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The discussion, moderated by LIBN Editor David Reich-Hale, included state Sen. Kemp Hannon, Dr. Charles Rothberg, commissioner of government affairs for the medical society of New York; Frank Branchini, president and chief operating officer of Emblem Health; Kevin Dahill, chief executive of the Nassau-Suffolk Hospital System; and Michael Dowling, chief executive of North Shore-Long Island Jewish Health System.
 
LIBN: So the health care overhaul that Washington leaders were pushing for over the last year seems to be in major trouble. What did you think of the bills passed by the House and Senate?
 
Dahill: We closely tracked the bills throughout the whole year. Hospitals stayed in constant touch, particularly on the Senate side where the approach was probably the most balanced.
 
The context in which we supported that effort on behalf of hospitals was one that said the alternative was staggering, quite frankly.
 
The president early last year had proposed massive cuts to hospital reimbursements for Medicare. The Senate Finance Committee brought those numbers way down and the offset for the hospitals was going to be that a sizeable number of the uninsured were going to get coverage over a 10-year horizon. And the cuts were going to be prorated pursuant to that new enrollment. That being the case, that benefited the hospitals and we supported the Senate Finance [Committee] version of the bill.
 
Dowling: I’m not exactly sure we knew what the bill was going to look like because you had two different versions and no bill is ever fully understood until you get the two committees together and draft the final version. So I thought it was a mistake for many people just to buy into one bill and they had some good on either side. I think generically, most people would agree that it was good to provide coverage for more people that are now uninsured. As a country we should find a way to cover everybody, so moving a step in that direction was a good thing. But I don’t think really any of us knew what the bills were going to look like. …
 
So I think that people were jumping to all sorts of immature conclusions earlier on.
 
I am not surprised at all that the whole thing failed because I have felt personally from day one that the president made a very strategic mistake in believing he had a mandate for comprehensive reform. Health care is extraordinarily complex and you cannot comprehensively reform health care all at once; there has been history to this.
 
The second thing I just want to mention is that in my view, in every organized system that we have – education, the banking system, in every single one of them – there are major deficiencies, but it doesn’t mean that they’re in crisis. Health care has been extraordinarily successful. You could argue that one of the issues with the cost in health care is that we’re suffering from a crisis of success because we’ve shown massive progress over the years. There’s a lot of great things going on all the time and there are deficiencies that need to be fixed, but the overall system isn’t completely, totally broken. We’ve had an avalanche of negativity which I think serves the public negatively and takes the agenda off in a direction that gets you to a conclusion that would cause more problems than the problem you’re trying to solve.
 
LIBN: But there are sensible reforms, which we’ll get to in a bit.
 
Dowling: It’s not a question of suggesting there are not reforms to be made, but this generic statement that the whole thing is a mess is something I just think is false.
 
Branchini: It’s very interesting. I agree almost wholeheartedly with what Michael Dowling said. I would add one or two other issues that … should have been articulated much better. I think when it started out it was about health insurance reform; it became health reform. It’s not quite clear whether we’re talking about reforming the whole health care system or reforming simply health insurance, which there are ways to reform. I think it started out with the fundamental premise that everyone should have health insurance and I think that’s an absolute positive step. Everybody should have health insurance. I do think to rename that as a reform of the whole health care system probably changes the whole debate and expands it way beyond what it was originally intended to do.
 
The definition of what we’re dealing with was to increase insurance for those that are not insured, and the only way to do that is with a mandate. There shouldn’t be a subsidy from those that are insured to the uninsured but everybody should have some basic catastrophic coverage.
 
Secondly, I think the whole discussion up until the last 45 days was about the public option and one of the main issues that we looked at and the industry took a position on with the public option is recognizing the fact that right now the commercial side of the insurance equation provides a major subsidy to Medicare and Medicaid. And reimbursement rates are mandated and not negotiated or agreed upon, and I think this is one of the inherent problems in the system. You have this subsidy going from the commercial to government programs and hospitals that are also in distress and need to make up for that shortfall through increased reimbursement.
 
So … what are you trying to deal with? Is it to reduce the uninsured?
 
