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2019 Predictions: a rocky road for hospitals, new players, artificial intelligence and more

2019 Predictions: a rocky road for hospitals, new players, artificial intelligence and more

2019 Predictions: a rocky road for hospitals, new players, artificial intelligence and more

By Dr. David C. Pate, News and Community
January 1, 2019

The landscape for health care has significantly changed with the mid-term elections that resulted in a shift of control of the U.S. House of Representatives from Republicans to Democrats. What can we expect in 2019?

Health Care Reform and the Affordable Care Act

Given the Democrats’ control of the House, the only changes the Trump administration can make to the ACA, other than those that would have support from the Democrats, are those that the administration can make under their rule-making authority. I don’t expect to see any significant changes to the ACA in the next two years, unless the ruling in Texas v. United States is upheld on appeal. I wrote about the case and the ruling for a post Dec. 17.

Medicare for All

“Medicare for All,” the idea of a publicly funded, single-payer health insurance program for all Americans, has been championed by progressive Democrats. Public support for such a program has been growing and has reached majorities in both parties, though support significantly drops off, especially among Republicans, when the discussion turns to payment for this through new and increased taxes.

Political support for Medicare for All is picking up steam, given that health care was the single most important issue for voters and Democrats gained the largest pick-up of Congressional seats since Watergate. It has been particularly fascinating to me that Medicare for All supporters also won elections in swing districts and traditionally conservative states.

Despite the growing support, there is no chance that Medicare for All will come to pass in the next two years. President Trump would veto it, even if it could get enough support in the Senate, which is highly unlikely. We might see the House try to pass a Medicare for All bill to get Republicans to vote against it in the face of increasing public support in anticipation of the 2020 races.

Medicaid Expansion

Proposition 2 passed by popular vote last month in Idaho, but there remain two threats to Medicaid expansion in Idaho.

One is whether the Legislature will vote to overturn the law or refuse to fund it. I predict that neither will happen. Prop. 2 won by a pretty clear margin. I think that lawmakers will realize and respect that the vote represents the will of the people. I do believe that lawmakers will fund the expansion, as I think they will believe it is their responsibility to the people to do so.

There is some concern that Idaho may seek to implement work requirements as some other states have, but I think that while the Legislature will look at this, they will realize that putting a process in place to monitor work status is expensive and will add to the bureaucracy of government and ultimately decide against it.

The other threat is a constitutional legal challenge to the law that will be heard by the Idaho Supreme Court early in 2019. I predict that the challenge will fail, and the Supreme Court will uphold the validity of the law.


Next year will be a very challenging year for hospitals. Among the negative factors that will result in weakened financial performance: a continuing payor mix shift to governmental payers (Medicare and Medicaid), which is lower-margin or even negative-margin business; an increase in bad debt as employers and insurers continue to shift more costs to patients in the form of deductibles, co-insurance and co-pays; and a continued shift of business activity from inpatient to less profitable outpatient services.


Medicare for All may or may not be an existential threat to insurers, depending upon whether there is still a role for insurers to administer plans for the Medicare program, as they currently do with Medicare Advantage. No doubt insurers will be developing their lobbying strategy.

Insurers face another threat as more providers take on managing risk. Payers are, for the most part, reluctant to become third-party administrators. For those that fear this, the adoption of risk by providers remains low. However, the pressures on providers to take on risk will only increase over time.

On the other hand, some insurers are embracing this change and realizing that if providers successfully manage risk, this will confer a premium advantage that will result in market share gains when they are able to offer and sustain lower premiums than those plans that retain risk and rely on traditional unit cost pressures to keep costs down. This will be a particular challenge, given that I think premiums must and will stabilize close to current levels to appease regulators and to avoid pricing more people out of the market.

Some insurers will enter the provider space. Others will be acquired by providers, as we saw recently with the acquisition of Aetna by CVS Health. It remains to be seen whether CVS can leverage its acquisition of Aetna to lower costs and advantage Aetna health plans by enabling them to keep premiums down compared with competitors. As best I can tell, CVS is pinning its hopes on reducing unnecessary hospital admissions by managing patients more effectively in its MinuteClinics; I am unaware of any data showing that retail medicine services have been able to do this.

New Market Entrants

2019 will usher in the next generation of disruptive market entrants. One example: Carbon Health, a health-care startup that is trying to disrupt primary care by changing the model from one that is centered around doctors and hospitals to one that is centered around the patient. Key to this is the use of technology, including video visits and an artificial intelligence-assisted messaging system. Other startups similarly are attempting to leverage technology to disrupt primary care.

