CRANSTON – Quick! What’s the one thing that CEOs from Rhode Island’s three largest hospital systems, the state’s last remaining independent community hospital, and the state’s largest primary care group practice all agreed upon as a practical solution to cut medical costs?

The answer: having a conversation with patients and families about end-of-life care, which accounts for a disproportionately large share of medical costs. [About $170 billion – 28 percent of the total Medicare spending in 2011 – was spent on about 5 percent of Medicare beneficiaries during their last six months of life.]

That surprising consensus emerged as part of a wide-ranging, conflicted but often frank, 90-minute Q&A held on April 23 at the R.I. Shriners Imperial Ballroom before about 50 representatives of small businesses in Rhode Island.

Toward achieving that end, Dennis Keefe, president and CEO of Care New England, invited the other CEOs to join The Conversation Project, a pilot program launched earlier this year by Care New England to support conversations about end-of-life care. “Any patient with a life-altering or life-threatening illness gets referred for a palliative care consult,” he explained, as a way to begin conversations with families and patients that are often very difficult and awkward. It was not clear if there were any takers.

Consensus was a rare commodity at the forum, which featured Keefe, Kenneth Belcher, president and CEO of CharterCARE [in the process of being acquired by a for-profit equity firm, Prospect Medical, in California], Dr. Timothy Babineau, president and CEO of Lifespan, Dr. Louis Giancola, president and CEO of South County Hospital [for now, the only remaining unaffiliated hospital in Rhode Island, although it has entered into partnership conversations with SouthCoast Hospital in New Bedford, Mass.], and Dr. G. Alan Kurose, president and CEO of Coastal Medical, Rhode Island’s largest primary care group practice.

The event was the last in a series of forums planned by the R.I. Health Insurance Small Business Task Force, organized and funded by the R.I. Office of the Health Insurance Commissioner and staffed by Mark Gray of the Providence Plan. [See ConvergenceRI stories on previous forums, links below.]

Is Rhode Island conversation-ready?
Given how dysfunctional and unsettled the current landscape is for health care delivery in Rhode Island, the common ground uncovered on end-of-life care is worth delving into a bit.

End-of-life care was a factor in the savings that were achieved in Coastal Medical’s first year of its pilot Medicare Shared Savings ACO, according to Kurose, cutting down on hospital admissions. “Our hospitalizations were down 20 percent; that’s a gigantic number,” he said. “I think this is a good example of where we can be inspired by the fact that, if we do the best possible thing for our patients, we can actually take costs out of the system,” he said.

Keefe talked about the success of Care New England’s new initiative, The Conversation Project, ensuring that patients’ wishes are understood – and that they have greater access and understanding about palliative care options. [See link to ConvergenceRI story below]. In its first few months of the program, the number of consults jumped from 50 to 650, Keefe told the audience.

Babineau concurred with Keefe and Kurose. People will continue to spin their wheels talking about controlling medical costs, he said, “until we’re willing to admit that American society is not ready to have a conversation about two of the biggest drivers of health care costs – end of life care and futile therapies – a big bucket of costs and waste.”

Competition vs. collaboration
The forum’s dialogue took place at a time when Rhode Island hospital systems are engaged in a fierce battle for market share, consolidation, and competing alliances with physician groups.

Lifespan has been aggressively moving into the field of women’s care, buying up OB-GYN group practices, moving in on the turf of Care New England’s Women & Infants Hospital. “It’s a war out there,” one prominent ob-gyn doctor recently told ConvergenceRI.

Care New England has been beefing up its clinical cardiology affiliations with Brigham and Women’s Hospital in Boston, challenging Lifespan’s hegemony in heart care. Kent Hospital recently sought approval to perform both emergency and elective coronary angioplasty procedures, services that are currently only available at Lifespan’s Rhode Island and Miriam hospitals in Providence and at Landmark Medical Center in Woonsocket.