Regarding the whole discussion about the public option, I think Michael hit a very important point: The two bills are more dissimilar than similar and I think both sides were so locked in, it would be very difficult to get a bill coming out that would be in the middle somewhere.
 
Rothberg: I’ve been invited to discuss this matter on several occasions and the observation I’ve made is that each time I get the invitation, by the time we sit down at the table, the legislation has changed.
 
Imagine how the public views this.
 
I think what you’re seeing happening is people aren’t sure where to put their allegiances so they look at what they have now and feel threatened by any sense that that might change.
 
Now I do have to disagree with Mr. Dowling in that he thought it was a shame that we squandered an opportunity, but I would like to be a little more optimistic and say that the apparent or interim failure of legislation to move forward might be a form of progress in itself. We have identified what things are workable, what things are not workable and what different stakeholders desire in their legislation.

And I have to disagree with the CEO of Emblem Health in that I don’t know that the original purpose of health systems reform was to provide insurance for everybody. I think that it was very simple what we were trying to do and that is we wanted to provide access to care for everybody and if insurance was the logical way to fund that then insurance should be provided. But I think we needed to look at it from a point of view of providing access to patients for their care and to be able to sustain the system, which meant we had to have some acknowledgement of the costs and what that might be going forward. And I think if we can rein in the discussion to those two elements, we can make real progress.
 
Hannon: I think in an age of information, even of health, we have not been able to give the general public information about what the health system is.
 
People don’t understand why it’s good to have other people having insurance. Certainly you want your own, but you don’t understand why everybody else should have it. You don’t understand that the more universal it is, that if costs can be lowered for everybody, we can have better research, better care. That never did come across and therefore people were starting to look at it from on the outside reading those letters and articles, plus they knew there was taxes involved, they knew if you were in Medicare they were going to have $400 to $500 in savings. Well does that take away from me? If you refuse to get the insurance mandate, you would pay a penalty. Well why do I have the mandate to begin with and then I have to pay a penalty? There were taxes on the high-income people; there were taxes on people with a good health plan. It began to look like a traditional welfare program and I think that’s the guts of it. In the middle of a recession, you’re being asked to give more. You didn’t see the benefit of getting more, and the reaction has been the way it’s come about.
 
LIBN: And the Senate bill? I know in Albany there was a lot of push back.
 
Hannon: Well the difficulty with the entire reform was that there were two major deterrents in New York. One was we were not going to get the same rewards other states would get for already having coverage beyond what is required. We have Family Health Plus, Child Health Plus, Healthy NY; we’ve really done a great deal to expand coverage in New York. We were going to get no money out of that. Every other state in the nation would be getting money when they raised their eligibility limits.
 
The second part is that so much of both bills is about changing insurance rules. We would have a community rating so you wouldn’t have a differentiation in the premium charge based on age. Well the difficulty there is that New York’s had a community rating for over a decade but the federal government’s proposal in either of the two bills was not for the same thing. So meshing that would have been extraordinarily difficult. We already have pre-existing condition and there was again going to be a different provision in the federal bills and meshing that once again would be different.
 
Lastly, they were going to set up high-risk pools for people who couldn’t afford insurance, it wouldn’t be the burden entirely of the provider and those pools wouldn’t mesh with what New York has done. So we were getting penalized for having been innovative in our thinking about health insurance and health care.
 
LIBN: What would be sensible health care reform?
 
Dowling: Well it’s kind of interesting as we go around the table that there isn’t even agreement between the four of us of what the bill was intended to do to begin with. That obviously shows you that there’s a real disconnect which is part of the problem the president has had.
 
What’s next? First of all understand that an awful lot of reform is going on and has been going on for a long time. It’s not like everything is completely stagnant and then you have to have a federal piece of legislation that sets the ball in motion.
 
New York has been a leader in the health reform movement as the senator said.

There has been extraordinary improvements and demonstration projects going on all over the country over the last couple of years about how to do things differently. Reform at the end of the day has to be done locally.
 
LIBN: If we took the federal government out of it and just spoke locally, is there anything in Albany that needs to be done that hasn’t been?
 