Babylon is a disruptor that seeks to combine the “computing power of machines with the best medical expertise of humans to create a comprehensive, immediate and tailored health service.” Babylon offers telemedicine services and a symptom-checker. I used the symptom-checker while I had a disease in mind, answering questions as if I had the symptoms of that disease, and it didn’t identify the disease as the most likely diagnosis, but it did fairly well and came up with a reasonable alternative diagnosis. Babylon also states that it uses artificial intelligence to help patients understand their current health condition and gives them practical insights into staying healthy.

These new market entrants are worth keeping an eye on to see if they can improve the outcomes of chronic diseases, better coordinate care, reduce unnecessary emergency room visits and admissions and reduce the total cost of care.

Many are variations of direct primary care (for example, offering subscription services for monthly payments above and beyond insurance premiums for prompt access and free office visits), so if traditional primary care practices can figure out how to make their services easily accessible, as I predict they will, the disruptees will become the disruptors.


Artificial Intelligence

Up until now, AI’s impact on health care has been limited. 2019 will be an inflection point. AI will improve the speed and accuracy of medical diagnosis by analyzing data quickly and accurately. These applications will improve the efficiency of physician workflows.

The research and development process for medications is painfully slow and expensive. AI will be able to explore chemical and biological interactions and early-stage clinical data to identify new treatments that are much more likely to prove to be effective, especially in the area of cancer treatments.

AI also has the potential to automate surgical procedures by robots, assisting the surgeon or in some cases, replacing the surgeon. Eventually (not in 2019), this technology could be used to perform emergency surgery in rural areas where there is no surgeon and little time to transfer the patient to a metropolitan center.

The Internet of Medical Things (IoMT)

Technology will advance remote monitoring of patients through wearables, smart sensors and mobile apps. Thirty billion IoMT devices are expected to be deployed worldwide by the end of 2019. Uber and Lyft are already creating health-care divisions to connect patients with providers. Uber will deliver meals; don’t be surprised to find Uber and Lyft delivering prescriptions to patients’ homes from the pharmacy.


Telemedicine is not a new concept, but its adoption has been rather slow. Expect utilization to increase significantly in 2019. More and more insurance companies are providing this as a covered benefit. As more people experience it, they will be repeat users and will expand use through word of mouth.

Virtual/Augmented Reality (VR/AR)

VR/AR has tremendous utility in clinical education and training. Expect more medical and nursing schools to adopt this technology. We will also see more use of VR/AR in surgery to assist and guide the surgeon in small spaces of the body or under complicated circumstances. This technology may also assist first responders in caring for the ill and injured, while recording critical information about the patient prior to arriving at the hospital. Finally, there is great potential for VR/AR to assist patients in treating their pain and reducing the use of addictive opioids.

Big Data and Data Analytics

The most widespread application of big data in health care is electronic health records systems. Data analytics will be developed that allow providers to glean meaningful, actionable data to improve care for patients and populations of patients, the insights from which would not be available from a casual review of the medical records. Predictive analytics will be developed that allow providers to identify patients at high risk for admission to the hospital or deterioration in their conditions, making possible proactive outreach and modification of their treatment and care plans to avoid costly hospitalizations, complications or even death.

St. Luke’s Health System

St. Luke’s Health System is going through a transformation. We are well on our way from fee for service to pay for value, with nearly a third of our revenue at full risk (global capitation). We are going through an organization design reshaping that moves us away from the hospital-centric model of most health systems to one that is truly population health-based. We are also focusing our service lines on improving outcomes and lowering the total cost of care and completely redesigning our end-to-end utilization. My predictions for next year are that we will see measurable improvement in outcomes and a bend in the cost curve for those populations we have under risk agreements.

About The Author

David C. Pate, M.D., J.D., is president and CEO of St. Luke’s Health System, based in Boise, Idaho. Dr. Pate joined the System in 2009. He received his medical degree from Baylor College of Medicine in Houston and his law degree from the University of Houston Law Center.

How Does a Virtual Care Center Work? See What St. Luke’s is Doing!

How Does a Virtual Care Center Work? See What St. Luke’s is Doing!

