Zeke Emanuel, MD, PhD | Beyond Theory: Harnessing Incentives to Drive Value-Based Care Initiatives

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Healthcare Unbound Intro/Outro:
Welcome to Healthcare Unbound, a podcast powered by Clarify Health, where healthcare's changemakers discuss ways to advance care outcomes, cost, and affordability.

Jean Drouin:
Hi everyone and welcome to Healthcare Unbound, powered by Clarify Health. I'm your host, Dr. Jean Drouin, founder and CEO of Clarify Health. Today I'm here with a very special guest, Dr. Zeke Emanuel. Zeke is vice provost for Global Initiatives at the University of Pennsylvania, co-director of Healthcare Transformation Institute, an oncologist and medical ethicist with a PhD in political philosophy. I could go on and on, but then we wouldn't have much time left to talk. Zeke, welcome.

Zeke Emanuel:
Great to be here.

Jean Drouin:
Terrific. So, Zeke, you have spent a good portion of your career in and around value-based care, value-based payment models, trying to get all of this to scale. How is it that you first got into this?

Zeke Emanuel:
Oh, so when I was in the White House at the Office of Management and Budget, working on the Affordable Care Act, it occurred to me that one of the things we had to put in the act, if we really wanted to control costs, is a change in physician incentives, that, we knew physicians accounted for 80 to 90% of medical spend through their ordering, their determination of which sites, procedures or tests were conducted in, how frequently they saw patients, and that if we really wanted to have a chance of controlling costs, we actually had to shift physician behavior, among other things, to take costs into account when they were caring for patients. I called the round and I called everyone I knew in my proverbial Rolodex about what do we know about the best way to pay physicians? And it turned out we knew damn little and we knew virtually nothing. We had not really trusted a lot of alternative payment models over the previous 20 years. We had, in the mid-1990s, tested out managed care and dumping all the risk on doctors, and that turned out to be a miserable failure because it was abrupt, it lacked information about where doctors were spending money, docs were not prepared to manage risk.

Jean Drouin:
Got it. Now, so you got your start in the policy arena.

Zeke Emanuel:
Right.

Jean Drouin:
And then you decided to move over to the entrepreneurial area and founded Embedded Healthcare.

Zeke Emanuel:
Well, I would say so. It wasn't one jump to the other. The one step in between is, ironically, I was creating a department at Penn, and part of that department at Penn was world-leading expertise in behavioral economics, and Kevin Volpe and other people around him who really understood behavioral economics. And then I think it was 2014, the American Board of Internal Medicine had a retreat. Someone was scheduled to be the speaker to talk about behavioral economics, like a month before or four weeks before canceled. And they called me up and said, could you substitute, you know, with a month to go and give a major keynote, the major keynote presentation. And I took that opportunity like an insane person and said, all right, let's develop something new. Let's develop ideas around implementing, about what behavioral economics directed at providers and in particular, physicians would look like, one of the principles of behavioral economics. And what do they communicate in terms of principles of how we should structure incentives, both extrinsic financial incentives, but also intrinsic incentives for them. And I sort of laid that out in the summer of 2014, and then we developed a paper on that with some examples, we created a working group to try to develop further these ideas. And then we realized, well, let's start some pilot projects. We realize that we had some good ideas and that led us to trying capitation with incentives in Hawaii, other kind of incentives with other payers. And we then had the final penny drop, which is if you want to take an intervention and you want to scale it, so not just do it as an academic exercise for a paper, you really need to have a company. You can't do these kind of things on a not-for-profit basis. I would say that the key change in my thinking about that was catalyzed by Bill Gates, who wanted us to think about how to change, and was a big believer, is a big believer, I don't think he's changed one iota, that you need, it's not so much the for-profit motive, but it's the kind of things that startups can do, raise capital, hire people faster than academics and not for profits, can deploy them in things like sales, which turn out to be really important. You actually have to get this adapted, so you need a product client fit. Anyway, so that was the step that led us to create a company. It also was my belief that a little bit frustration, I would say, with CMMI and the government in being slow in, I think effectively deploying value-based payment and taking what they've learned about things related to bundled payments and not generalizing them and not making them a permanent part of the payment reform.

Jean Drouin:
So that's fascinating. And it's the first time actually that I've heard the bridge of being asked to give the keynote and that as part of the catalyst of adding on that layer or that idea of behavioral economics on top of the value-based models, if you will. Okay. So you start Embedded Healthcare.

Zeke Emanuel:
Yeah.