Branchini: The subsidies are a major problem. Michael mentions Medicare but Medicaid is a big issue also in terms of the subsidy. But I think there’s a very fundamental definitional issue. When things began to change maybe 10 to 15 years ago and we moved the business I’m in from protection to benefits, everything is about benefits without the protection.
 
If you go back 15 years, it’s sort of an incremental approach. When Medicare was coming out to provide catastrophic coverage, it would have been a very major step in terms of reducing the cost of health insurance, which is fundamental to the problem because you can’t have true access if people have no way to pay for the access. You can’t run a hospital when 30 percent of the people have no way to pay the bill. And that payment then gets tacked on to people who have insurance. So you’ve got to make a fundamental distinction between benefits and protection.
 
If, like New York, you pooled the large catastrophic payments and pooled it across the whole population, you would see premium rates drop significantly. People who are healthier drop insurance and take the bet because they don’t want to pay $12,000 to $15,000 per year. What that leaves you with is a pool of insured who are at higher risk with more expenditures and it almost explodes geometrically because of premiums. So some sort of pooling, it’s an incremental approach and I give that as an example of a thoughtful way to move incrementally. I don’t think you can change the whole health care system. That’s a huge project. Hospitals have to change, individuals have to change their behavior, better incentives have to be developed for the simple concept of getting more physicians into primary care, which I thing is a fundamental change in the system, but you have to change the incentives to get individuals in.
 
You’ve got to (provide) increased compensation to primary care physicians.
 
But these are incremental steps. And I do think that nothing at all will set it back as it did with the Clinton program in many years. It’s becoming a political third rail.
 
Rothberg: Let me just back track to Mr. Dowling’s point that the public may or may not understand the enormity of the public component of paying for health care. Can you estimate what portion of your care mix is Medicare and Medicaid?
 
Branchini: There’s a 15 percent, 20 percent …
 
Dowling: 55 to 56 percent.
 
Rothberg: People might hear Medicare and they think Grandma is just a small part of their family, but it’s a significant part I expect of health care expenditure.
 
Dowling: In every hospital across the country, about 40 percent of their revenue is Medicare. That percentage is going to grow because as people get older, Medicare is the only option. Everybody’s going to potentially be a Medicare recipient if they live long enough, and we all hope to live that long.
 
Rothberg: And I think you made an important point that even if it’s a small cross-subsidy today, it’s a cross-subsidy for a very large part of your revenue.
 
Hannon: And it has a tremendous leveraging effect. There’s another phenomenon that Albany has seen. We’ve expanded the number of people that get coverage and it’s significant, so there’s an enormous new pool of people coming to a hospital, a nursing home, a home health care agency, saying, ‘I’d like to be cared for by the physician.’ At the same time we’ve had this unfortunate series of hidden taxes. They talk about an assessment on a hospital. We put $1 billion of taxes collectively on New York state health insurers last year. And then people wonder why their premiums are going up. A billion dollars. They can’t absorb it, they’re not rich so all of these hidden taxes, they have the money but how much do you pass through? Eighty to 85 percent of every dollar you get goes right back out in terms of medical coverage. There’s just an illusion that you can separate out who you’re providing for with how you’re providing for it. At some point there’s a breaking point and as we’ve seen, hospitals can go out of business, nursing homes can go out of business and that’s going to be the real crisis should that occur.
 
Dahill: We have a great lab experiment taking place in Massachusetts as we all sit here and it’s a good news/troublesome news story. The good news is that through mandates and reshuffling, they did open up access and coverage to a point where I think they’re at 97 percent now. Well guess what happened? Costs have spiraled upward and out of control. Boston City Medical Center was on the brink of bankruptcy because of all the people flocking in. Now that they’ve got coverage, they’re going to access the system.
 
A number of policy issues were raised during this federal debate that got skirted because they were politically charged. Let me give you an example: end-of-life issues. More damage was done to palliative care and hospice care in my opinion by the outlandish charging around death panels and all that went on during the summer. But that issue of end-of-life care is one that should not be lost and it should not be one that is politicized. It should be one that is discussed openly and freely. We have too many patients dying in our intensive care units when there is a much more appropriate setting from a patient’s point of view and a family’s point of view. And so when we allow a political system to take over these policy discussions, health care loses an opportunity to incrementally reform the way in which we deliver care. So I think that the opportunity this now presents is that there should be a wake-up call for all of us in health care to look at some of these policy issues that were raised and go to government with suggestions and proposals. Rather than the White House delegating this to Congress, they should delegate it to the leadership in health care to come back to them with proposals and suggestions.
 
