be surprised at some of the things i thought were easy things in the payment unit, i think the big challenge is, but the big rewards are per episode bundles and accountable care organizations and i would say that, know, what you just heard about in massachusetts, is i shouldn't have said accountable care -- that's a buzz word. let's just say capitation like structures, so let me say a few things about per episode bundles. first, the key is including all the providers involved in an episode of care. our system has long had experience using bundles for a single provider, but the point here is to use a bundle that crosses all the providers involved in care. and this provides incentives for an efficient delivery an episode of care, provides incentives for the different providers to

choose efficient provider partners, so that the o orthopet does the procedure at the most expensive hospital, they never get a reward, but if they do it at a more efficient hospital, less expensive, they might have not have to change anything they do and this way they could be a winner in per episode bundles. now, the attribution of episodes to -- of patients to different episodes or different providers, can be a challenge. it's easy with the major surgical things. initially, this actually has been pursued by private insurers, as a modification of fee for service. basically, bonuses or penalties in for per-episode efficiency and cms to me is laying the

groundwork for this in the future for medicare, as they are implementing, as directed by congress, resource use reports, which basically are for information only, reports to physicians on the efficiency with which episodes of treatment that they're involved with are provided. now, there's been some criticism by some of the proponents of c capitta ted of per bundles uses. i would bundle them in two services. one is leaving of the incentives to generate more episodes of care in the hands of providers, and possibly those providers that do very well on per episode payment, having even greater incentives. i think of the other reason is probably limited policy resources.

you know, we may have to choose as particularly federal governments in whether it's going to -- whether we're going to put the limited policy resources into proceeding and developing per episode bundles, or proceeding and developing with more capitation-like approaches. ok. i did label this as a accountable care organizations. which basically have per enrollee incentives, rather than per episode incentives and involving organizations that are formed to take per enrollee risks. i think massachusetts actually is a very good place to be launching capitation-like initiatives, because there are a lot of providers that are well positioned from their experience under, you know, earlier managed

care models in taking per enrollee risk. now, many of these, as i think in massachusetts also, works as fee for service payments, with bonuses or penalties for quality and efficiency. and the key challenges nationwide are can effective organizations be created where they do not cies? and, can enrollees be attributed accurately to, you know, who gets the capitation payments or who is basically logged in with a capitation payment for enrollee a, and a final issue, which is not on my slide, is i think that it's important at some points to be involving the consumer or the patients in these payment methods. you know, this is a different approach than consumer directed health care, but i think that the two of them really need to

come together because these methods would be a lot more powerful, if patients were engaged. if not only were the efficient providers rewarded on a, say, per capita, per enrollee basis, but also, the enrollees had an incentive to use the efficient providers, so you can get movement to them, which is much more robust, and you know, the key thing is we're to the going to save a lot of money just by moving patients from one delivery system to another because the delivery systems are limited in how fast they can grow their compassist. but -- capacity. but if there was enough movement that these systems that lost enrollees noticed it, and decided to improve their efficiency, then we could get much more rapid gains from this approach. this brings me to private payers. where do private payers fit in with it?

and i think there is a lot of potential for medicare to work with private payers, because their interests are the same. in fact, working with medicare, blows away anti-trust restrictions. so it facilitates working together. but there's a distinct problem of private payer market power. especially in hospital care. and -- so in a sense, if medicare just decides to cut its payment rates, how much of this will actually be shifted to private payers as a result? and you know, there are two basic strategies to address provider market power. i don't think anti-trust policy has been very effective and has a lot of potential, at least in the short term, but basically, you can have patient incentives to choose less expensive providers, which means revamping

your insurance benefit structure, because few benefit structures have such incentives, and the other possibility, and that's the market approach, and the other possibility is a regulatory approach of literally regulating the payment rates by all payers for a provider. neither of these has been getting much, if any, discussion in conjunction with health care reform. so if i can conclude. i think payment reform may have the greatest potential to bend the trend of medical spending. and medicare is well positioned to lead in this area, in conjunction with health care reform, but medicare's potential to lead needs shoring up. there's probably a real need for reform of the governance of the

medicare program, which is getting more and more attention in congress with all these ideas about federal health boards or basically creating something that's more insulated from day-to-day political pressures from both congress and from the administration. and also, though, providing reliable resources for cms or a new governance entity to really do the developments and the payment decisions, to perform the technical functions is very important. and i also think that limitations in private payer market power will have to be addressed. thank you. [applause]

