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How payers can improve quality and reduce cost

An interview with Dr. Jim Woodburn, Chief Medical Officer of Applied Pathways, by Stephanie Kowalski, Chief Marketing Officer of Applied Pathways

I recently talked to Dr. Jim Woodburn, known as Dr. Woody, who has spent his entire career in healthcare — as a practicing physician, a Medical Director and a two-time Chief Medical Officer. We talked about improving quality of care while reducing cost, what he learned during his years as a Medical Director for Blue Cross Blue Shield of Minnesota, and what advice he’d give his contemporaries in light of what he’s learned since he started.

Stephanie: Dr. Woody, tell me a little bit about your background.

Dr. Woody: Thank you, Stephanie. I started out my career as an engineer. I grew up as an engineer. I think like an engineer. I was an electrical and computer engineer and got a masters in biomedical engineering from the University of Wisconsin. I decided to go to medical school not necessarily to be a doctor, but to be a better engineer because I enjoy fixing things. There’s a gulf between how computer scientists, engineers, and clinical team members look at the world and how they approach solving problems.

During medical school I fell in love with emergency medicine, which is what I did as a resident, and fellowship training at Hennepin County Medical Center in Minneapolis beginning in 1984. I practiced emergency medicine for several years in the Twin Cities, and then moved over to occupational and environmental medicine in private practice for several years.

It was in that transition from emergency care of individuals, which was dynamic and fast-paced, to something that was a great awakening for me, the business side of healthcare. Occupational medicine revolves around helping employers manage the health and wellbeing of their employees to reduce cost, improve quality, and increase the functional capability of their teammates. I was asked to join Blue Cross Blue Shield in Minnesota in 1993. I spent 12 years there working as a Medical Director in a variety of areas within health insurance, including technology assessment, utilization management, case management, disease management, wellness and health promotion, and, staying true to my roots, working with national accounts and employers around the country dealing with healthcare. Since then, I spent 2 years as the Chief Medical Officer for Minute Clinic, a year with United Healthcare doing a telemedicine startup with Cisco Systems, and for 7-8 years I’ve been the Chief Medical Officer at Applied Pathways.


Stephanie: So tell me, during your days as a medical director, given all your previous experience, how did you think about quality for your organization, for the individuals that interacted with your organization, and what, if any steps did you take to improve the quality that was delivered?

Dr. Woody: One of the principle reasons I joined Blue Cross was because I’m a physician advocate. I believe that physicians care for patients directly and health insurance companies and health plans have to be sensitive to the needs of physicians to make sure the work that the insurance company needs to do is done in the least intrusive way with the maximum amount of impact. All of that is driven off of a very old definition, probably more than 100 years old, where value equals quality over cost. Part of my goal at Blue Cross in Minnesota was to help find ways to accomplish both quality improvement and cost reduction, day in and day out. Health insurance companies and the healthcare system in America really need to continue to focus on improving quality and reducing cost wherever you can find opportunities.

To focus on quality, I use foundational definitions from the Institute for Healthcare Improvement, IHI, and Don Berwick, and Deming before him, where quality is measured in many different ways.  I’ll just list a few.

  • First and foremost, it’s the patient’s, the customer’s, the client’s perception – the patient’s perspective — of how life has improved after an event, an injury, an accident, or any encounter with the healthcare system. The patient’s perspective can include biopsychosocial determinants of health and wellbeing. I could talk for hours about what that means and how we measure it, but it is a good place to start.
  • The second is biological measurements of successful outcomes: X-ray results, lab tests. For example, if you had a cervical spine fusion, it’s always nice to get an x-ray of the neck and make sure that the screws are in place and the placement and bone growth between the vertebrae has successfully healed. That’s the technical assessment of a high-quality outcome.
  • Another one is more of the traditional, day-to-day process metrics that health plans and provider groups do for a whole host of reasons, primarily economic. From HEDIS scores, to patient satisfaction results, to timeliness to get an appointment, there are hundreds of different process metrics out there. As a health plan executive, you need to know about all of them, pay attention to them, pick your battles carefully and find within that network, within your geography, within your institution, the opportunities to focus your energies on.


Stephanie: You talked about the three different areas that you could focus on. How did you choose which to prioritize? Did you find that any of them were in conflict? For the ones you did choose, did you see improvement over your tenure?

Dr. Woody: Like any big professional learning organization, we had a team of people from legal, actuary, marketing, provider network, provider physician consultants, occasionally external consultants, continuously looking at data, problems, complaints, to identify the major focus areas for our team for a particular year. The list was somewhere between ten and twenty different major activities.