St. Luke’s Virtual Care Center Will Extend Reach, Expand Services

From left to right: Krista Stadler, senior director of telehealth services for St. Luke’s Health System, Lisa Knox, St. Luke’s project manager and Diane Wilson, St. Luke’s interior designer, on a recent tour of the 35,000 square foot virtual care center.
By Chereen Langrill, News and Community
April 3, 2018

St. Luke’s Virtual Care Center is one of the most exciting developments for patients served by St. Luke’s since I have been here. We have piloted components of the center including teleICU, remote patient monitoring, teleurology and telenephrology, but now the pieces are all coming together as a virtual hospital. This will translate into better outcomes at a lower total cost of care.

Here to tell you more about this exciting development is St. Luke’s Communications Coordinator Chereen Langrill.

– David C. Pate, M.D., J.D.

Construction on St. Luke’s new virtual care center in Boise should be finished by summer 2018. The high-tech hub will feature a centralized medical team and 60 virtual care stations.

When St. Luke’s began offering telehealth services several years ago, the focus was an electronic intensive care unit that decreased the number of days people spent in the intensive care unit and improved overall patient outcomes. It was an important first step in a journey to improve patient care by harnessing technology, and that journey continues today.

St. Luke’s is now building a virtual care center that will serve as a hub for a suite of telehealth programs, consolidating the services in one building to allow the team to collaborate and coordinate care.

Construction on the 35,000-square-foot center began in January, and soon teams will begin training in the space. Expected to be complete this summer, the virtual care center represents St. Luke’s ongoing commitment to giving patients access to quality care without barriers.

Those barriers can be geographic when people living in rural areas have limited or no access to specialists. People with physical barriers can be too sick to travel to a provider visit. Other patients face barriers related to transportation because they can’t drive or don’t have access to transportation.

In addition to removing barriers, virtual care also helps St. Luke’s more effectively reach specific patient populations, such as people with chronic illnesses.

“Merging technology and care delivery is the way we have to operate in order to be successful in population health,” said Krista Stadler, senior director of telehealth services for St. Luke’s Health System. “Hiring an army of 20,000 people to deliver quality care services is not realistic.

“With the growing Idaho population and consumer demand for convenient care, we have to explore how we can use technology to achieve our goals and meet the needs of our patients.”

A high-tech hub in Boise will feature a centralized medical team that includes physicians, nurses, allied health professionals and IT professionals. When fully operational, 350 team members will work to ensure the center provides continuous care. This means services are available at night, on weekends and even holidays. Telehealth services are available for patients at clinics, hospitals and homes throughout Idaho and Eastern Oregon.

There will be more than 60 virtual care stations with the ability to operate continually using two-way audio and video. A generator and back-up power will support the virtual care center and a St. Luke’s Disaster Response Center.

“If you peel back the curtains of the virtual care center, it will look like a lot of desks and people, but it is much more than that because of the level of care and services we can provide and the number of patients we can serve,” Stadler said.

Among the services that will be supported:

  • Inpatient telehealth (intensive care unit and neurology)
  • Telehealth in the home (remote patient management)
  • Clinic telehealth consultation for services such as urology, nephrology, sleep medicine autism and pediatric surgery

Regardless of the care setting, telehealth is a way to enhance the service already given through patients’ primary physicians. Support offered through telehealth technology allows the provider to consult with a specialized team, extending the impact of evidence-based care.

“This space will allow us to grow our services and capacity throughout the organization to ensure patients have access to the right care at the right time, regardless of geographic location,” Stadler said. “We believe there is an opportunity to improve a patient’s access to care and ensure that care is patient-centered.

“The virtual care center will serve as the epicenter of discovery and innovation as we act on this belief.”

About The Author

Chereen Langrill works in the Communications and Marketing department at St. Luke’s.

Thinking Globally, Executing Locally: St. Luke’s Plans the Patient-Centered ‘Medical Neighborhood’

Thinking Globally, Executing Locally: St. Luke’s Plans the Patient-Centered ‘Medical Neighborhood’

Thinking Globally, Executing Locally: St. Luke’s Plans the Patient-Centered ‘Medical Neighborhood’

Care coordination is a significant part of the team-based care approach at St. Luke’s Clinic – Payette Family Medicine and St. Luke’s Clinic – McCall Internal Medicine. Team huddles – like the one shown here – are often held to discuss patient care plans.
By Chereen Langrill, News and Community
March 6, 2018

Besides the malaligned incentives created by fee for service, one of the biggest downsides of that reimbursement methodology is that it produces fragmented care. With fee for service, providers are paid for defined visits, procedures or hospital stays but not work that might occur between visits. That is why, when I was in practice, I treated patients at appointments that were months apart, even though their disease or condition continued between visits.

