Dean Stephen Shortell of the University of California, Berkeley School of Public Health and the Blue Cross professor of health policy and management, was among a group of invited health economists, health policy researchers and thought leaders who met this past week with Obama administration officials on health care reform. The focus of the discussion was on ideas for moderating the rate of increase in cost, both in the short and long run, to provide greater value in health care delivery and to make expanded health insurance coverage affordable.

The meeting was called by Mr. Peter Orszag, director of the Congressional Budget Office; Ms. Nancy DeParle, director of the Office of Health Care Reform; Ms. Christina Romer, head of the President’s Council of Economic Advisors; and Dr. Zeke Emanuel, special advisor on Health Care Reform, on leave from the National Institutes of Health.

At the core of the discussions was the need to implement payment reforms that provide incentives for hospitals and physicians to work more effectively together, particularly in managing high-cost chronic illnesses and reducing preventable hospital readmissions. Current data suggest that 18 percent of Medicare discharges result in readmissions. It is estimated that up to half of these readmissions are potentially preventable, which if achieved, would save $12 billion a year.

Participants discussed the idea of bundled payments, which establishes a risk-adjusted single global payment for both hospital and physician care up to 30 days post hospitalization for such conditions as coronary artery bypass graph surgery, total hip replacement, and total knee replacement. Contingent on meeting predetermined criteria of appropriateness and quality of care, hospitals and physicians could share in any savings that would result from providing better coordinated care. Dean Shortell and others also discussed the potential of Accountable Care Organizations (ACOs)—entities with the governance and leadership capability to respond to incentives to manage cost and quality of care—to accept a global payment for a designated population of patients. Under such an arrangement, any savings generated could be shared with both providers and patients, provided criteria for appropriateness and quality of care were met.

There was general agreement that payment reforms alone; however, would not result in much traction without relevant performance measurement and public reporting which, in turn, would depend on widespread diffusion of interoperable electronic health records. Providing incentives for employers and consumers (through reduced premiums, co-insurance, and/or deductibles) to select the more cost-effective providers and ACOs was also emphasized.

Dean Shortell suggested that CMS might start by using the Dartmouth Atlas data to implement demonstrations in "hotspot" areas of the country aimed at high-cost chronic illness conditions. He also suggested that current integrated delivery systems such as Kaiser Permanente, the Mayo Clinic, the Geisinger Clinic, and others could be provided with incentives to provide technical assistance and counseling support to key providers to accelerate their adoption of best practices and new ways of delivering more cost-effective care; a concept he called "twinning." This concept has been successfully used in some parts of the country.

Several participants also underscored the importance of greater investment in selected disease prevention and health promotion practices that would be needed to stem the rising cost of health care over time. Dean Shortell called for DHHS, Department of Education, Department of Labor and Department of Transportation to create an intergovernmental highly visible Task Force on Obesity Prevention and Reduction. The task force would identify a coordinated multi-sector approach to reducing obesity by focusing on the underlying social and physical determinants of health consistent with the DHHS new approach to Healthy People 2020.

"It was encouraging to hear the degree of agreement and convergence among the ideas expressed at this meeting," said Dean Shortell. "What remains to be seen is whether the political waters can be successfully navigated to implement them over the coming months."