Jean Drouin:
Reflecting on that journey, if you will, what were some of your biggest lessons as you went for scale?

Zeke Emanuel:
Well, I would say that the biggest lesson is, or two big lessons is having adequate capital, which every startup except the startup by academics realizes. I mean, we started up with literally pennies in the pocket instead of a multiple millions that you probably need and underappreciating the importance of sales and getting into market. I would say a third deficit that we had is realizing that, if you were going to value-based payment, that you were stuck or you were going to, one of your barriers, as it were, was the contracting cycle with physicians and providers, and that if you were changing that contract and not using the contract, that delayed deployment made it patchy and things like that, and that we had to rethink how you would deploy value-based payment, given that contracting cycle. So I think a large part was we thought about what is the intervention? We didn't think about, well, what do we need to do to deploy it effectively? And I think that's partially, you know, that if I had to blame myself, I would say it's the blind spot of academics. Our thinking has always been where always is, for decades and decades. Publish a paper, people will see it's brilliant and adopt it. Well, that we know is false. That causal pathway is not the one that happens and the need to actually go out there and get adoption, both adoption by payers that will sponsor it and adoption by providers to implement it takes marketing, sales, meetings. And one of the things when I did get that aha moment, I realized at least regarding the providers getting them to adopt, we have a very good model about how to get physicians to adopt things, the pharmaceutical industry has taught us.

Jean Drouin:
They sure have, yeah.

Zeke Emanuel:
Detailing, go to the doctors into their office, talking to them about what they, how much they're prescribing, which patients this is good for, giving them some material, taking down all the barriers to that prescription that has for decades been very effective for the pharmaceutical industry. And we realized we need something similar to that if we want them to adopt a payment trace because it requires them to change their behavior, it requires an incentive that is salient to them, it requires infrastructure changes and information about how often they're doing it, where they need to change their behavior too. You can't just say, well, go to lower cost places. They don't know what the cost of lower cost places is. You've got to educate them about it.

Jean Drouin:
So when you farm the company or in the first few years, what was the big idea that you were seeking to go and test out in the market? Because you did have quite a bit of success and it sounds like you had a very deliberate idea to test the approaches that you were deploying out there. Do you want to share for the listeners a little bit of what is it exactly that you went out to prove and where you're at to the extent that you're able to share?

Zeke Emanuel:
Well, I would say the following, transformation of physician behavior requires three I's. I1, incentives. Physicians need to be paid to do the change or the change has to be revenue positive for them. Two, they need information. You need to provide them information about what change, where to implement the change, which patients this change is good for. And third, you need to provide an infrastructure for them so that barriers to that change are reduced as much as possible. Whether it's making it easy for them to actually refer to this specialist or to implement changes in their office, you need to bring those infrastructure barriers down and help them with those infrastructure barriers. We gave physicians very specific information that was actionable information so that they knew what switch changes we needed or wanted from them and what would be rewarded. And we gave them feedback about how well they were doing so that they actually had a global picture. So, for example, we wanted a series of things from the primary care doctor, extended hours. In the early days before Covid, we wanted them to use virtual interactions, whether texting or telephone or video interactions. We wanted them to have weekend hours so patients could, if need be, come into the office at some period over the weekend. We knew that a lot of these changes would actually be quite effective in terms of reducing costs, reducing hospital readmissions, reducing emergency room visits, changes that would facilitate their being able to provide quality care and lower the cost of care. So that's the kind of way we tried to change or make more effective these value-based payments. We also dramatically shrunk the quality metrics that they were responsible for to get quality bonuses. We took them from, you know, the usual haedus measures, 60 plus measures down to low teens and 12 measures. And they helped us. These are measures that were salient to them.

Jean Drouin:
That's right. And Clarify and Embedded came together a little over a year ago. And as I recall, when we first met, one of the things that I found incredibly inspiring in terms of what you had done with Embedded is, effectively, what I remember you're saying to me is, Jean, look, we we had a good first go with the ACA and CMMi and ACOs and bundles. It's just that in retrospect, the way in which we deployed them didn't really hit the dopamine receptors of most clinicians. And effectively what you've been doing is working with those from the field of behavioral economics to take that thinking on incentives, apply it to these programs, and then say, hey, when we do that, we start seeing a different kind of result both on primary care spend and that's more that capitation and ACO type model, and it's also possible to do it on the specialist end, where bundles are one of the tools that have been used in the past. But in that case, if you waited 12 to 18 months to tell a doc once all the claims had come in that they'd made a bonus or a penalty, it wasn't that appealing to them. But if you flipped it on its head and you were able to bonus them within a month for doing the right thing, you'd create a different set of incentives. Is that a fair summary of some of the, the why behind what you've been doing?