The nature of fee for service also is that we typically only have time to address one problem at a time during a visit – again, an outcome of the incentives created under fee for service. Pay for value really changes the incentives and best promotes doing whatever it takes to improve outcomes and lower the total cost of care, including meeting patients’ health care needs in between visits to keep their diseases and conditions under control to avoid costly complications and avoidable emergency room visits. This has led to our patient-centered medical home model of care. Here with a report is St. Luke’s Communications Coordinator Chereen Langrill.

– David C. Pate, M.D., J.D.

A team-based care approach introduced in McCall and some other rural St. Luke’s locations is serving as a springboard to launch similar efforts at other St. Luke’s clinics.

Sometimes referred to as a patient-centered medical home, the approach emphasizes care customized for each patient. This comprehensive, coordinated care incorporates various providers based on patients’ needs, such as prevention, acute or chronic disease or behavioral health. A team of health professionals housed in one location can help patients avoid unnecessary emergency room visits and reduce the cost of their care.

Instead of a single-visit, single-provider approach, it is more of a big-picture focus. The team can triage, assess and help navigate for each patient’s best outcome.

“Team-based care is an important strategy as we shift from a volume-based model to one that is value-based,” said Lucy Dennis, vice president of operations for St. Luke’s physician services. “It improves patient outcomes and drives up patients’ perceptions of the value of their care. And it has the added benefit of supporting our physicians by preventing burnout and reducing stress.”

Team-based care makes sense for a community like McCall, where the population is approximately 3,000 and there are limited medical services available. In McCall, St. Luke’s has two clinics recognized as patient-centered medical homes. In 2014, practice manager Don McKenzie led the effort to adapt the patient-centered care model at St. Luke’s Clinic – Payette Lakes Family Medicine and St. Luke’s Clinic – Internal Medicine: McCall.

Before that shift, patients would sometimes visit the emergency department for treatment that could have been handled in a clinic setting because access was possible without a wait. The cost for an emergency department visit is significantly higher than a clinic visit, however, and doesn’t necessarily foster a long-term relationship between a physician and patient.

“A lot of our drivers were because we live in a rural community that doesn’t have all the services that are available in the Treasure Valley,” McKenzie said.

When people need care that isn’t available in McCall, it can become a roadblock. It can mean the delay of a critical diagnosis or lead to complications from a chronic illness.

“Some just say they won’t deal with it,” McKenzie said. “The saddest thing in this field is if you could have screened something early and stamped it out.”

McKenzie likes to call the clinics a medical neighborhood; a community rich with resources. Some of those resources include patient access navigators, early detection services, education that promotes healthy living, care coordination and behavioral health specialists.

These resources work together as a team when a patient needs multiple types of care. For example, a teen who comes to a clinic for a school sports physical may display signs of depression. He or she can be referred to a behavioral health specialist in that same location. Having multiple resources in one location makes it more likely a patient will receive additional care. When patients have to go elsewhere for care, they are less likely to follow through with a referral, especially when that care is far from home, according to McKenzie.

“There is so much work that occurs outside of the actual patient visit,” he said. “All these people with co-morbidities and chronic conditions, it takes a team to achieve success for that patient.”

Dennis is leading an effort to transform the care model at all St. Luke’s clinics and to adopt the type of team-based model that has been successful at clinics like those in McCall.

“We started with these patient-centered medical homes in these rural areas where, by default, it is the only place where patients could go,” Dennis said. “Our charge now is to take the very best and scale that throughout the system. To think globally but execute locally.”

To achieve that goal, the focus needs to shift from a physician-centric model to one that is patient-centered. Magic Valley is in the process of making that shift at two locations: St. Luke’s Clinic – Physician Center: Twin Falls, College Road, and St. Luke’s Clinic – Physician Center: Twin Falls, Pole Line Road. Dr. Bartholomew Ripepi helped launch a patient-centered medical home at the University of Pittsburgh and has provided support at the two St. Luke’s Magic Valley clinics as the project and physician lead.

“The patient-centered medical home model delivers a means of coordinating care and acting upon individual patient needs that may not otherwise be identified in a single patient visit to achieve high-quality, whole patient care,” Dr. Ripepi said.

Dennis said a team is looking at how to leverage the approach at highly diverse clinics.

