Episode 64:
Responsible Sharing of Risk
Jeff Goldsmith, Ph.D., President, Health Futures, Inc.
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In this episode of Fireside Chat, we sit down with Jeff Goldsmith, Ph.D., President, Health Futures, Inc. to discuss healthcare payment models and the need for commercial companies, providers, and the government to lower the administrative burdens on providers to increase usability. We also talked about the contrast of the U.S. fee for service payment model with other western countries to which the U.S. is frequently compared.

Jeff Goldsmith is one of the nation’s foremost health industry analysts, specializing in corporate strategy, trend analysis, health policy and emerging technologies. He has worked across the health system- hospitals, health plans, physician groups, pharmaceutical, biotechnology, and health manufacturing and distribution sectors- advising senior management and Boards. Health Futures also helps guide venture and private equity investment in emerging technologies. Jeff Goldsmith writes and lectures actively on health policy, financing and technology, both in the United States and overseas. Read more

Transcription

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Jeff Goldsmith 0:03
I think this industry took the eye off the user and that user interface it’s just a sad comment. Our healthcare system is in the dark ages in terms of usability.

Gary Bisbee 0:15
That was Dr. Jeff Goldsmith president Health Futures, Inc sharing his views on the failure of the healthcare system to create an electronic medical record with an efficient physician user experience. I’m Gary Bisbee and this is Fireside Chat. Jeff has substantial experience with EMR systems and he challenges commercial companies, providers, and the government to lower the administrative burden on providers and increase usability. Let’s listen.

Jeff Goldsmith 0:42
We need a quantum improvement in the user experience for this technology to generate the potential that I think we all saw. This may be the only industry in the history of American business that saw productivity decline as it automated. That’s not something we can sit today in 2020 and feel good about. We have to fix it.

Gary Bisbee 1:03
Jeff’s an astute student of the healthcare system and he contrasts the US fee-for-service payment model with those of other Western countries to which the US is frequently compared. He is thoughtful about payment models and proposes a subscription plan for baby boomers with an abundance of chronic diseases. He’s a fan of Medicare Advantage and the incentives it provides for consumers and providers. Jeff’s an outspoken and well-regarded critic of the healthcare system and he is unabashedly optimistic about its future and its providers as follows.

Jeff Goldsmith 1:37
We are capable of making a huge difference in people’s lives. And that capability is what makes me optimistic. We have an amazing healthcare system. It’s the policy framework and all of the stuff we’ve laid on top of it that’s failing us.

Gary Bisbee 1:51
I’m delighted to welcome a good friend Dr. Jeff Goldsmith to the microphone. Welcome, Jeff.

Jeff Goldsmith 2:01
Hey Gary, good seeing you.

Gary Bisbee 2:02
Good seeing you. We were just comparing notes. We were together a lot for 10 or 15 years on a board and then haven’t seen each other in a while. So good to be with you.

Jeff Goldsmith 2:12
We certainly were. Time flies when you’re having fun.

Gary Bisbee 2:14
Well, you always had a good time. But your background is special academician, advisor, thought leader, investor, board member, author. The interesting question, we also hear this word futurist attached to you and on a more humorous note, how does one get to be a futurist, anyway?

Jeff Goldsmith 2:33
Largely by accident, I wrote a book in 1980 called Can Hospitals Survive? I was at the University of Chicago and this was before Clayton Christensen and the whole disruption thing. I basically said there are three huge threats to this industry that it needs to deal with right away. One of them is the growth in ambulatory services, you won’t need to come to the hospital for a lot of imaging or surgery. These HMOs are a problem because hospitals are the most expensive piece of the service mix that they’re trying to manage. And the growth of high-tech home care, which will take people that were in intensive care units out of hospitals. So what do we do about it? That was sort of like a strategic challenge, but it was also looking forward. And that led to a whole bunch of people going, “Well, what about this? What about that?” And in 1986, I was asked to write a piece about the health system in 50 years. And I remember getting this, “Come on. I mean, who knows.” And then a light bulb went on and I realized that not only was I going to be dead in 2036, but pre-internet, so were all the people that had read the article. So I could say anything. I could be completely wrong and no one would know. So it was one of those, “God, this is a great way to make a living. I’ve just got to stay out there far enough that people don’t remember what I said.”

Gary Bisbee 3:55
That book was 40 years ago, Jeff.

Jeff Goldsmith 3:57
Yes, it was.