In the courtroom, Prime Healthcare Services, the for-profit hospital system in California that bought Landmark, recently sought information in advance of a public hearing on the sale of CharterCARE to a for-profit equity firm in California. It seems that Prime had bid and then re-bid to buy CharterCARE but had been turned down.

Left out of the task force’s series of conversations have been the network of community health centers that serve about a quarter of Rhode Island’s residents. And, surprise, surprise, surprise, patients were not invited, either.

The April 23 task force discussion was framed by an opening question: “How can we hope to control costs in health care given that health care doesn’t act like any other market – the lack of emphasis on competitive pricing, and providers’ seeming ability to ask for increases and get them?”

Revealing responses
Babineau pared the world according to Lifespan into dichotomies of cost vs. care, public health vs. economic engine, limited networks vs. coordinated care.

Babineau said it would be “naïve” to believe that the cost of health care would actually be lowered anytime soon. Because Lifespan operated as what he called “a public utility” in some sectors – its burn center, its trauma center, its children’s hospital, he continued, these services were, in his opinion, deserving of more reimbursement.

“I feel your pain,” Babineau told the audience, borrowing an empathetic line from former President Bill Clinton. [Though it was unclear if the audience agreed.] To cope with the reality of $140 million in yearly health insurance costs for employees, Babineau said, Lifespan has developed its own limited, internal network, forcing employees to seek services from Lifespan providers or pay out-of-network costs.

Babineau acknowledged publicly Lifespan’s decision to restrict its employees’ choices. “We are limiting the choice of our employees, because that’s the only way I can control my costs,” he said. Going to Boston for care, he predicted, “that’s going to go away. And that’s a good thing.”

Further, Babineau gave his view on the debate as to whether hospital systems are an economic engine or a public good. “I go to two types of meetings these days,” he said. “At one, I get a big pat on the back for adding 3,000 jobs over the last decade” and investing millions in the local economy. “Then I come to meetings like this, and they say: ‘You’re killing my ability as a small business to make a profit.’ You have to have both sides of the conversation.”

Lifespan brings in $80 million in external research money a year and employs 20,000 researchers, Babineau continued.

“Seventy percent of all our costs are labor,” he said. “If we’re talking about cutting health care costs, we’re talking about cutting jobs. My frustration has been, what starts off as a health care debate about costs devolves into a ‘not in my backyard’ [debate]. If you want to say lower costs, lower costs, lower costs, it will eventually mean jobs.”

Babineau did not discuss – nor was he asked – about the controversial $7.8 million in executive pay received by former Lifespan CEO George Vecchione in 2011, his second-to-last year. Neither did he talk directly about Lifespan’s financial difficulties, which showed it posting a net loss of more than $3 million for the fiscal year ending June 30, 2013, and resulted in layoffs.

Changing business models
“Did anyone see the New York Times story in the business section this morning?” Giancola asked the audience. It was about a new Hepatitis C drug, he continued, that costs $1,000 a pill. In one fell swoop, he said, “It wipes out all of the efforts we have made [toward cost control].”

Giancola said the issue of costs revolved around a more central question: what kind of health care system do you want? Is it the current health care market where employers pay about 75 percent of the premium, trying to make the best decisions that you can?

The alternative, Giancola continued, is to look at international comparisons such as Denmark, where the cost of medical care is about half of what it is in the United States, with better outcomes.

If you look at Denmark’s system, he continued, “and ask: what do they do differently, the answer in general is that they divorce health insurance premiums from employers.”

For many in the audience, Giancola continued, “that may be verboten. It may seem like the wrong direction, to institute the government as payer, with government regulation on prices.”

The challenge for Rhode Island, Giancola said, was to figure out what direction the health care delivery system should move in, because, he said, “We’re conflicted. We believe in our institutions. We believe in what we do. We believe we’re doing God’s work. But you’re paying the bill.”

Giancola urged the small businesses to get more involved. “Maybe you should be taking over the board of my hospital, demanding to know what we’ve done to lower costs, to ascertain if we’ve done enough.”