“This is about working like a family would, with great communication, a strong culture and a team environment where everyone is focused on the patient and doing what’s right for that person,” Dennis said. “This is what we are trying to promote and deliver across the system.”

About The Author

Chereen Langrill works in the Communications and Marketing department at St. Luke’s.

It’s Time for a Bipartisan Approach to Health Care Reform by Dr. David Pate

It’s Time for a Bipartisan Approach to Health Care Reform by Dr. David Pate

It’s Time for a Bipartisan Approach to Health Care Reform

By Dr. David C. Pate, News and Community
July 25, 2017

We all watched as the House of Representatives passed the American Health Care Act (AHCA).

It was hugely unpopular.

The bill then went to the Senate, where senators said they were going to start with a clean slate and instead tweaked the AHCA to come up with the Better Care Reconciliation Act (BCRA).

It soon became clear that the BCRA would not attract enough votes to pass, so Senate leadership made some further changes to the bill.

Still not enough.

Most recently, the leader of the Senate has indicated that a vote on a bill to repeal the Affordable Care Act (the ACA, known as “Obamacare”) without a concurrent replacement bill will be undertaken and Republicans will have two years to come up with a replacement bill.

It appears that there will not be enough votes to pass this repeal-only bill, either.

So, where do we stand, and where do we go from here?

Although it appears that Republicans have run out of options, I’m not counting them out. They are under tremendous pressure to repeal the ACA – and the fear of what will happen during the 2018 midterms if they don’t.

On the other hand, the prospects are dim, and I wonder whether the calculus of their risk with voters for the upcoming elections weighs in favor of doing something in a bipartisan manner. Republicans have the opportunity to be heroes and let their constituents know that they were the ones who “fixed” Obamacare.

In hopes of a bipartisan possibility, here are my recommendations. For this purpose, I am assuming that the ACA will remain the law of the land, simply because neither party has the desire, will or votes to scrap the ACA and start from scratch.

First of all, let’s be clear. Health care reform may consist of insurance reforms that regulate how the insurance market works (this is primarily what the ACA, AHCA and BCRA do) and/or it may consist of delivery system reforms that regulate how health care is delivered, which is a significant challenge facing the country but which was only cursorily addressed by the ACA and was not addressed in either the AHCA or BCRA.

Insurance Reform

Let’s address insurance reforms first. A bipartisan approach is possible if Republicans admit that their attempts to repeal the ACA have been unsuccessful and that the goal must now be to provide constituents with relief from increasing premiums and a limited choice of insurance plans in those counties where there is only one plan or no plan on the public insurance exchange.
Here, then, are the critical decisions to be made:

Commit to enforcing the individual mandate.

This is a bitter pill for the Republicans, but if they keep their eye on the prize – lowering insurance premiums – this is one step that would reduce premiums somewhere in the range of 7 percent to 20 percent, according to estimates I have heard from insurers. It can also be a good-faith gesture toward the Democrats, who would be likely to support this in exchange for concessions.

Commit to the cost-sharing reduction payments.

All businesses dislike uncertainty, and this is no less true for insurance companies. In times of regulatory uncertainty, they will increase premiums to decrease their risk. The cost-sharing reduction payments, which assist those who are below 250 percent of the federal poverty level with their deductibles, copays and co-insurance, are critical to the stability of the plans sold on the public insurance exchanges. The Trump administration has been making decisions month by month as to whether to pay these payments.

If the administration were to commit to making these payments and Congress would appropriate the funds for them, this would stem the losses of insurance carriers from markets and might entice some companies to return to the public exchanges. More insurance companies offering plans on the exchanges means lower premiums and lower annual increases. The Republicans have been making these payments anyway, and Democrats will readily support this measure. I would propose that we return stability to the market, commit to these payments and let Republicans take the credit.

Eliminate the employer mandate.

Here is a win for the Republicans, for whom mandates are anathema, and an opportunity for Democrats to make a concession.

The employer mandate was implemented because of the fear that employers would abandon coverage for their employees and send them to the public exchanges. This fear never was realized, and employers continue to understand that employee benefits are important and essential in being competitive for workers and talent. Let’s just get rid of it and let Republicans take the win.

Induce more insurance companies to offer plans on the exchanges.