Gary Bisbee 3:58
That is good for you.

Jeff Goldsmith 3:59
Well, and the industry was $80 million in 1978. It’s now a trillion two.

Gary Bisbee 4:05
Right! And there probably weren’t any multi-hospital systems or if there were, there were just two or three, right?

Jeff Goldsmith 4:08
There were actually, there was, you know, there was Inner Mountain. You had the Lutheran Hospital Society of Southern California, which is now a part of CHI/CommonSpirit. That was my peer group. Those guys, the people that were doing that, particularly the planners and strategists were my age and they were people that I admired and I really thought, for a lot of reasons, these guys were onto something. And when I started doing strategy work after I left the University of Chicago, those were my clients Providence Health, Sutter, the Pres. St. Luke’s in Denver, which is now part of Health One.

Gary Bisbee 4:42
Think back to the 1980 book and then your article subsequently. What has changed that you did not expect?

Jeff Goldsmith 4:49
I didn’t fully anticipate the industrialization of this industry to the extent that it’s happened. I mean, the idea that you could have a UnitedHealthcare $250 billion of CVS, Aetna, $260 billion, the huge capital flows into this industry. I mean, I had absolutely no idea. I was really focused on the care delivery part itself and the idea that you’d get the degree of just sheer muscle that we’ve gotten. And I think a lot of these places are now struggling with what do I do with all that muscle?

Gary Bisbee 5:24
You’ve been very articulate about value and the slow evolution there. A while back we thought everything was going to be value-based. Tell us about that and particularly, what’s the future for fee-for-service?

Jeff Goldsmith 5:36
Well, remember that the vast majority of the care provided in countries to which we’re unfavorably compared is fee-for-service. Its fee-for-service with a global cap or some type of government management, Canada’s fee-for-service, we get compared to Sweden and Switzerland that that’s fee-for-service. So I think people made a diagnosis about what was wrong, why we stood out that was maybe not entirely accurate. I was a big advocate of creating risk-bearing healthcare enterprises during most of my consulting work. And what I discovered is, there needs to be a supply of capitated risk that payers are willing to get rid of and to delegate to providers in order for risk to grow. And that’s what was missing. And every market is different. On the Pacific Coast, I think the reason why we got so much capitation and risk-based payment was because of Kaiser’s dominant position. And a lot of the strategy work that I was doing during the 80s was like what the heck do we do about Kaiser? Well, my solution was to create a Kaiser-like enterprise. Have a large physician group, have your own health plan, have a framework where people could choose a system rather than just get services ad hoc. And unfortunately, there wasn’t that much demand for it. Kaiser was a one-off. And in the ensuing 40 years, there have been 5 waves of efforts, the latest during Obamacare, to try and convert the fee-for-service based health system into Kaiser-like entities. And each one of them has left a residue of really high quality managed care health enterprises, like a Geisinger or an Inner Mountain or whatever, but it never spread to the entire system. The ACO was the last effort to do this.

Gary Bisbee 7:34
Fast forward 10 years from now, we’re sitting at this table. Delivery system providers carrying risk. How much further down that path will we be do you think?

Jeff Goldsmith 7:42
I actually pulled some numbers to try and get a sense of the trend. Gary, guess what the median hospital percentage of hospital revenues that are capitated is today? 1.8.

Gary Bisbee 7:55
Dependent on how you count it? You’re talking downside risk?

Jeff Goldsmith 7:57
No, I’m talking capitated risk. And then two-sided risk, which is like the at-risk ACO’s. Guess what that is right now? 1.9. You add the two of those together, those are medians. 3.7% between capitation and two-sided risk. It’s only grown five-tenths of a percent in 5 years. It could be 5% or 7 and nearly all of that’s in the west. California and Oregon made deliberate decisions to use delegated risk models when they expanded their Medicaid programs. So you get east of the Sierras, these numbers are in like 1%, less?

Gary Bisbee 8:35
What is the push to get rid of fee-for-service? Why are people wanting to do that?