>> thank you, palm. that was excellent. now we'll look at a state example where they're actually doing some very interesting things. the state of minnesota, and for that, we have patrick geraghty, president and c.e.o. ever blue cross blue shield of minnesota, who will discuss the recent initiatives that he is involved in. minnesota is well known for its low cost of care and its high quality of care can really serve as a model for the nation, and as we work toward those goals. >> thank you, nancy. some of you who are close to the front of the room know that there's a fly buzzing over the podium here, and a couple of weeks ago, i would have just swatted it. [laughter] >> but we live and we learn. thank you very much. it's my honor to be here representing the state of minnesota and representing blue

cross blue shield of minnesota. the discussion that we're having as a nation is really not just about health care, but it's about health. and wellness, prevention and quality outcomes is really what we are collectively thinking about and looking at. so as we talk about what we're doing in minnesota, i would like you to take a look at these slides, where we're looking certainly at cost, we're looking at improving care and we're looking at the value being delivered in the system. i'm also going to talk a little bit about how we positioned our company as a health company, and some of the things that are distinctive about that. and then i'll touch on some disruptive innovation, because health care is in great need of disruptive innovation to continue to improve what is happening in the country. one of the things we have in minnesota and i think it's the back bone of the difference in the minnesota model, is the

tight integrated nature of health care and health care delivery in minnesota, particularly in the twin cities, but certainly in rochester, minnesota, as well a place called mayo. and many of you have heard of mayo, and it's getting a lot of play in the national discussion. we in minnesota are very proud of the mayo health care system and it certainly does an outstanding job. but i'm also here to tell you that we have a number of terrific health care providers in minnesota, and we have significant opportunity to have quality and to have tremendous amount of access as a result of that. so you have can see that the fair view system, aligna, health east an mayo, all of these institutions as well as our children's hospitals and a number of other institutions provide outstanding care for the folks in minnesota, and this is -- this is really an important issue.

one of the community ethics that i think has been advanced in minnesota and is one of the distinctives, if you will, is that we have learned a lot of lessons about where should we collaborate, and where should we compete? and the system needs to take some lessons from some of that example, and i'll touch on that as we move through this discussion. certainly working on payment reform, i don't need to repeat a lot of what you've heard already today, but i agree with the premise that has been put out here, if you pay for volume, you get volume. and we have seen that largely across our systems, across the united states. in minnesota, we have medical homes and what we call baskets of care, that are actually part of public policy and are being piloted in a variety of places. so these are certainly measures that we think are important in the system as it evolves, but we

also think that global payment is going to be a very important and significant feature of how health care gets funded in our state. it will be important that as the private sector, in combination with our health systems, move towards more globally oriented payments, that we move that way with medicare moving that way as well. so i agree with of the comments that have been made about medicare and medicare payment reform, it's going to be important to have critical mass as we move through that. a variety of other instruments about been put into play to sort of get at the cost issue, because there isn't one flavor that suits everyone, and you have to have a lot of different approaches. so certainly, we've done things to tier networks, so some these smaller employers, who are making more cost-related choices are making them around what delivery system works for them. we have done work around centers

of excellence. minnesota happens to have 16 designated centers of excellence within the blue cross system. so it gives us lots of choices and opportunities there. we profile providers on their quality, and use that data and made that data transparent in hour market, and that's been important. has it taken on the full flavor that i think it will in the future? no. but it actually has put information out there and i think it will become increasingly more information -- more important as that information becomes more robust. we've also moved to what we call a care comparison tool, which allows the consumer easy access to move through the various forms of treatment that they may be looking at, to compare treatment patterns and also to look at costs. so it's an important part of the equation, when we are talking about how do we get the consumer in the equation, the consumer

needs to understand, we need to be more transparent as an industry about sharing information, about cost, so that people can make informed decisions, and this care comparison tool is one of the vehicles for getting that done. changing the care model, obviously, we need to take fee for service type of reimbursement out of the system, where we can. and i think that will be an important part of the transition to a new health dare system for all of us. -- care system for all us. it will also be important to incent the right kind of procedures. so one of the benefit plans we see taking on a lot of interest are benefit plans where the consumer can have a reduction in their premium by managing their numbers and when i safe their numbers, being aware of your blood pressure, being aware of your cholesterol, being aware of your body mass index, an we make that available thank you a number of employers today, and