LIBN: I know the insurance industry has been hammered for not covering pre-existing conditions. Should that be done away with and also, how much does that cost hospitals and the health care industry as a whole if insurers are not covering pre-existing conditions?
 
Branchini: I think it should be covered and New York has gone in that direction. I think that the medical underwriting is a real issue in terms of our industry. But I think part of that equation, however, is to provide a much more universal coverage. The issue you have with medical underwriting, and New York really doesn’t have this, is people will choose to take insurance only at the point at which they have catastrophic needs.
 
There is no dollar price that you can put on what the premium would be. It would be exactly what the cost of the end of life is or the sustaining of life. But in order to really make that work across health reform, you’ve got to have everybody with some level of coverage so that the risk is being spread. All of us are going to have catastrophic costs at some point, that’s the reality of it. In our business almost 60 percent of our costs are incurred by 5-10 percent of our people in the last six months of their lives. And you get into better care at the end stage. I mean it’s difficult to talk about, but much better care, more palliative and compassionate care because it’s true. People are dying in the ICU and they have no alternative. Where do they go?
 
Dowling: You know you’re raising a very interesting issue and Kevin did the same. There are things that we are afraid to talk about and there are things that we talk an awful lot about but we talk about them incorrectly. A big part of the discussion during the last year was about how the whole purpose of this reform was to reduce costs. There wasn’t a thing in the statute to reduce costs. Zero. Most of what was in the bill would increase costs. And the argument that you can become so efficient to offset the fantastic cost tied to all the other parts of the bill like universal coverage is ludicrous. There are things we need to talk about such as at least 50 percent to two-thirds of cost growth in health care over the last couple of decades has been tied to progress. New developments, new tests, new ideas, new treatments, things that we can do that we couldn’t do before. When you can’t do something, it doesn’t cost you. But when science progresses at such a phenomenal pace to allow you to do things you couldn’t do before, you now have to provide it if you so choose and more and more people want it.
 
So we take great satisfaction in the progress associated with the science of medicine in the United States. What physicians can do is extraordinary. But that carries with it extraordinary costs, in fact unlimited. It is very appropriate on the end-of-life issues because of the ability of what we can do at the end of life that keeps people alive for an awfully long time, probably in inappropriate places, which I agree with Kevin. The second issue that we don’t like to talk about is that cost growth is driven by what hospitals do and doctors do. But cost growth is driven in part also by lifestyle. You walk around a mall on the weekend and you watch. It’s like an obesity fair. And you ask yourself, did I cause this? Did I make these people obese? No, they did. And our whole lifestyle is driven in this direction, yet we’re very timid about trying to deal with it.
 
And we argue that prevention would save money, yet prevention is a good public policy issue but there’s no evidence that it saves money. And then you’ve got the aging of the population. So if you want to deal with the cost growth issue, you’ve got to tackle some of these. And you’ve got to tackle one more fundamental issue that nobody wants to touch and anybody that’s done it in the past has been politically dead. We have to decide about whether or not over time we need to limit what people are entitled to. It’s called rationing.
 
Rothberg: That’s not a politically popular word.
 
Dowling: If science progresses at the rate it’s progressing then you cannot continue to talk about reducing because in every other country in the world they do some form of rationing. I don’t know how it is we can address the cost issue because we fool ourselves all the time by saying that all of this stuff would save money. I think there needs to be public debate on this.
 
Rothberg: I would like to be optimistic enough to think that we’re not at the phase where rationing is our only remedy. And you brought up an excellent point and I know that your institutions are very active in this and that is finding ways to innovate the delivery system. And in your institution, because you’re larger and because you have different classes of providers under one roof, you’re able to do things that allow collaborative action between the different classes of providers. And you either accomplish better outcomes or more cost-effective outcomes with that. Most everybody else finds that there’s a tremendous hurdle to doing that so we’re relegated to things like demonstration projects. And that’s all that the pending legislation would have offered. But a lot of these things have been demonstrated before. And because of the legal environment we’re in, particularly antitrust, people in your position and people that I represent can’t get together and say lets do this together and we’ll make the system more cost effective and with better outcomes. How do you respond to that?
 
