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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.

Read MoreHow payers can improve quality and reduce cost

Quantum Leap: Revolutionizing Healthcare Through Knowledge Management

What Knowledge Management is and how it will improve quality.

By John Feldman, Founder and Chairman of Applied Pathways

When it comes to healthcare, all the knowledge mankind has accumulated since the dawn of recorded time could be described as the foundation upon which contemporary medicine has been built. Over the past several years, great leaps in technology have allowed for the unprecedented collection of massive amounts of data. This data, when properly harnessed through machine learning or other analytic processes, is capable of hugely augmenting our existing knowledge base, extending the foundation while also laying the cornerstone for precision medicine and truly revolutionary healthcare delivery.

Therein, however, lies the rub. For although we now excel at collecting data, healthcare often and infamously lags behind other industries in effectively translating that data into knowledge to improve quality. This is where knowledge management comes in. And with the proper solution in place, it is capable of evoking a sea change in healthcare, fomenting no less than a knowledge revolution that will grow exponentially and continue to drive quality.

So what exactly is knowledge management, and how can it help us? To begin, let’s focus on the knowledge management pyramid.

Augmenting the DIKW model 

The traditional knowledge pyramid is also known as the DIKW pyramid. Each letter in the acronym represents a different level. From the bottom up, these are:

1. Data;

2. Information;

3. Knowledge; and 

4. Wisdom.

Source: Clinical Knowledge Management, Opportunities and Challenges, Rajeev K. Bali

Delving further into these concepts, we can see the components comprising each step of the pyramid and how they relate to the traditional model (again, from the bottom up):

Collecting and Organizing – Parts of the lower pyramid’s data level, caregivers have gotten quite good at these imperative tasks, especially in recent years as technology advances have hugely aided in the data collection process.

Summarizing and Analyzing – These more advanced ventures occupy the second level of the pyramid: information. Technology again is a driving force here, with significant investments and advances in data analytics software allowing practitioners to finally begin to use collected data to its fullest potential.

Synthesizing and Decision Making – Occupying the pyramid’s apex at the third and fourth levels of knowledge and wisdom are, respectively, synthesizing and — most importantly — decision making. While the decision-making process remains solely with caregivers, knowledge-management technology is a powerful, cutting-edge tool to aid in synthesizing data, correlating it with all related information to suggest a hierarchy of importance (Ex: appropriate study or intervention), pointing out further information that should be gathered, and even listing possible causes.

Properly utilized, effective knowledge management is a robust tool capable of transmuting medical data into clinically relevant information, and making that information universally available to caregivers whenever and wherever they require it.

Proper knowledge management increases quality of service

Established in other industries in the early 1990s, effective knowledge management has been shown to encourage the sharing of information. This environment fosters innovation, providing that the knowledge management solution is a living, malleable entity capable of change and incorporating new learning as it is accumulated.

From the decades of data collected from those other industries that began incorporating knowledge management long ago, there is a demonstrable link between effective knowledge management and improvement in quality. By putting best practices into the practice of medicine, we can deliver tools to help caregivers perform at the highest level possible.

Knowledge management works best when it’s used across all continuums of healthcare. With contemporary technologies, contextually relevant knowledge or expertise can be delivered anywhere a patient seeks care. As the industry demands more performance from practitioners, there must be adequate tools in place to help them achieve their goals, including the Triple Aim. A proper knowledge management solution lays the foundation for rigorous quality control enabling improved workflow, efficiency and accuracy in diagnoses.

Raw data becomes information. Information becomes knowledge. Knowledge produces quality when enforced and consistently applied. The trick is to connect the people who produce knowledge with those who apply it. We now have a handle on data storage. Determining what to do with the data? That’s knowledge management.

Read MoreQuantum Leap: Revolutionizing Healthcare Through Knowledge Management

The Enemy of Quality

Why variance management is key to improving healthcare.

By John Feldman, Founder and Chairman of Applied Pathways

How do you know you are successful if you don’t set goals? In healthcare — and everywhere else, for that matter — quality is defined as achieving your desired outcomes.

But just what is “variance,” and how does it impact quality?

In statistics, variance calculates how data is distributed about the mean or expected value. In other words, variance measures quality by letting you know how close you are to meeting the goals you intended to achieve. Higher variance means lower quality.

In manufacturing, quality is determined by how closely the final product matches the desired specifications.

To understand just how variance management can impact healthcare, let’s first take a look at how quality control experts in other industries elucidate the relationship between quality and variance.

That’s nice, but can you do it again?

Engineer and statistician W. Edwards Deming, credited with helping Japan improve the quality of its manufacturing industry after World War II, defined quality as “predictability,” and called variance “the enemy of quality.” To achieve an intended outcome, Deming thought it was important to plan for common-cause variation, which can be predicted, and special-cause variation, which cannot.

Harold F. Dodge, one of the principal architects of the science of statistical quality control, said, “You cannot inspect quality into a product.” In other words, once the inspection takes place, it’s too late. Rather, data from the quality inspection needs to be utilized to continually improve the process.

Management consultant Joseph Juran, who focused on management training and the human element of quality control for a variety of businesses, stated that quality is “a fitness for use.” Juran said that resistance to change often causes a reduction in quality, and insisted that high-performance quality management systems must contain planning, control and improvement (known as the “Juran Trilogy”).

Businessman Philip B. Crosby, who developed the concept of Zero Defects while working as senior quality engineer at aircraft manufacturer The Martin Company, defined quality as “a conformance to requirements.” He warned against the high cost of nonconformance, and said that the desired performance standard of zero defects could only be achieved through the proper management system.

Historically, healthcare has been a late adopter of established practices shown to work in other industries. But what if healthcare managed quality and variance in the same way other industries do?

Making a list, checking it twice

The National Academies’ Health and Medicine Division (HMD), formerly The Institute of Medicine (IOM), defines quality as, “The degree to which health services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge.”

Author and expert on the challenges of modern medicine Atul Gawande makes the case that something as simple as a checklist can substantially improve healthcare outcomes (“The Checklist Manifesto: How to Get Things Right”).

To that end, the HMD outlines six specific aims that a healthcare system must fulfill to deliver quality care:

Safe: Care should be as safe for patients in healthcare facilities as in their homes;

Effective: The science and evidence behind health care should be applied and serve as the standard in the delivery of care;

Efficient: Care and service should be cost effective, and waste should be removed from the system;

Timely: Patients should experience no waits or delays in receiving care and service;

Patient centered: The system of care should revolve around the patient, respect patient preferences, and put the patient in control;

Equitable: Unequal treatment should be a fact of the past; disparities in care should be eradicated.

Knowledge is power

The knowledge underpinning evidence-based medicine (EBM), which optimizes decision making by emphasizing the use of evidence, is evolving so rapidly that clinicians cannot keep pace. As sophisticated analytics, deep learning, machine learning and big data accelerate learning, the challenge for healthcare organizations will be to determine how to close the ignorance gap — the delta between evidence and awareness. A knowledge management ecosystem will bridge the gap between knowledge and ignorance, enabling healthcare organizations to reproducibly achieve their intended outcomes by keeping variance low.

The objective of EBM is to apply best practices to achieve intended outcomes. The purpose of knowledge management is to deliver wisdom to those who need to apply it. As medical knowledge advances, so should the care delivered to patients.

What do you think? Are you working to reduce variance in your organization? If so, let us know what steps you are taking and we’ll write about the responses we get.

Read MoreThe Enemy of Quality