those employers set bench marks and then as you move towards improving those numbers and demonstrate that you've moved towards improving those numbers, you actually get a premium reduction. those are incentive-based benefits. those are important to this overall reformest that we're all talking about. some of the other things we've tried to do is certainly minnesota is one of the early leaders in retail clinics and we now actually waive co-pays if you use the retail clinics, to trying to put incentives in the benefit package to use the right place for people to be accessing care, where you can get quality, and where you can get a lower cost, so it's also about having the benefit line up with where we'd like to take the system. one of the other things that has been a valuable conversation going on if minnesota is one that involves all the c.e.o.'s of the various health plans in

town, and the large health systems in town. and i mentioned the four large systems before, but it also includes the children's hospitals and some of the other providers. we've made it open to anyone who wants to be in that dialogue, but literally, we are as a group of leaders, meeting every couple of weeks, talking about how do we as a private sector reform the system, and do the things that are necessary to deliver the quality and outcomes and access that are expected of us and should be expected of us by each and every person in our state. so we have set some very aggressive parameters for ourselves. we want to flatten out the trend line. we want to make that less than cpi if we can. and what all of the health systems have come forward and said is, they are interested in global payment, they would like to engage those dialogues. so we're not as far along as cleve's payment with global capitation type of payment, but

we are moving down that path and the providers of care see that as an important vehicle that they are actually asking for. we think with the foundation we have in minnesota, and with the change payment reform, that we can be a model for the nation and we would very much like to step up to that challenge. when we look at some of the collaboration, i mentioned before, understanding where to collaborate, where to compete, we as a community have moved to a number of different organizations. one called the institute for clinical system improvement. we refer to that as icsi. that is also looking at best practices and establishing those for the community, not health plan by health plan, not institution by institution, but for the community. a valuable asset. minnesota community measurement is looking at data, it's looking at the patterns that are emerging in our community, and

publishing those. so you as a consumer can go and look at minnesota community measurement, and and see the results from one clinic to the next and the other part of that that's valuable is physicians can go and see where they stand versus their peer physicians, and that has been a good motivator as well. we have the minnesota information exchange, which is really setting the parameters for how the various organizations, including the state of minnesota, will exchange information. so rather than operating in your own world, the system obviously needs to be more integrated, and these are critical community assets that are moving us towards that type of integration. an example out of the icis group is they've established 40 guidelines already. one ever them is around diabetes care, so as you move down this list, looking at each of the elements of how diabetes should be treated and scoring that and then through minnesota community

measurement, making that visible to the consumer on line, where you can go and see how one clinic versus another is performing. and this is just a quick depiction of what that would look like, given that i'm presenting in washington, d.c., i didn't put anybody's name on this, but literally in minnesota, you can go and look and the names of the clinics are on there and you can see how one compares to the next through an element called health score and this is just a valuable piece of data for the reform of the system. when we look at minnesota and think about it as a model, a potential model for the country, a lot of it is built around how integrated the delivery system is, so the hospitals in the twin cities in particular, have the physicians are employed by the hospitals, ancillary services employed by the hospitals, and these are very tightly integrated systems, so they're in position to take on a global payment and to manage that, much

more effectively than perhaps would have been the case a number of years ago. so when we talked about hey, this feels like something we may have tried before, i think of the system is in a different place. it is a very different dialogue when the system leaders are asking those of us on my shied of the table to bring that type of payment to them. i think the last time we can all admit, that the health insurers were bringing that to the system, and the system wasn't quite ready to take on that kind of change. the other thing about having large integrated delivery systems is they've made of the capital investments in electronic records. so we have a lot of data moving in the system, in a much more effective way. is there more opportunity to use that data? absolutely. but the foundation and the infrastructure is there, and i think that sets a model that a lot of other people would aspire to. we've also worked with a lot of large provider groups around quality payments, paying for performance, and standardizing

practices of care. so one of the great examples in this space, is the minneapolis heart institute. of the minneapolis heart institute was able to reduce by half the incidence of mortality related to m.i. and they did that not by involving new technology. they did it by bringing together nurses, emergency staff, cardiologists, everybody who touches the treatment of cardiac event. they brought them all together, remapped the process, remapped the protocols, and worked collaboratively in a very different way than you see in a lot of other communities around the country. now that protocol that they've established is in 100 different places around the country, but it comes from thattest i can around collaborating and -- that ethic around collaborating and