Jeff Goldsmith 8:39
I think we’ve made the normative assumption, at least in the progressive part of the health policy community, that the fundamental policy question we needed to address was the corruption of doctors and hospitals. The idea that if we don’t do something to restrain them, they’ll just do enough unnecessary stuff to fill their beds or to make their target income. And I think that’s just been a demeaning, obnoxious, I mean, there are medical communities and hospitals that behave that way, but they’re not the norm. So we’ve made a normative assumption that our health system is all about ripping people off and that unless you create financial incentives to prevent them from doing it, people will just run up the tab. And I just think it’s so demeaning. It’s so insulting to this field to assume that we need to be paid to not do unnecessary things to people. I think we need a more holistic approach. I wrote a book in 2008 on what to do about the boomers. It was an effort to look at could there be a positive outcome for what was shaping up to be a fairly significant train wreck. In the Medicare chapter I talked about, no, you don’t need a global solution health care payment. You need to pay docs as close to friction-free basis as you can and you do that through subscriptions. And that’s essentially capitation. I pay my primary doc a monthly fee and it covers x envelope of services, my psychiatrist if I’ve got serious chronic illness, that chronic illness doctor. And for the shoppable services and the services that you can actually coherently bundle, pay for a complete clinical solution rather than for the individual services and leave the rest of it alone.

Gary Bisbee 8:39
Got more of the primary front end.

Jeff Goldsmith 8:45
That wasn’t satisfying as a policy solution because it wasn’t global enough. And it didn’t have that moral undertone of we’ve got to stop this corruption, we’ve got to stop the ripping off.

Gary Bisbee 10:31
Kind of a concierge model.

Jeff Goldsmith 10:33
That has a connotation that it only works for wealthy people. I think there’s an argument that you pay community health centers that way. We’re still paying community health centers per visit. That’s nuts! People ought to subscribe to primary care services. And of course, if we did that, a huge chunk of that wasted motion in the billing process and all the time that docs and nurses are wasting documenting things would drop out. We’ve got to take the friction out. And I think we’ve got to find friction-free payment methods for the simpler services that really make so much of a difference.

Gary Bisbee 11:10
Let me go back a bit where we talked about the industrialization of healthcare, fee-for-service, and then the new topic of interest, which is affordability, and a lot of people equate fee-for-service with affordability. How would you approach the affordability issue?

Jeff Goldsmith 11:27
Let’s narrow it down to Medicare for a minute. Medicare is obviously, I mean we’re both on Medicare. I mean, I love Medicare. I paid for it for 50 years. And now I know it works.

Gary Bisbee 11:37
It works.

Jeff Goldsmith 11:37
And now I’m using it and it works. What is Medicare’s obligation, not to us, because we invested in it, a chunk of our salaries went to it for our entire working lives. What’s Medicare’s obligation to the taxpayer? Medicare’s obligation to the taxpayer, it seems to me anyway, is to be a prudent purchaser of health services. Now, you can’t be a prudent purchaser of health services and just pay whatever drug company wants to charge for Sovaldi. And we haven’t had that conversation yet. We’re starting to have it. You can’t pay gross charges to a hospital. You’ve got to figure out a way to have a responsible sharing of risk with the care system and the providers of technology that’s very difficult to do in this political environment.

Gary Bisbee 12:21
What do you think about Medicare Advantage?

Jeff Goldsmith 12:23
I’m a subscriber. I mean, I’ve been in Medicare Advantage for 5 years. It’s worked for me, I love the price. It was $0. I mean, I’m still paying my Medicare premiums, obviously, but to, for MA, I think it’s now up to $30 bucks a month or something like that. I think the problem with MA is that it’s twice as profitable as commercial health insurance. And that’s not going to survive the next recession. I just looked at the numbers this morning, the per life profit on an MA contract is about $1600 bucks, versus $800 for group insurance. I think a future OMB director or CMS director is going to look at it and say, “You know what, I’m not sure it’s worth us providing y’all a 5% margin to continue doing this.” So I think I MA is grown, it’s what a third of the program.

Gary Bisbee 13:15
A little bit over a third now, but half of the new people over.

Jeff Goldsmith 13:18
You’re right. Half of it, including me. I think MA is going to get a fresh look by the next administration, whoever that is.

Gary Bisbee 13:25
Let’s turn if we could to demographics. We have what 75 million baby boomers, half of them aren’t even on Medicare yet. What’s going to happen in the next 10 or 20 years as this influx of baby boomers hit the medical care system?