Dowling: Well the last point I completely agree with. The debate has always been that we should coordinate care and should all work together with seamless transitions of care between doctors and hospitals, yet there’s a whole series of federal laws that prevent you from doing it. Nothing in the legislation actually addressed that issue. I mean, should doctors and hospitals be able to work much more collectively together?
 
We have to work through 100,000 rules to figure out the little narrow bands in which we can be able to do this and it’s pretty ridiculous. I also agree with you that big systems like ours, and we try to be very innovative, we are probably able to do things better than a lot of others because of size and scale and because we’re constantly trying to be innovative. And it is possible that we’d be able to reduce some costs or slow the growth of the costs. But when you look at it overall in the United States in terms of whether you go from 17 percent GNP and health care costs to 20 percent you can always show a savings in a micro area, the question is from a national sense if you can show savings on an aggregate. And I’m not sure you can over the long term unless you address some of these other things I mentioned.
 
But on the issues of getting physicians and hospitals together I think the future has to be physicians and hospitals working very, very closely together because we’re not enemies here. I also think that we get ourselves in the situation sometimes where we fight back and forth with insurance companies but I don’t think we’re also the enemies either. So I think all of these things are very good things that can have a positive impact, but the science is marching ahead faster than our ability to innovate from a delivery point of view.
 
Rothberg: But don’t you think we need to shift the way that we think about collaboration between the different provider classes, particular hospitals and physicians?
 
Hannon: I would argue that one of the things we should even put more emphasis on is how each of the people in the health delivery system are doing their things – hospitals or doctors or nursing homes – because we’ve kept three different silos: affordability, access and quality. But what we’ve actually started to do in the past decade is to start to look at the quality and realize that when we establish the protocols as to how people should be treating a different disease in terms of management – not in terms of a new drug or a new medical device, but in terms of management that we can keep people from staying in a hospital an extra few days – we can improve their outcomes. We can improve their after-stay care and we start to erect things such as hospital report cards. And all of a sudden, looking at the clinical adoption of hospital report cards, not just billing, there’s been some decent standards. They’ve actually come out of Washington. They drive someone like Michael Dowling crazy because now he has to run a hospital and it’s reported out there. We’ve done some of the things for doctors, reporting their malpractice records on the Internet. But we’ve set up these standards and it’s not a happy thing.
 
Rothberg: Is that supposed to please us?
 
Hannon: No but it pleases the patients and at the end of the day the affordability, the access and the quality is for the patient. And so when I get the chance to deal with public policy in health, I’m not trying to please any of the sectors you represent. What I’m ultimately saying is, ‘How is the patient going to be bettered on this?’ And we have to move that forward.
 
LIBN: How much is malpractice costing the health care industry in New York?
 
Hannon: It is outrageous and on Long Island it’s even more outrageous. We have obstetricians who are paying close to $200,000 a year just for their malpractice insurance before they’ve done anything else. And to the extent you’re looking at the average age of an obstetrician on Long Island, it’s going up, and I don’t know how we replace them. It’s very difficult. The burden is being shifted to the hospitals but some of the numbers that are cited out there are just staggering: $10,000 a year per delivery. So when people are looking at health costs or costs of health insurance, it’s right there in the malpractice system. And you see other states making changes and there’s a very salutary benefit of that system.
 
LIBN: What are some of the changes that you’ve pitched?
 
Hannon: I have legislation in that would set up a whole system for the child born with a mental impairment. Right now, even though there might be no malpractice whatsoever –  no wrong use of the forceps or anything like that – if a child has a mental impairment, that’s a suit that’s almost guaranteed to result in an award. And it only benefits one-third of the kids born with that syndrome. The other two-thirds somehow society takes care of. My thought is you set up a whole fund, set up a whole system, you automatically take care of it and remove it from the tort system and let people try to take care of the patient, again, instead of just rewarding someplace in the system.
 
