was the consuming nature of the work. In policy analysis and research you do not have to get into all of the depths, complexities, and practical issues of implementing new programs. At the beginning, it was nice to have more control over my schedule and less of that stress. But one of the most rewarding things about being involved in implementation is actually seeing your ideas make a real and direct difference. So I do miss some of that.

How did your time at CMS and FDA shape the portfolio of activities you lead at Brookings?

Our focus at FDA was on turning ideas from the lab into safe, effective, and reliable treatments that can make an impact on the lives of patients. I viewed my time at CMS in a similar way. In my first address to the staff at CMS I highlighted that I thought CMS was the nations largest public health agency in terms of financing, since how we pay for care has such an impact on effective treatment. At Brookings we have tried to put these ideas together. Whether it is better approaches to determining which treatments work for particular patients or better approaches to improving the delivery system, all of our work maintains a focus on protecting and promoting the health of the public.

Are there any recent reports or activities from Brookings that you would like to highlight?

In April 2013 we released the Bending the Curve report, which brought together a number of experts to determine the best policy directions for bringing costs down. The emphasis in the report is on the fact that the best way to effectively reduce costs is to focus on improving quality and on getting care right. There are recommendations about financing and regulation, but the basic theme is that better care as the pathway to higher-value.

 

ON ACOs

You were part of a debate in the Wall Street Journal over the promise of ACOs. What is the source of the disagreement?

I do not think there is any disagreement about the need for disruptive innovation in health care. The question is how is to make that happen as quickly as possible. One of the reasons we have not seen more disruptive innovation is because our financing is not aligned. In most other industries you are rewarded when you develop a product that costs less or does a better job. But under traditional financing and regulatory systems in health care you are often punished. Strategies like intervening early and targeted use of interventions lead to less revenue. The promise of ACOs is making disruptive innovation pay off. ACOs align valuable innovation and health care financing systems so it is no longer the case that if you come up with an innovation in care that reduces costs while maintaining or improving quality you lose money. There are certainly other ways to align incentives for innovation and improvement, such as value-based insurance design and steps to make regulations focused more on results and value rather than on structural and process issues.

What early lessons are you starting to see from your work with the ACO community?

I do not want to oversimplify based on limited case study results, but ACOs that seem to have the most impact are ones where there is an organizational commitment to real cultural change creating a systematic focus on getting to better care at a lower cost. Many of the ACOs we work with have emphasized that it’s not a matter of implementing one initiative and thinking you’re done. Changing care delivery enough to have a systematic impact on health outcomes and costs is a long and sustained process. Similarly, viewing the ACO financing model as a transitional process seems to lead to more of an impact over time. Successful organizations use ACO contracts a starter phase to help them get data systems in place and identify a clear set of opportunities for improving care and lowering costs. They can then move on to additional changes in financing such as two-sided risk and capitation contracts.

We have seen a lot of encouraging results so far, mostly in the private sector. But it is still early and we are looking for more systematic evidence on when and how ACOs work best.

How do ACOs fit into the larger environment of delivery and finance reform?

Quote2The key thing about ACOs is the focus on better health outcomes at lower costs accompanied by aligned financial incentives. ACOs are not the only financing reform that can achieve this goal. Also very helpful, even instrumental, could be case-based payments in primary care medical homes and bundled payments for episodes of care. In fact, a lot of ACOs are implementing these kinds of payment reforms together in a complementary and reinforcing way. But it is not just about provider payment reforms. There needs to be corresponding changes in benefit design so that patients can share in the savings when they take steps to get more effective care at a lower cost. Some private sector ACOs are now implementing their provider payment changes along with changes in benefit design that lower premiums or co-pays when patients use more effective, lower cost services.

You mentioned that among ACOs that have made an impact, there is a cultural commitment to high-value care. Do you think that the process of sitting down and negotiating an ACO contract motivates culture change?

The focus on ACOs has been helpful since it puts the core goals of better health and avoiding unnecessary costs at the center of an organization’s activities. Even if an organization does not implement an ACO, or adopts other payment reforms, it is a great way to reorient the discussion around innovative approaches to get more value.

 

PAYMENT REFORM & SUCCESSFUL INNOVATION

On the topic of the shifting payment from volume to value, what can CMS do to best facilitate that transition?

I think it would be helpful for CMS to view each of their payment reform activities as potentially reinforcing elements of a comprehensive improvement strategy rather than standalone solutions. Many of these programs were started as pilots, and evaluation is focused on how each may have an impact in isolation. I think making these steps part of a systematic strategy is more important for driving health care reform. Instead of figuring out if we can get costs down and quality up with a particular medical home or bundled payment model, it may be more important to implement them all together and look for the cumulative impact. This requires a systematic approach to thinking about payment reform as well as a systematic infrastructure for measurement and data support. And I think we still have a way to go before CMS is there.

To conclude, what major gaps do you see in the literature on health care delivery science and improvement? What role can a journal like HJDSI play in filling these gaps?

Health care delivery is complex, dynamic, and uncertain. A lot of organizations are trying to get better results for patients at a lower cost, but are not sure how to do it. Success depends on current organizational form, policy options for reimbursement and benefit design, regulation, and being able to make solid inferences from actual practice data. Better science for dealing with this complexity is badly needed and I think the Journal could play an important role in its development.

 


A link to the interview published in our journal can be found here

McClellan holds an MD from the Harvard University–Massachusetts Institute of Technology (MIT) Division of Health Sciences and Technology, a Ph.D. in economics from MIT, an MPA from Harvard University, and a BA from the University of Texas at Austin. He completed his residency training in internal medicine at Boston’s Brigham and Women’s Hospital, is board-certified in Internal Medicine, and has been a practicing internist during his career.

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