There are several ways to achieve this. First is to enforce the individual mandate and commit to the cost-sharing reductions that I mentioned above. I offer up these additional ideas:

  • In those counties that have no insurer or only one insurer on the public exchange, offer reinsurance for a period of three years. This would minimize the risk for insurance companies to offer plans in those markets and encourage more participation.
  • Require that, if plans want to offer a Medicaid plan in a given state or individual plans in other counties in that state, they must participate on the public exchange in all counties of the state so that all counties end up with one or more insurance plan options.
  • Offer a public option through a private Medicare Advantage plan that allows enrollment starting at age 50 to take higher-risk patients out of the risk pool for commercial plans in those markets, pay the plan the average Medicare per capita fee for that market (which should be attractive to plans) and separate this population from the plan’s age 65 and older enrollees for purposes of calculating the plan’s star rating so that payments for the traditional Medicare enrollees are not diminished.

Enact changes that will reduce insurance premiums.

Enforcing the individual mandate and committing to the cost-sharing reduction payments I discussed above will decrease premiums. There are four more things we can do to lower insurance premiums:

  • Increase the age rating band.

Generally speaking, an insurer will spend five times more on its oldest subscribers as its younger ones. The ACA instituted a fee cap of 3:1, meaning insurance companies could not charge more than three times the premium to older subscribers as they do to younger ones.

Republicans are in favor of increasing that age rating band to 4:1 or 5:1 and doing so would lower insurance premiums for younger, healthier individuals needed in the insurance risk pools.

The downside would be that premiums for older individuals will increase, and Democrats would be likely to oppose this. I would propose that we increase the age band but provide additional subsidies to older individuals through the advance premium tax credit to help offset those premium increases.

  • Create invisible high-risk pools.

In most all populations, 5 percent of people account for nearly 50 percent of health care spending. Insurers have to increase premiums significantly for the remaining 95 percent of the enrollees to cover the costs of caring for this 5 percent.

An invisible high-risk pool would allow these higher-cost individuals to remain under the insurer’s health plan, but would cap the insurer’s liability and use state or federal funds to pay for all the costs above the cap. This could significantly reduce premiums.

Republicans are in favor of high-risk pools and included funding for them in the AHCA and BCRA, so this should not be a stretch. Democrats have generally been opposed to high-risk pools because of the experience with traditional high-risk pools, but an invisible pool would alleviate most concerns as there would not be a waiting list, a waiting period, decreased benefits or an inadequate network of providers.

  • Create an early buy-in for Medicare.

We could lower Medicare eligibility to age 50 or 55 and require those beneficiaries to pay the average Medicare per capita spending amount for that geographic area as their premium until they reached age 65. These are the highest-risk enrollees in commercial insurance plans, so removing them should improve the risk pool and lower premiums.

At the same time, these patients would be the lowest-risk patients in the Medicare risk pool, so if they paid the average Medicare beneficiary per capita spending amount as their premium, they should cover their costs in aggregate and not pose a negative financial impact to the Medicare program. The expansion of Medicare eligibility should be attractive to Democrats, and the ability to lower premiums and not add to the deficit should be acceptable to the Republicans.

  • Lower drug prices.

According to Politico, “Obamacare has helped reduce the overall growth of health care costs to the lowest rate in half a century, but prescription drug prices have continued to soar.” Many plans now spend more on drugs than hospitalizations.

There are many possible ways to reduce drug prices. Here are two:

      • Implement the equivalent of a medical loss ratio. The ACA put in place a medical loss ratio (MLR) for insurance companies that requires that 80 percent to 85 percent of the premium must go to providing medical services. The remaining 15 percent to 20 percent can be used for administrative purposes and profit. Any amount less than the 80 percent to 85 percent spent on medical services must be refunded to subscribers. Congress could impose similar limits on pharmaceutical companies and require that a certain percentage of their revenues be devoted to research, development and production of medications. Another percentage of their revenues could be used for marketing and administrative purposes. Revenues in excess of the limits on marketing, administrative costs and profits would have to be refunded to the health plans, employer-sponsored health plans and individuals who purchased their medications.
      • Tie profits to the length of pharmaceutical companies’ patents. Currently, pharmaceutical companies obtain patents that allow them to be the sole producer of a medication for a period of years. During that time, they can price their medications at levels as high as the market will bear. I would propose that as soon as the aggregate sales revenue reaches the amount a company has invested in research and development of the drug, the patent expires. This would discourage high prices that bear no relationship to the R&D costs, and firms not discouraged by this approach would pay for it in loss of patent protection. Their higher prices additionally would attract competitors.