Dahill: There’s a good demonstration going on in the Bronx in which a specialty court has been established with a judge who’s become very well informed on medical issues and medical malpractice, who can hold both plaintiff’s council and defense council accountable for certain procedures. Just bringing out the efficiency issues and bringing matters along, that could lead to holding attorneys accountable for cases that they bring that maybe were not appropriate to bring. But just bringing out the efficiencies in a court with a judge who hears the matter and makes a decision, could go a long way. We’ve put that forward as well as a proposal.
 
Branchini: Let’s get back to quality for a second. If I run a hospital and I pick the best cardiac procedures around, eventually all the sicker patients will come to me. And you’ll have a higher mortality rate, which will affect your quality, so it’s very complicated to get it all risk adjusted so that you can really focus in on quality and scorecards. It’s a complex issue. It sounds easy to the public, but it’s not that easy. We were out looking at North Shore-LIJ two months ago and one aspect of their critical care. It’s the type of an operation facility where you’re going to attract the sicker, more catastrophic cases. But because he’s built the state of the art [facility], he’s going to attract the sickest, more catastrophic cases and there’ll be a higher mortality rate. How do you factor that in? It’s not easy.
 
Rothberg: Getting back to Sen. Hannon’s legislation, the medical society would support that because it tends to compensate people quickly and certainly the whole goal of the system is to compensate people because they need the money. It would be fair, it wouldn’t have the arbitrary nature of the system we have now and it would be very predictable, which helps all of the business entities to plan. And most importantly, it protects the public because that’s what the goal of any liability system is. Right now I think the current system, all the shortcomings have been identified but it doesn’t do what it’s supposed to do which is to protect the public. It’s the most inefficient means of doing that. It takes many years, sometimes eight years, to settle a case like that and it costs the system much more than what the person who’s being compensated actually derives. So we really appreciate what you’re doing.
 
Dowling: One of the things we’ve got to keep in mind here is that it’s very easy in discussions like this to become very pessimistic and frustrated and annoyed. But it’s in part because health care is so extraordinarily complex. It has so many pieces to it and it’s an evolving science all the time. But there are enormous things that we can continue to do. I would strongly urge at the federal level that they allow a lot more innovative, demonstrative projects around how to pay for health care differently that requires people to collaborate and work together.
 
There are organizations like ours and others that are more than willing to innovate and do things differently than we’re doing. If you’re a leader in this business, you should never be satisfied with what you do; you should always be figuring out how to push the envelope and do it differently. Break down the rules that prevent the various parts of the provider network from working together without having to worry and look behind your back every moment that maybe if you collaborate in a certain way you’re going to get in real trouble. Unless you break those kinds of barriers down, it is ridiculous to go around talking about how we should coordinate care all the time.
 
Everybody wants to do that. I had a meeting last night with 100 physicians talking about this and trying to figure out how do you do it, given the plethora of constraints that currently exist in statute to stop you from doing it. It makes no sense. And at the federal level I would urge that we continue to focus on covering more of the uninsured. You may not be able to do it all at once, but you definitely can find a way to cover the uninsured that are working, for example, to expand coverage for children. We have a great lesson in New York. I was there when we did Child Health Plus and was very involved in that. That made a huge change in the way New York provides coverage.
 
Now it’s Family Health Plus; it expanded incrementally. It will provide continuing resources for the advancement of information technology so that you can manage care and be transparent. I’m a big believer in transparency and a big believer in public reporting. I believe that’s good in the long run. So there are a lot of things that can happen and are happening and will continue to happen. And I would say for the government at the moment, which I don’t see as the bad guy in this because they have their own constraints from their side, take a look at the barriers that prevent us from doing the things that we need to do and figure out a way to eliminate those barriers. Innovation will just sprout in large health systems like mine where you have nursing homes and palliative care and home care and ambulatory centers; I’ve got the whole thing.
 
My job is to figure out from a patient point of view, how do I move the patient around seamlessly without going into all the problems and with the patient coming out in the end with optimum quality that’s all reported. That’s all doable. That’s where reform, I believe, is going to bear the fruit of success.