Jeff Goldsmith 13:39
This is a sad story. And I’ve been spending a lot of time talking about this out on a circuit that we can now see, with the glow of hindsight, that in about 1997 the health status of our generation began deteriorating. That 1997 was the year when you saw the beginnings of this rise in midlife mortality, mortality at 45 to 54 has risen 15% since 1997. A lot of that is the obesity epidemic. 40% of boomers are obese, something like 10% of them are morbidly obese. It is going to take a huge bite out of our federal budget and out of the lives of their families when this generation checks out early, and that’s basically what’s going to happen. We’ve also seen a lot of this Angus Deaton thing, about the deaths of despair, that kind of started with the leading edge of the boomers as they moved into midlife. So one of the big surprises about the opioid epidemic is the large number of people in their 50s and 60s that succumb to it. Deaths from cirrhosis and from complications of alcohol use. It surprised me. I certainly didn’t predict this. I knew when I wrote the boomer book, about a third of our generations, this was in 2008, a third of our generation was already in fairly serious trouble. And the argument in the boomer book was, get them on to Medicare early, get the high-risk folks that really need a comprehensive care model or need to be on MA, get them in before 65 because there’s already evidence of problems. Those problems have significantly escalated in the last 10 years and they’ve brought us a whole bunch of fallout, including our current political environment.

Gary Bisbee 15:19
Are you supportive of the Medicare for all program then?

Jeff Goldsmith 15:22
No, I think it’s a terrible idea. Our federal government has a terrible track record in implementing health care change. For all the good works that we saw in Obamacare, they couldn’t stand up a website to enroll people with 4 years and 55 subcontractors. The Bush administration bollixed the rollout of Medicare prescription drug benefits. I have no trust at all in the capacity of our current federal government to run a $3.7 trillion entity. I think it’s enough for them to function as prudent purchasers for the people that they represent. Now, having said that, I think people ought to be able to buy into Medicare at age 50, on a subsidized basis if they don’t have income. So it’s not like I’m in favor of Medicare expansion. I am, on the record. But I think Medicare taking over the whole healthcare system is just a catastrophically bad idea.

Gary Bisbee 16:18
Let’s turn to EHRs, electronic health records or electronic medical records. And you’re pretty outspoken about the imposition of time on doctors. Talk to us about your thinking there, Jeff.

Jeff Goldsmith 16:32
I think this industry took the eye off the user and that user interface, it’s just a sad comment. Our healthcare system is in the dark ages in terms of usability. When the iPhone came out, that was a remarkable piece of engineering. It was a remarkable piece of human factors engineering, because Steve Jobs, who was a dictator, basically said, I don’t want it to take more than 2 or 3 clicks for someone to get what they need out of this device and beat the stuffing out of his engineers to create a system that did that. We never had the same discipline in the electronic part of our healthcare system. It really was all about chasing features and functions and database management and latency. It wasn’t about the user experience. And I still think today, the main incumbents are disruptable. If someone is willing to spend the $5 or $10 billion to create a user interface that’s a whole lot smarter and easier for the clinician to use and is able to free up a day a week, and that’s how much we’re talking about here of clinician time, I think they run the table. I think the vendors have fallen asleep on the users.

Gary Bisbee 17:49
So a day a week, you’re talking about at a week that physicians spend time interacting with the computer.

Jeff Goldsmith 17:55
They’re spending more time typing. I don’t merely blame the vendors for this. I think that the federal government with the HITECH Act piled on all of this value-based payment. A lot of it was about providing huge amounts of information so that you could decide whether people were being virtuous or not. I think that’s been a contributing factor. But the technology itself sucks. We need a quantum improvement in the user experience for this technology to generate the potential that I think we all saw. This may be the only industry in the history of American business that saw productivity decline as it automated. That’s not something we can sit today in 2020 and feel good about. We have to fix it.

Gary Bisbee 18:38
What’s your thinking 10 years from now? You think that kind of problem will be solved?

Jeff Goldsmith 18:43
I think it’s a soluble problem. I think it’s going to take policy changes as well as better engineering. I think we need to listen to the articulate people out there like Bob Wachter or John Halamka. I mean, these guys have been talking about this for years. Wachter wrote a brilliant book Digital Doctors about the conversion at UCSF. These guys are onto something. And I think they have the right values. I don’t think this is just Luddite talk. We need to fix this tool.

Gary Bisbee 19:11
Jeff, let’s go to politics. You’ve been thoughtful about the middle class, their anger, actually, I think you’ve used that term. And that’s given rise to Trump presidency. Tell us about your thinking there. And what’s going to happen with the 2020 presidential election do you think?

