The Mayo Model: So Hot Right Now

The Mayo Clinic is something that everyone knows about, because they have great brand recognition, and lately has won lots of praise for delivering high quality and low cost care. It seems like they’ve been putting this great brand to use, and have been generating a lot of buzz. If you aren’t familiar, Mayo is a large Minnesota group practice in which physicians are on salary — President Barack Obama frequently singles out the Mayo Clinic as an example of quality, cost-effective health care.
Last week I was talking with Jeff about health care reform and in between asking me to “Please, let’s talk about something else,” he did ask me a great question about why integrated systems weren’t already being widely adopted, if they are so great like everyone claims. I think I said something weak and predictable, like “special interests” resisting it, but decided that there was probably a deeper, more accurate answer..

Background on Mayo and their Model

The Mayo Clinic, Kaiser Permanente, the Cleveland Clinic and the Veterans Administration are all examples of Accountable Care Organizations (ACOs). These are care providers that follow the philosophy salaried care with emphasis on results, as opposed to fee-for-service pay¬ments to physicians, will lead not only to lower medical costs, but higher quality of care. They often use electronic medical records in order to better achieve integrated, collaborative care. “The Mayo Clinic in Rochester, Minn., is famous for some of the best quality and some of the lowest cost,” Obama said in a June speech. “People are healthier coming out of there, they do great.”

A lot of experts are convinced that the Mayo model will solve problems not only of how care is paid for, but also in how people receive it. Doctors get to practice real medicine, profits are made from keeping people healthy, and there are incentives to improve outcomes.

Mayo and Cost Containment

If you have not read “The Cost Conundrum” by Atul Gawande in The New Yorker, you’ve likely at least heard about it. If you work in the White House, apparently it is required reading these days. This article, along with Mayo’s increasingly loud voice in the debate, drives home the point that many people believe over-utilization is the most crucial issue in health care reform. If, as Dr. Gawande indirectly suggests, over-utilization is a big part of the problem, then a solution would be to support companies like Mayo that eliminate incentives to over-treat.

In fact, Mayo and others like it do claim to address this issue by creating economic incentives for favorable patient outcomes. In most health care settings, doctors are paid for how many tests they run, how many surgical procedures they do or how many patients they see. Mayo doctors, however, are salaried employees. This counters the reality that doctors are players in the health care market, maximizing their profit margins like most other professionals. Accountable Care Organizations, by definition, address these financial conflicts of interest by linking payments to the quality and utilization of health services. (This article talks ALL about ACOs:

Reinforcing this assertion, Mayo surgeon Dana Thompson said in an ABC News interview, “I’m not figuring out how do I work most efficiently to get the most out of reimbursement. I’m working most efficiently to figure what are the needs of the patient and delivering quality care.”

Where is the Dispute?

This weekend, The Washington Post did a whole “deep-dive” piece on the Mayo Clinic.

“Few dispute the prowess of Mayo, which brings in $9 billion in revenue a year and hosts 250 surgeries a day. But a battle is underway among health-care experts and lawmakers over whether its success can be so easily replicated. Before embracing a fundamentally new approach to health care, dissenting experts and lawmakers say, Congress should scrutinize the assumption that a Mayo-type model is the answer.

“It is a disparate group of skeptics that is taking on the Mayo mystique: federal health policy analysts, medical administrators and lawmakers in districts that would be hurt by the proposed Medicare reforms, and an informal network of health-care experts.”

Claim: Some people who believe that health care should not be a business (aka single-payer advocates) say that Mayo’s outcomes are due largely to its healthy, wealthy and racially homogenous Midwestern patients.

Response: To rebut this assertion, the Dartmouth Professor published a piece in the New England Journal of Medicine stating that poverty and health status accounted for only about a third of the spending disparities among communities. Mayo also says that Wisconsin, Iowa, and Minnesota residents really aren’t all that healthy, so its not as though the network doesn’t face challenges and obstacles in health care delivery.

Claim: Kaiser Health News says, “It limits the number of procedures it performs per patient, but the rates it charges private insurers and self-paying patients is higher than average, allowing it to thrive despite the lower Medicare spending cited by its supporters.” Translation: It may reduce spending on some fronts, by not totally ripping off Medicare like many other hospitals, but private insurers still get charged a lot, which are costs they would pass on to citizens/employers/individuals.