getting outside your walls. i'm going to look at access because access is also a very important part of what we're talking about when we talk about covering the uninsured population in the country. in minnesota today, we cover 92% of our citizens. so we have 8% uninsured, where the country has averaged out i believe around 15%. of the 8%, 4% of those folks actually have access and haven't availed themselves of coverage they're entitled to. so we need to do a better job there, but we really have programs available to 96% of the people in our state. we absolutely are not happy with that. we have need to close that gap. we'd like to have everybody covered. but part of this is making sure that you've got availability to everyone and i think we've done a pretty good job of making that happen. some of the vehicles for doing that is what we call the minnesota comprehensive health

association, this is where someone who is not covered now, who doesn't qualify for coverage, is covered as a result of a pool which is a cooperative between the health insurers and the state. it's a very effective way for expanding coverage. minnesota care is the expansion of medicaid coverage within our state, and of course, the chip program, so we have lots of partnerships between the state and between private insurers, to get people covered. so there is an example of how do you get access and how do you get people covered? we're working that already in minnesota, and we feel like we've got very good partnership with government to make that happen. the blue cross plan that i belong to has just also launched a series of what we call nstaa care products. we've launched products that are

30 day, 60 day, 90 day coverage for people who have a gap in coverage. i've talked a bit on public-private partnerships. we have those in medicare and medicaid, within our state, where we're working cooperatessively with government. probably no secret that i see this cooperative arrangement and this partnership as the wave to go, as opposed to having government as a competitor, i think we've demonstrated, we can have access, we can deliver quality, and we can address the cost problem, particularly when we get the payment reform that we need. so when we look at minnesota, within the medicare product, minnesota stands out because it's in the highest quadrant for quality, and the lowest quadrant for cost. so we believe we're getting the job done. we think there's more to be done, but we've laid out a map for how we think we're going to

accomplish that. i mentioned before, thinking about our company as a health company. i literally stepped back with my team and we did a strategy session and thought about our industry and its migration. we grew up as an insurance industry, we paved claims, we were there to cover the loss, the large financial loss. we then were health plans. we were delivering to employers, and we were trying to manage the cost for employers. i believe the next generation really about health company. how do we create prevention, wellness, better outcomes, how do we create the partnerships in the marketplace to deliver that. how are we an agent of the consumer. that doesn't mean we don't still pay claims and still are involved with employers, but i think as we take care of consumers, we then take care of employers because of our commitment to the consumer. so that is th a difference in hw we think about ourselves and

what we think our primary jobs are. so as a health company, what's our focus? it's encouraging research on what works? so best practice and evidence-based medicine, critical to a health company's focus. change of the incentive to promote better care. so let's get out of the fee for service trap that we've been in. empowering consumers and providers, giving them the data. but with you get the data, it's a double edged sword. there's a responsibility on the consumer's side as well. coverage for everyone. we have absolutely believe that everyone should be covered and we're working to make that happen in minnesota. promoting health and wellness. we think these are critical. if you look at the growing tide of cost, coming through the health care system, it's not going to be changed by taking one player out of the mix, or making small changes around the fringes. it's going to be changed because we did in and get to the issues that are creating the major cost

bubble that is coming at us in this country. so if we look at what are the things that are driving costs, tobacco, number one, and diet and inactivity, number two. so we cut this differently as opposed to disease states. these are the things that people are doing that are driving costs. we have to be serious about taking on these challenges. these are preventable issues. so how do we think about this in minnesota? we think about this in a very comprehensive wave. i'll start with how do we address of the individual. when we look at the individuals, we have health risk assessments in place, to try and get a better handle on what each consumer needs in their risk profile. we are absolutely dedicated to stopping smoking. i'll give you some data in just a minute. we have on-line coaching of our members. we're actively involved in reaching out to folks as we see the markers that tell us that folks need to be engaged very

directly. and we have of the preventive benefits that i talked about before. so engaging people with premium discounts when you are managing your numbers, i think is a very effective wave to draw engagement of the consumer into the equation. when we look beyond the ring of the vivid, it's the family. -- the individual, it's the family. everyone who has a health issue, has a family of some kind around them that are critical to the support system that delivers to that individual. so thinking more holistically, not just thinking about the person that you cover, we want to think about that whole family, even if we don't cover that whole family. so we think more about the community, and how we reach out to the community. and this is a very critical part of our care. when we look at the worksite, we're engaging the employers that we cover to look at the cafeterias that they have. to make recommendations about what foods should be there, how they should subsidize the items that they s