Get rid of the Cadillac tax.

Neither party likes this. It is a tax on the richest employer-sponsored health plans. Republicans hate it because it is a tax. Democrats hate it because it is unpopular with unions. The reason it was implemented was to discourage rich health plans that encouraged health care spending and because it was a minor attempt toward equalizing the tax treatment of employer health benefits, which are excluded from income taxation, and health plans bought on the individual market, which are bought with after tax dollars.

Let’s get rid of it and replace it with a limit on the exclusion from tax exemption of employee health benefits. This could be set at the 90th percentile of benefits, which are typically received by those who are in higher-paying jobs and can afford the tax. The benefit of doing so is to achieve the purposes of the Cadillac tax, but not lose the revenue anticipated with that tax.

Roll back Medicaid expansion

(a win for Republicans), but replace it with tax credits and cost-sharing reduction subsidies for those below 138 percent of the federal poverty level, so that instead of being eligible for Medicaid in expansion states and not eligible for anything in non-expansion states, all of these low-income individuals and families could be covered under commercial plans on the public insurance exchanges. The latter would be a win for Democrats.

Delivery System Reform

I believe the approach outlined here could achieve bipartisan support for health insurance reform. For delivery system reform, we must first understand where the costs are coming from. I put them in three buckets:


The American health care delivery system does not do a particularly good job in this area. In its defense, until the ACA, insurers did not spend a lot in this area, even though prevention of disease is much less costly than treating the disease. Of particular concern to me is the rising epidemic of childhood obesity and the huge health care costs that will be associated with these children’s care as they become adults. I am also concerned about the opioid and other drug/alcohol addiction problems in this country and the corresponding health care costs and costs to society.

We need to identify and invest in programs that are effective in combating these health threats, and we need value-based insurance benefit design changes that not only provide prevention and screening services not subject to the deductible and copays, but also lifestyle medicine interventions for at-risk patients.

Low-value/no-value services.

It is estimated that 30 percent of health care services are of low value or no value. These range from treating patients with antibiotics for viral illnesses to futile care, or surgery when a patient is just as likely to achieve their goal with conservative treatment.

To address these problems, we need to change the reimbursement system from fee for service to pay for value so that providers are accountable for the outcomes of care and the total cost of care.

Here is an example from another sphere of care. My beloved dog just suffered a slipped disc and loss of motor function in his hind legs. Jake underwent surgery and is expected to recover.

However, the vet has offered three additional optional services: laser treatments, hyperbaric therapy and hydrotherapy. From what I understand, there is little research to support these treatments, but I love my dog and want to do everything that is reasonable to promote his recovery. From the fee-for-service standpoint, are they recommending these services because each one comes with another charge, or would they get some or all of these services if it were their dog, the way I would like for the decision to be made under pay for value?

Patients with multiple chronic diseases.

Twelve and a half percent of the American population has five or more chronic illnesses, and half of these patients account for half of all health care spending in the U.S. It is also in this population that a lot of mental health, behavioral health and substance abuse disorders coexist, at least doubling the cost of caring for this population. Under fee for service, care is fragmented and poorly coordinated, and there is huge opportunity to reduce spending and at the same time, improve outcomes, care and health.

To address all of this, we need to move from fee for service to pay for value to encourage health care providers to take accountability for patients across the continuum of care, better coordinate care, manage transitions of care, develop disease management programs and address underlying mental health issues.

For high-risk/high-cost procedures, I think commercial payers and the government should develop centers of excellence programs, where the use of those providers who are able to offer the best outcomes at the lowest total cost of care are encouraged by waiving out-of-pocket expenses and providing for travel expenses. A beneficiary could still choose to get care locally with the standard deductible and copays and co-insurance if they desired to, but they would be provided with a financial incentive to get care for high-risk/high-cost procedures at those hospitals with the lowest mortality and complication rates for that particular procedure.

We’ve seen multiple runs at the Gordian knot of care and costs in America now for decades, most recently with Obamacare and all the recent attempts to revise that law. Politicians of all stripes now have a unique opportunity to work together on behalf of millions of Americans. I hope they rise to the occasion.

About The Author

David C. Pate, M.D., J.D., is president and CEO of St. Luke’s Health System, based in Boise, Idaho. Dr. Pate joined the System in 2009. He received his medical degree from Baylor College of Medicine in Houston and his law degree from the University of Houston Law Center.