Zeke Emanuel:
I think that is a fair summary, and I would say that we had experience when we started Embedded with a lot of frustration in the medical community around pay for performance. Either payers were sort of paying regardless of performance or pay for performance if it was seriously used, was not producing results. And I think that's what the academic literature shows. Two of the reasons is, one, when you pay for performance over too many metrics, the payment is trivial and it reduces what the behavioral economics call the peanut effect, and the individual change gets you peanuts. It's the response, so the amount of money is so low, it's trivial. And in your racing, there's no dopamine rush. It's like meh, so you got to really incentivize. If you're going to use financial incentives, they have to be real and substantial and timely. So that was the other one, is, you can't roll it out six, eight, nine, ten, 12 months later or two years later in some cases, it has to be much more immediate so that action gets a positive response. And so those were some of the kinds of things we were trying to overcome in our thinking and bringing behavioral economics to bear in this space.

Jean Drouin:
What are some of the results you've been seeing? And I know you're an eternal optimist, but hopeful for where it is that we're going as a system.

Zeke Emanuel:
We target it to the very specific factor. We try to say, all right, how is this doctor practicing? Where are they sending referrals? What are they doing? What changes do we need in this Dr? And so we try to micro-target the, want the incentives to actually be large so that there's something the, that will wake the doctor up and say, oh, doing this is actually a real positive for me. Our main successes have been with capitation to get doctors to take seriously a small group of quality metrics and shifting site of service where in the commercial space there's a big arbitrage to be made because doing the same exact procedure and a variety of different locales or facilities can change dramatically the total cost of those procedures. So one of the things people say, you got to let doctors know when they make an order, you know what an alternative places, that's probably too late. Part of my philosophy is you got to get them at the start of the day, that's a little harder. You have to know what their schedule is, you have to have access to a lot more information. And so figuring out how to do that I think is a bit more complicated, but just exactly the kind of thing that we're trying to do in next generation. So one of the most exciting things I'm engaged in is, okay, what's the refinement of the model? You know, B1, what's B2, what's B3? What are the changes in the progressive reform and improvements you want to implement?

Jean Drouin:
And what's your thought on value-based payment models overall? And if you had to forecast or prognosticate over the next 5 to 10 years, you know, where do we see ourselves as a as a health system on the VBC front?

Zeke Emanuel:
Well, again I think it's been a slow start, right? It's been whatever, we're now 12 years, 13 years-post Affordable Care Act enactment and we're still not there. I'm actually more optimistic. We've learned a lot about what works and what doesn't. I think most payers are now very committed to value-based payment. And third, I think providers want it. Primary care docs, lots of other docs experience a lot of revenue loss during Covid and capitation makes a big difference rather than fee for service. It also allows you to get off that hamster wheel as long as you're not running on a fee for service. So I think over the next decade, we're going to see a lot more value-based payment. We have Clarify, one of the things we've done is to build the infrastructure for payment on value-based payments, make it a, built that so the resistance we had from CMS and others, we don't know how to pay bundled payment, we do it by pencil and paper. By the way, that's not unique to CMS, those alternative payment models, most insurers, despite giving a lot of lip service to it, they don't haven't built the infrastructure either. I just talked to a big primary care group wants to pay alternative payment model to their docs and capitation and they're confronting the builder or I choice. You know, do we build it or do we buy it? Well, now, fortunately, because of Clarify, we have, you know, you can buy it. There is an infrastructure out there. Others have spent the time to develop that. And I think, again, you got to progressively eliminate some of the barriers to adoption of value-based payment. And that's been one of the biggest barriers. And I think getting rid of that, there is an infrastructure you can actually buy. It is exceedingly important to making progress in adoption. And again, I'm very optimistic about the next decade. Payers are on board, providers are increasingly on board and there's infrastructure. So I think that's the combination I see going forward.

Jean Drouin:
Well, Zeke, time flew by. Thank you for an amazing discussion. We'd love to have you on the show again. And for those listening, thank you for tuning in and please be sure to join us for the next episode of Healthcare Unbound, powered by Clarify Health.

Zeke Emanuel:
Thank you. Great to see you.

Jean Drouin:
Likewise.

Healthcare Unbound Intro/Outro:
Thank you for listening to Healthcare Unbound. We hope today's episode was insightful. If you want more information on how Clarify Health can help you, please visit ClarifyHealth.com.

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