Edward D. Miller, MD, has led Johns Hopkins Medicine, the $5 billion enterprise that unites physicians and scientists of the Johns Hopkins University School of Medicine with Johns Hopkins Health System, since 1997. As leader of one of the most respected healthcare institutions during one of the most revolutionary times in healthcare, few are better poised to discuss the changes healthcare providers will face in coming years and how health systems must adapt to succeed in light of these changes.
Q: Johns Hopkins has consistently supported the new healthcare reform law and its extension of coverage, and you publicly advocated for better coordinated care and a revamped payment system that does away with fee-for-service. Do you think the law does enough to address all of these issues?
Dr. Edward Miller: Our view was that continuing on the same path year after year was not going to get us anywhere. It's certainly not a perfect bill, and a lot of pieces have yet to be defined until specific rules and regulations come out of CMS and HHS. That said, having 32 million uninsured Americans is a significant problem, and it was only going to get worse. We felt it was time to tackle these problems. We pushed hard for health innovations like the Healthcare Innovation Zone concept and accountable care organizations as a way to cost-effectively care for a population of individuals. In our experience, it's really the only way to bend the cost curve. Priority Partners, our managed care organization for Medicaid patients that cares for 175,000 members, is paid per member per month and manages to make money.
However, the legislation fell short in two key areas. It did nothing to address tort reform or how to increase the workforce to care for the 32 million additional people coming into the system. Both of these will be big stumbling blocks to success. I would have liked to see an increase in the number of slots for residents. There has been a lot of talk about increasing the size of medical school classes, but once medical school is over, [the graduates] have to go out and find residencies. Last year, 200 students did not match for a resident slot. The number of residencies has been flat for several years, and the legislation didn't address this despite it being a relatively quick fix.
Q: Medicare will allow ACOs to share in cost savings they create for Medicare beneficiaries beginning with a pilot program in 2012. What impact do you think this will have on our fee-for-service system?
DM: I think it's probably going to be very different in different regions of the country. It seems that some organizations are pretty far ahead, but a lot of organizations are not. Providers in rural areas are going to have a more difficult time; distance becomes an issue when you are trying to integrate care for a population. I think in many areas you'll see ACOs driven by academic medical centers. Hopkins has managed care for 175,000 Medicaid patients, a group of 32,000 military retirees and their families and our own employees through our hospitals, 25 ambulatory sites, pharmacies and hospice care relationships. We're able to take care of a full gamut of patients and conditions, and we have a wide reach. In other areas, ACOs could be driven more by insurers partnering with providers. I think success [under a medical home reimbursement model] depends on the degree of integration in a system. Providers incur risk in these type of arrangements, and a big factor is the amount of risk an ACO is willing to take on. An academic medical center with a 2-3 percent profit margin does not have a lot of room for error.
Q: That's a good point. How would a health system go about determining if a bundled or capitated fee offered by a payor is a fair price for services?
DM: The most important question here is "Do you have the data?" Since we're an insurer, we have the data. We have inpatient, outpatient and pharmaceutical data on every patient — all 175,000 — in Priority Partners. We can analyze the data and determine the cost of their care in a given year. The same rule would hold true for other populations of patients, like diabetics. For example, if the average cost of care for a diabetic patient is $5,000 and a payor offers $4,000, that's a bad deal. It all comes back to having the data.
Q: It sounds like integrated systems need to be in place for a few years, then, before an ACO could accurately predict their costs. Would you agree?
DM: Yes, I think there needs to be a system in place for a few years in order to have that kind of data. This is where people will get burned if they don't know the true cost of their care. Organizations that wing it and accept rates without knowing their true costs could be in real trouble. However, those with a good grip on costs and are strong negotiators have the potential to do really well.
Q: Large health systems and academic medical centers seem the best situated for financial success under the medical home model. What's the role of the community hospital in all of this?
DM: There are two responses for these small community hospitals. They first need to determine if they can make it as a standalone facility any longer or if it would be better to come into a system. It's an important decision that trustees of hospitals have to face. Hospitals that once thrived are having much more difficulty in this economic climate with increased rules and regulations. Two hospitals — Suburban Hospital in Bethesda and Howard County General Hospital in Columbia — recently joined John Hopkins Medicine because they didn't want to go it alone anymore. Instead of putting their facilities up for sale, they gave their resources to the system and in return are able to take advantage of our infrastructure. They remain community providers, and the board members are kept local. They are the ones embedded in the community and can best help the bigger system understand local issues and identify issues we might not see.
A second way is to establish a meaningful affiliation with a system. For example, we have affiliations with Greater Baltimore Medical Center and Anne Arundel Medical Center in Annapolis. We work closely together, running some of their programs and clinical trials for their facilities.
Q: What are the biggest opportunities for hospitals in the wake of reform?