Giancola also addressed the elephant in the room, the excess capacity of hospital beds in Rhode Island. “At some point, we have to have the guts to take some capacity out of the system,” he said. “I have no bad things to say about two hospitals [Westerly and Landmark] that were teetering financially. In the end, we kept them alive. I’m not sure it will lower the costs of care.”

Belcher argued that the way to get costs out of the system is to bring about more collaboration between institutions. “Every institution does not have to have the most current technology, if we collaborate,” he said. “That’s the way we can help knock down utilization.”

Kurose, citing figures from the meta-analysis done by Donald Berwick, the former administrator from the Centers for Medicare and Medicaid, said that 30 percent of the entire medical spend in the U.S. was waste. In Rhode Island, he continued, in setting goals for cost-cutting goals, as a realistic short term goal, “we can try to keep increases down to the rate of inflation, because there’s a lot of work and transformation that will have to occur to take waste out of the system.” Longer term, he added, “we might want to set a more aggressive target.”

Disconnect between costs, insurance rates
One businessman, citing the push toward internal networks, asked the CEOs: “Why do we need health insurance companies, anyway?”

Babineau quipped: “I see Stacy Paterno [communications spokesperson for Blue Cross & Blue Shield of Rhode Island] in the back [of the room.] “This will teach Peter A. [Andruszkiewicz, president and CEO of Blue Cross] for not showing up.”

Saying he couldn’t speak for health insurers, Babineau said that he would answer tangentially, quoting Peter Drucker, who said you had to confront the brutal facts.

“The brutal facts are why health care is 18-19 percent of GDP over the last 10 years; America has an appetite for that. They have an appetite for the medical industrial complex. If we want to be honest with ourselves, there is a bit of a disconnect.” In the abstract, cost control is great conversation, Babineau continued, until it’s a family member lying in the hospital bed.

Giancola took a different tack. With health insurance, he said, “There’s a lot of administrative costs that we all hate. We try to get paid for each of the services; the insurers try to find ways not to pay us. That’s an exaggeration – but how much money is tied up in that transaction?”

Giancola continued: “I can take my American Express Card, and anywhere in the world, I can pay for something. You bring your Blue Cross card in, and you can’t just swipe it and have a transaction, it drives me nuts. We have an army of people that don’t add value to the health care system, trying to [to make sure that] we get paid. And, an army of people paying us.”

To cut costs, we have to find a way to make that more efficient, Giancola concluded.

Keefe said he didn’t see insurers going away. Rather, he saw insurers as being part of the solution in changing the payment system, moving away from the fee-for-service payment model. “It’s one of the reason why the burgeoning medical expense has been unchecked,” he said.

Under fee-for-service, “whatever services we provide, we get paid, whether there are high costs or low costs, whether it produces value or quality. That’s been the American health care system.”

Pushing the cost envelope
Instead, working strategically with health insurers, physician groups and providers, Care New England is moving toward what Keefe termed a “fixed” amount of money to care for population health – sharing dollars with aligned physicians within that cost envelope.

“If we pay for care outside that envelope, we eat it. If we pay within that cost envelope, we get to keep it – with quality targets to make sure we’re not withholding care,” he said. Keefe called it a fundamental change in the incentive system that rewards lower cost value and better patient experience.

Keefe said that he had been relentless in his focus on costs at Care New England, shaving the rate of increases from 8 percent in 2009-2010 to 3 percent in 2012-2013. “We have been doing everything relentlessly to get our cost structure lower,” he said,

“It may surprise you to learn that when we negotiate with health insurers,” Keefe explained to the small businesses, that the hospital system doesn’t charge different rates for different insurances groupings – small and large groups. “There’s one negotiated rate.”

As a result, Keefe continued, cost savings achieved by hospitals are not necessarily passed onto small businesses and patients. “There isn’t that direct match between what we negotiate with insurers and what gets passed onto you as rates,” he said.