Response: The models’ leaders say they charge their private payers so much because they are shortchanged by Medicare’s regional formulas. They threaten that if the government allows a “public option” modeled after Medicare, the country will go bankrupt over night (source: Mayo CEO on NPR this morning). This should be no surprise, since Mayo loses hundreds of millions of dollars each year on Medicare patients, because gov’t negotiated rates are “below market.” A person debating this point might say that if Mayo didn’t invest in so much infrastructure and fancy buildings, they wouldn’t need to recoup such high profits on their treatment.

Mayo in DC

Last week, 28 senators led by Minnesota’s Democratic Sen. Amy Klobuchar sent a letter to President Obama calling for renewed emphasis on cost-control measures like those used by Mayo, and once opposing “the public option.” Republicans seized on the letter, noting that the public option was opposed even by hospitals Obama had praised as models. “I’m surprised he holds these groups up because you knew they were going to oppose what he was trying to do,” said Rep. Paul D. Ryan (R-Wis.).  Whooaaa…Snap.

The White House and Congress seem to be listening, however. Obama is no longer insisting on a public option. Lawmakers are also tossing around ideas of a “value index” which would pay cost-efficient hospitals the most.
In digging deeper, I looked at Mayo’s health policy website, where they discussed their ideals.
“Require adults to purchase private health insurance for themselves and their families. Employers could continue to participate by buying insurance for their employees or giving them stipends to purchase it. However, the individual would own the insurance.This will allow for:
• Portability: Individuals could take their insurance to their next job or perhaps even into retirement.
• Choice and control: Individual ownership would allow health insurance to evolve into a service that gives patients more control and choice.”

This sounds a lot like something Senator Ron Wyden would support. Like Mayo, Wyden is also a hot topic in DC these days. He is a Democratic Senator from Oregon on the Senate Finance Committee who wrote a bill with Senator Bennett (R-UT), which is the only truly bipartisan health care reform bill. No one is suggesting this bill would directly be put into law, but Wyden has taken elements of this bill and created an amendment to the Baucus bill, called the Free Choice Proposal. He met with Obama to discuss his ideas last Wednesday, just hours after Baucus unveiled his proposal to extremely lukewarm reception.

The long-and-short of Wyden’s proposal is that people wouldn’t have to accept their employer’s insurance if they weren’t given any other option. If employers only offer one plan, people could go buy their own. Sure enough, Wyden says that under his proposal, “To stay competitive, insurers would need to follow the example of places like the Mayo Clinic and offer good, low-cost coverage.” (Read Wyden’s reasoning here in this op-ed:

Looks like an alliance of ideas here… Wyden and Mayo’s influence seems to be on the rise.

Okaaayy soooo, what’s the real risk of Mayo-type orgs being everywhere?

These networks of hospitals and clinics’ dominance in regional markets is also allowing them dominance in negotiating prices from insurers. This could mean that any savings could be canceled out by higher rates the networks could charge insurers, which would be passed on to beneficiaries like you and me. In fact, a 2005 study of federal employee insurance by the Government Accountability Office found that Wisconsin cities such as La Crosse were charging insurers the highest rates.

NPR’s Linda Wertheimer interviewed Mayo Clinic President and CEO Denis Cortese. Yes, he says, the Mayo model “is transportable–with difficulty.” The key ingredient is instilling a culture among physicians that puts the needs of patients first, he says. (Listen to the NPR story here:

In conclusion, Mayo thrives because of the current system — they have a strong market for people who are willing to pay out of pocket or incur high charges for good outcomes, to offset their unprofitable Medicare patients. Their business interest is in having an individual mandate where everyone is required to purchase insurance in the open market. Expanding the nations safety net worries them, because this would mean more people who are tied to low reimbursement rates, which would lead to higher charges for privately insured patients, which would disrupt their competitive advantage. Bringing everyone into their system might not work, but there are elements of their approach that will probably be lifted.


~ by Kathryn Bailey on September 22, 2009.

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