DM: I think the biggest opportunities to drive change are these pilots. Some are going to work and some are not. Insurance companies don't want to be left out either, so I think we'll see relationships forged between insurers and providers we've never seen before. I also think large employers are going to wake up and realize they have to do something to combat rate increases of 12, 15 or 20 percent. They will start to look at other ways to provide health coverage to their employees. If providers can say, 'we'll take care of your employee population for this amount of money,' it could be a great opportunity. Maybe there's a way to figure out how much the ACO is willing to be at risk and how much the employer will risk, and maybe there's a way both can share in any savings created. A key here would be measuring patient satisfaction at the same time. In the era of HMOs, patient satisfaction dropped to zero because a gate keeper was preventing them from [receiving] care. That's not the goal here. It's about getting the appropriate care at the right time from the right provider.
Q: Hospitals have agreed to $155 billion in cuts over 10 years in return for more insured Americans. Do you think hospitals will net positively from this deal or should they be preparing for decreased revenue?
DM: I personally was not a big fan of this to tell you the truth. It still remains unclear if it will truly provide an offset. When someone first gets an insurance card, they use a lot of resources in the first year or two, and the added cost of that is yet to be determined. If hospitals are seeing more admissions and reduced reimbursements, it could be a double hit. A hospital running at 50 percent capacity would experience increased revenue, but a hospital that's running full like ours could suffer by treating the nearly the same number of patients for less payment.
Another concern is how the cuts will be factored into a medical home payment model. I think it's all about timing here. We are concerned about not getting too far ahead of the curve if payment is behind us. If everyone else is still under a fee-for-service model and we're taking care of a Medicare population, we don't want to get burned.
Q: You are in a very high-profile position at a very remarkable time in healthcare. What has been your greatest accomplishment so far?
DM: My biggest accomplishment has been recruiting a great group of chiefs here throughout the clinical sciences. I think I have the best directors you could ask for and the best group of leaders in John Hopkins. It's really the people who are important in the success of an organization.
Q: What has been your biggest challenge?
DM: It's a challenge to truly understand how quickly change should be instituted. You have to gauge the pace [at] which you can make change. If you do it too quickly you'll fail, and if you do it too slowly, you'll fail. Culture eats strategy everyday for lunch. Communicating the need for change to a group as large and broad as an organization like John Hopkins is challenging, but it's one of the duties of someone in my position and [it’s] what leadership is all about.
Q: What is one piece of advice you would give other hospital leaders?
DM: In this job there are a tremendous number of opportunities that come along, and you cannot be so narrowly focused that you dismiss an opportunity because it doesn't quite fit your organization's strategy. You need to explore those opportunities and partnerships. If we stayed the way we were 20 years ago, we would have shot ourselves in the foot. Take workplace development and who provides care as an example. With physician shortages looming, we have been able to use nurse practitioners as true partners in caring for our patients. Being open to new ideas and new ways of doing things is the one thing I would ask of those leading hospitals.
Dr. Miller is an anesthesiologist who joined Johns Hopkins in 1994 as professor and director of the Department of Anesthesiology and Critical Care Medicine. He was named interim dean of John Hopkins School of Medicine in 1996.
Q: Johns Hopkins has consistently supported the new healthcare reform law and its extension of coverage, and you publicly advocated for better coordinated care and a revamped payment system that does away with fee-for-service. Do you think the law does enough to address all of these issues? Dr. Edward Miller: Our view was that continuing on the same path year after year was not going to get us anywhere. It's certainly not a perfect bill, and a lot of pieces have yet to be defined until specific rules and regulations come out of CMS and HHS. That said, having 32 million uninsured Americans is a significant problem, and it was only going to get worse. We felt it was time to tackle these problems. We pushed hard for health innovations like the Healthcare Innovation Zone concept and accountable care organizations as a way to cost-effectively care for a population of individuals. In our experience, it's really the only way to bend the cost curve. Priority Partners, our managed care organization for Medicaid patients that cares for 175,000 members, is paid per member per month and manages to make money.
However, the legislation fell short in two key areas. It did nothing to address tort reform or how to increase the workforce to care for the 32 million additional people coming into the system. Both of these will be big stumbling blocks to success. I would have liked to see an increase in the number of slots for residents. There has been a lot of talk about increasing the size of medical school classes, but once medical school is over, [the graduates] have to go out and find residencies. Last year, 200 students did not match for a resident slot. The number of residencies has been flat for several years, and the legislation didn't address this despite it being a relatively quick fix.
Q: Medicare will allow ACOs to share in cost savings they create for Medicare beneficiaries beginning with a pilot program in 2012. What impact do you think this will have on our fee-for-service system?
DM: I think it's probably going to be very different in different regions of the country. It seems that some organizations are pretty far ahead, but a lot of organizations are not. Providers in rural areas are going to have a more difficult time; distance becomes an issue when you are trying to integrate care for a population. I think in many areas you'll see ACOs driven by academic medical centers. Hopkins has managed care for 175,000 Medicaid patients, a group of 32,000 military retirees and their families and our own employees through our hospitals, 25 ambulatory sites, pharmacies and hospice care relationships. We're able to take care of a full gamut of patients and conditions, and we have a wide reach. In other areas, ACOs could be driven more by insurers partnering with providers. I think success [under a medical home reimbursement model] depends on the degree of integration in a system. Providers incur risk in these type of arrangements, and a big factor is the amount of risk an ACO is willing to take on. An academic medical center with a 2-3 percent profit margin does not have a lot of room for error.