In terms of medical costs, Keefe believes that Rhode Island’s health care delivery system needs to live within the rates of inflation, whatever that number is. “We should be trying to get there as quickly as we can.”

Push back on internal networks
Kurose, Keefe, and Giancola all pushed back at Babineau’s vision that limited networks led to better outcomes and better quality care.

Kurose said he had questions, because Rhode Island was such a “dysfunctional” market. “If limited networks are a mechanism for different organizations to compete on quality patient experience and cost efficiency, it doesn’t sound so bad,” he began. “On the other hand, past health care models that have restricted choice, like HMOs, have not been well received.”

The question, Kurose continued – one that needed to be dealt with a society, as a state and as a community – is the issue of actuarial fairness. “If we have a small business that employs all healthy young people, the actuarial outcome is great.” But, he continued, it created a kind of competition that may not serve the best interests of the community.

“The tension,” Kurose said, “is do we want competitive, limited networks, or do we want a coordinated statewide health plan?” To oversimplify the tension, he said, is to make a mistake.

“We don’t want to eliminate all competition, that’s bad,” Kurose said. “Incentives are still important for organizations and individuals.” Yet, a “Wild West” approach created too much waste, he continued. Further, it may not be correct to assume that all health care organizations are now operating at top cost efficiencies.

Keefe responded by saying that limited networks had been tried up in Massachusetts, with very limited results. “They don’t necessarily [bring about] cooperation and collaboration,” he said. Instead, “everyone has their own network, everyone has their own silo.”

Even in Rhode Island, Keefe continued, there are some services that don’t exist here, such as transplants and other high-end services, requiring people to leave.

Instead, Keefe said Care New England was promoting a business model where the relationship between health care systems would be conducted was “a business relationship, where we can cooperate and collaborate, with business terms that work for both parties and are bidirectional. Business services as opposed to competition.”

Trying to be all things to all people, Keefe said, “That is what got us into this problem in the first place.”

Giancola, as head of an independent community hospital, framed the issue differently. “We are a general community hospital, we have to respond, at least initially, to virtually everything.”

South County has developed a center of excellence in joint replacement. “I think the problem is we don’t have franchises,” he said. “Tim [Babineau]’s got a center of excellence in joint replacement, too. Right now, we’re competing, so we’re spending money trying to get patients to go to one or the other.”

Perceptive questioning
As the forum drew to a close, the audience of business owners peppered the CEOs with a series of perceptive questions: “Where does prevention fit into the equation of health care?” “Why is Rhode Island’s rate of hospital infections so high, compared to Boston, and wouldn’t reducing it cut costs?”

And, “Have hospitals adopted LEAN business practices to improve the quality of services delivered?” All the CEOs raised their hands to say that they were involved in continuous improvement efforts.

“Where was the follow-up with patients?” suggested one businessman, who wondered why, following his own open heart surgery, he didn’t receive follow-up texts or emails from his caregivers, compared to the avalanche of emails he received from places that he bought something online, waving his smart phone in the air.

“Did the hospital CEOs support HealthSourceRI?” asked one business owner, who said his 50 employees voted in favor to use the exchange.

Babineau said one fundamental change that the exchange had brought about on the path to control costs was greater consumer price sensitivity about the actual cost of care.

Giancola said that the exchange could have a double effect, if insurance purchases could be aggregated to increase market purchasing power. And, if the data can be aggregated, he continued, it would make the costs transparent, to see “what we have to do to stem costs in those areas that are out of control.”

And, finally, “How do patients become part of the process?”

Kurose said that for about five years, Coastal Medical had been working on continuous innovations to transform care delivery. “We haven’t talked too much about patients,” he admitted.

“We’re planning for the medical office of the future now, using a LEAN process to see what happens in the office. We realized that we’ve got to bring the patients into the process.”

Mental and behavioral health’s integration into the delivery of health care was not addressed, despite the current epidemic of overdose deaths.