Jeff Goldsmith 19:30
It’s a funny thing to say middle class. I don’t think we have much of a middle class anymore. And I think that’s the root of the problem. I was reading something that just last night, as a matter of fact, about how a 25 to 29-year-old in the early 1960s was making 4 times what his parents were. I still couldn’t believe that 4 times, because that’s how much progress we made economically during that post-war period. Well, that really came to a crashing halt in the 70s. We had a working-class in this country. That working-class just got crushed. And a lot of people just saw themselves drowning in debt, not able to get where they wanted to go, not able to be secure. So the gap between the dreams that people had when they were in their teens and 20s and what they have now is the root of all of this anger. And it isn’t just on the right. There’s a lot of angry younger people on the left that are 100 or 200 grand in debt from their college experience. They can’t afford to buy homes, they’re reluctant to start families, it’s holding back our economy. So I don’t think it’s just that core of Trump folks that Trump has skillfully tapped into their anger. I think there’s a whole other reservoir of anger out there over people that are a lot younger. The median Trump voter was 57 years old.

Gary Bisbee 20:48
So it’s a Bernie voter?

Jeff Goldsmith 20:49
Yeah, it’s a Bernie voter and I don’t think they’re going away. I mean, the point of elections is for us to have a national conversation about what we need to do as a society. We’re not really having that conversation. We need a much more fine-grained approach, Green New Deal, Medicare for all, these things aren’t going to fix that anger. What do we need to do to have a more vibrant and dynamic economy that really does create a broad-based opportunity for everybody, not just on the two coasts, but in the middle? I’ve just finished reading Nick Kristof’s book Tightrope. Part of the reason why that’s poignant for me is because, Nick’s 10 years younger than me, but he grew up 25 miles west of me in Oregon, in a little town called Yamhill. We played those kids in football. And as early as 1967 or 68 you could see the economy in that part of Oregon, that western part of the Tualatin Valley just disintegrating. Kristof’s book is about what happened to the kids on his school bus and a lot of them are dead. And what’s cool about the book is this is not like, “Oh my God, ain’t this awful.” It’s like, “Here are all the things that people are doing about some of the problems that have hurt these communities. And we really ought to scale them up.” So unlike some of the other books, I mean, Hillbilly Elegy, what’s the message there? Join the Marines? It helps. My wife’s niece is in the Marines. But Kristof looked at a lot of different communities that were struggling and was sort of looking for, well, what are the solutions to some of these problems that can help people find productive employment, can help people deal with the problems that they’re having in their families, that can help them deal with addiction, and get clean and get back on a productive path? We’re not looking at that level of institutional change yet.

Gary Bisbee 22:42
Jeff, candid as usual, this has been a terrific interview. Let’s wrap up with, are you optimistic about the healthcare system here?

Jeff Goldsmith 22:49
This is a funny thing to say, but I was a big expert on the health system for 30 or 40 years and then when I turned 66, all hell broke loose. And I ended up having 5 complex surgeries in 29 months, starting with surgery for head and neck cancer. And it was sobering. But I came away from that experience, incredibly optimistic. Only 3 of the people that touched me in those 5 surgeries were over the age of 40. They were on fire. They worked in teams. There wasn’t a lot of prima donna stuff going on. People really focused on me and my family and how to get us to a productive place. It was stirring. And I was like, we are capable of making a huge difference in people’s lives. And that capability is what makes me optimistic. We have an amazing healthcare system. It’s the policy framework and all of the stuff we’ve laid on top of it that’s failing us.

Gary Bisbee 23:46
Jeff, this has been great. Thanks so much.

Jeff Goldsmith 23:48
Gary, it’s great.

Gary Bisbee 23:50
Fireside Chat with Gary Bisbee is a Health Management Academy podcast produced by Think Medium. Please subscribe to Fireside Chat on Apple Podcasts or wherever you’re listening right now. Be sure to rate and review Fireside Chat so we can continue to explore key issues with innovative and dynamic healthcare leaders. In addition to subscribing and rating, we’ve found that podcasts are known through word of mouth and we appreciate your spreading the word to friends or those who might be interested. Fireside Chat is brought to you from our nation’s capital in Washington DC, where we explore the strategies of leading health systems through conversations with CEOs and other interesting leaders. For questions and suggestions about Fireside Chat contact me through our website firesidechatpodcast.com or gary@thinkmedium.com. Thanks for listening.