Q: That's a good point. How would a health system go about determining if a bundled or capitated fee offered by a payor is a fair price for services?
DM: The most important question here is "Do you have the data?" Since we're an insurer, we have the data. We have inpatient, outpatient and pharmaceutical data on every patient — all 175,000 — in Priority Partners. We can analyze the data and determine the cost of their care in a given year. The same rule would hold true for other populations of patients, like diabetics. For example, if the average cost of care for a diabetic patient is $5,000 and a payor offers $4,000, that's a bad deal. It all comes back to having the data.
Q: It sounds like integrated systems need to be in place for a few years, then, before an ACO could accurately predict their costs. Would you agree?
DM: Yes, I think there needs to be a system in place for a few years in order to have that kind of data. This is where people will get burned if they don't know the true cost of their care. Organizations that wing it and accept rates without knowing their true costs could be in real trouble. However, those with a good grip on costs and are strong negotiators have the potential to do really well.
Q: Large health systems and academic medical centers seem the best situated for financial success under the medical home model. What's the role of the community hospital in all of this?
DM: There are two responses for these small community hospitals. They first need to determine if they can make it as a standalone facility any longer or if it would be better to come into a system. It's an important decision that trustees of hospitals have to face. Hospitals that once thrived are having much more difficulty in this economic climate with increased rules and regulations. Two hospitals — Suburban Hospital in Bethesda and Howard County General Hospital in Columbia — recently joined John Hopkins Medicine because they didn't want to go it alone anymore. Instead of putting their facilities up for sale, they gave their resources to the system and in return are able to take advantage of our infrastructure. They remain community providers, and the board members are kept local. They are the ones embedded in the community and can best help the bigger system understand local issues and identify issues we might not see.
A second way is to establish a meaningful affiliation with a system. For example, we have affiliations with Greater Baltimore Medical Center and Anne Arundel Medical Center in Annapolis. We work closely together, running some of their programs and clinical trials for their facilities.
Q: What are the biggest opportunities for hospitals in the wake of reform?
DM: I think the biggest opportunities to drive change are these pilots. Some are going to work and some are not. Insurance companies don't want to be left out either, so I think we'll see relationships forged between insurers and providers we've never seen before. I also think large employers are going to wake up and realize they have to do something to combat rate increases of 12, 15 or 20 percent. They will start to look at other ways to provide health coverage to their employees. If providers can say, 'we'll take care of your employee population for this amount of money,' it could be a great opportunity. Maybe there's a way to figure out how much the ACO is willing to be at risk and how much the employer will risk, and maybe there's a way both can share in any savings created. A key here would be measuring patient satisfaction at the same time. In the era of HMOs, patient satisfaction dropped to zero because a gate keeper was preventing them from [receiving] care. That's not the goal here. It's about getting the appropriate care at the right time from the right provider.
Q: Hospitals have agreed to $155 billion in cuts over 10 years in return for more insured Americans. Do you think hospitals will net positively from this deal or should they be preparing for decreased revenue?
DM: I personally was not a big fan of this to tell you the truth. It still remains unclear if it will truly provide an offset. When someone first gets an insurance card, they use a lot of resources in the first year or two, and the added cost of that is yet to be determined. If hospitals are seeing more admissions and reduced reimbursements, it could be a double hit. A hospital running at 50 percent capacity would experience increased revenue, but a hospital that's running full like ours could suffer by treating the nearly the same number of patients for less payment.
Another concern is how the cuts will be factored into a medical home payment model. I think it's all about timing here. We are concerned about not getting too far ahead of the curve if payment is behind us. If everyone else is still under a fee-for-service model and we're taking care of a Medicare population, we don't want to get burned.
Q: You are in a very high-profile position at a very remarkable time in healthcare. What has been your greatest accomplishment so far?
DM: My biggest accomplishment has been recruiting a great group of chiefs here throughout the clinical sciences. I think I have the best directors you could ask for and the best group of leaders in John Hopkins. It's really the people who are important in the success of an organization.
Q: What has been your biggest challenge?
DM: It's a challenge to truly understand how quickly change should be instituted. You have to gauge the pace [at] which you can make change. If you do it too quickly you'll fail, and if you do it too slowly, you'll fail. Culture eats strategy everyday for lunch. Communicating the need for change to a group as large and broad as an organization like John Hopkins is challenging, but it's one of the duties of someone in my position and [it’s] what leadership is all about.
Q: What is one piece of advice you would give other hospital leaders?
DM: In this job there are a tremendous number of opportunities that come along, and you cannot be so narrowly focused that you dismiss an opportunity because it doesn't quite fit your organization's strategy. You need to explore those opportunities and partnerships. If we stayed the way we were 20 years ago, we would have shot ourselves in the foot. Take workplace development and who provides care as an example. With physician shortages looming, we have been able to use nurse practitioners as true partners in caring for our patients. Being open to new ideas and new ways of doing things is the one thing I would ask of those leading hospitals.
Dr. Miller is an anesthesiologist who joined Johns Hopkins in 1994 as professor and director of the Department of Anesthesiology and Critical Care Medicine. He was named interim dean of John Hopkins School of Medicine in 1996.