We spent a lot of time working on disease management, improving the health of the membership within Blue Cross Blue Shield in Minnesota. We had a great experience with a company called American Healthways, which was one of the largest, oldest, and most innovative disease management programs. We spent several years working with that disease management program to find ways to identify patients who had fallen off goal and were outside of what they needed to have done in order to best manage, improve, and mitigate problems of their chronic diseases. A lot of what Applied Pathways does is really what Blue Cross of Minnesota does: Continuously find ways to reduce inappropriate variation, look for the gaps in care, find ways through data to reach in and modify the trajectory of that patient or member’s condition to both improve their quality of life and reduce unnecessary cost. The disease management program demonstrated significant return on investment. There was anywhere between two and four to eight to one return depending upon the situation. So that’s a good example of success that we had.


Stephanie: That’s excellent. You mentioned that a lot of data analysis went into selecting the areas of focus and that in choosing to focus on disease management you used a lot of data to identify the right people to target. What kinds of tools did you utilize either to identify those people or to manage their health and engagement?

Dr. Woody: Health insurance companies are rich in data. We had claims submission data which has information nuggets in it: who was the patient, birthdate, the demographics, but also a CPT code, what was the procedure that was done, and the ICD-10 code, what was the disease that was being dealt with, and there could be other codes with inferential type data. We would mine this data across entire populations looking for individuals that we could intervene on. Claims data is a source of information, but it’s incomplete, it can be delayed, and it is sometimes slightly incorrect. It was not designed to be a health improvement or a population health mechanism. It’s designed to be a billing tool. We also relied on disease management members in our own team to actually contact patients and ask them specifically for their personal perspective at that moment in time. Both claims data and the direct patient discussions let us gain a whole picture of the individual and deal with things accordingly.


Stephanie: It’s been a while since you’ve been in a Medical Director role. You’ve seen a lot of things and the world in many ways has changed a lot. How much do you think things have changed for the Medical Director who is now sitting in the same seat you sat in, in terms of priorities and tools?

Dr. Woody: At its core, the role of a physician or a clinician in a health insurance company is to continue to focus on that value, improving quality and reducing cost, so the fundamental equation hasn’t changed. I would expect that there are still procedural things, like technology assessment, what new treatments – whether they’re medication, chemical, surgical, behavioral, service-oriented – what new activities in healthcare are deemed an accepted medical practice for which a claim ought to be paid. That work continues on today much as it did when I was there. There’s still case management and disease management. There are still teams of people that have to reach into the membership of a health insurance company and inquire- how are you doing, are you happy with your care, is there anything we can do to help you? And a health insurance company does that in order to improve the patient’s satisfaction and also to find opportunities for appropriate ways to reduce cost. Those kinds of things haven’t changed.

There are a lot of things that are changing, slowly on some hands and rapidly on others. That’s really around the shift toward value-based payment, whether it’s Patient Centered Medical Homes, Accountable Care Organizations, pay-for-performance or full capitation. Actually I caught the tail end of the last time we tried to do capitation which was in the 1990s. That, people believe, was a failure, not for bad work on anybody’s part, but because our society wasn’t ready to deal with capitation. A whole lot of work that’s happening today requires reengineering, retooling, and finding new ways to mine data. And you have to move quickly and be nimble with modifications to the rules within the organization because things are changing so fast. You have to customize your rules, understand them, and share them with the providers with whom you are contracting. All of those features are new since I left Blue Cross of Minnesota. And the explosion of certain genetic testing and biological therapies – those are the clinical-related changes that are happening that health plan executives, my colleagues, continue to deal with daily.


Stephanie: Given the rise of complexity, if you were still a Medical Director, would you be equipped in the right ways to manage and get the kind of improvement I imagine a payer organization is looking for?

Dr. Woody: I think what’s new today is electronic medical records (EMRs). When I was a medical director I struggled with data, as I’m sure my medical director colleagues do today. Do you have the right data, do you have enough data, do you have data that will lead to insight in ways that you can make changes in your operations to improve the situation? Now you can mine the wealth of data in the EMR by building rules that allow you to pinpoint inappropriate variations in care and gaps in care, so that greater and more specific and more effective targeting of population health programs can happen. That’s a huge pool of data that I think is beginning to be tapped for insurance company purposes in order to improve value.


Stephanie: Final question. Knowing what you know now, what kind of advice would you give to your peers who are doing the work that you’ve done in a previous life?

Dr. Woody: Well, first and foremost I’m a physician. When we go to medical school we adopt the Hippocratic Oath and we assume a mantle of responsibility that’s been around for literally thousands of years. I would continue to encourage and support my colleagues to not forget about that, to make sure that the work you do has respect for the patient and the physicians, through whom healthcare is delivered, and to find ways to improve the lives and reduce the frustration that providers and patients experience as the necessary work of a health insurance company and a health plan is done. Never lose sight of the doctor-patient relationship that really is the whole point of financing on which the job is dependent.

The second is to pick your targets carefully. There are ways to reduce utilization management and prior authorization that allows the vast majority of good providers to do that work seamlessly and visibly, without intrusion. Find those abnormalities, those inappropriate variation practices, and those providers who need to adopt the best utilization management techniques and allow the other providers to practice without intrusion.

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