C-SPAN/NEWSMAKERS

Host: Pedro Echevarria

Guest: Scott Armstrong, President and CEO of Group Health Cooperative

Reporters: Noam Levey, David Lightman

PEDRO ECHEVARRIA, HOST, “NEWSMAKERS”: This is “Newsmakers.” Our guest this week is the President and CEO of Group Health Cooperative in Seattle, Scott Armstrong. Mr. Armstrong, thanks for joining us.

SCOTT ARMSTRONG, PRESIDENT & CEO, GROUP HEALTH COOPERATIVE: It’s my pleasure.

ECHEVARRIA: Also joining us in the questioning, Noam Levey of the “Los Angeles Times” and “Tribune” Newspapers – he serves as their Health Reporter, and David Lightman with McClatchy Newspapers – he is their National Reporter. Mr. Lightman, you get the first question.

DAVID LIGHTMAN, NATIONAL REPORTER, MCCLATCHY NEWSPAPERS: Thank you. All right, Mr. Armstrong, if I’m sitting in wherever – Charlotte, North Carolina, Sacramento, et cetera, and I’m being told that your model is the one that Congress may adopt, what does that mean in English? What does that mean to me the consumer who is so baffled by all this healthcare news?

ARMSTRONG: Well, I can describe for you how Group Health works – basic features of an organization like Group Health Cooperative. It’s not-for-profit. Our Board of Trustees is elected by the patients themselves from among the patients. We contract with, or we employ, an integrated medical group, which is really a critical part of what you would experience anywhere if you saw a cooperative like Group Health because it’s a way in which we have a real impact, then, on the healthcare delivery system, and our view is that ultimately that’s the way you change healthcare.

And then finally, you would experience an organization that brings together through its business model the financing, the upfront insurance functions if you will, along with this integrated care delivery system or group practice, being a model, then, that allows you to innovate in ways – because you have both the financing and the care system, being a model that allows you to innovate in ways that – really that drive better healthcare outcomes and better costs overall.

LIGHTMAN: Talk to me as a consumer – again, not as a member of Congress, with all due respect. Will I be able to keep my doctor? Who will I call? Suppose I got sick tomorrow. Do I pick up the phone and call someone? Do I go to an office? Talk to me as a consumer and tell me what this means.

ARMSTRONG: Actually our view is that the best health outcomes, the best care, the way this model works is by giving patients as ready access as they possibly can get to the healthcare needs that they need when they need it.

And so, what you would experience and what our patients in this market experience is access unparalleled, and access that doesn’t just require patients to show up in the exam rooms, but in fact we’re investing in primary care models that allow our doctors to have time to e-mail with their patients, that allow our doctors to have telephone conversations, making the presumption that better access to primary care, engaging in relationships with our patients through a healthcare system that accommodates you know what patients’ requirements are early on, quickly, is the best way to promote health. That’s what you should expect to see in a cooperative.

NOAM LEVEY, HEALTH REPORTER, “LOS ANGELES TIMES” AND “TRIBUNE” NEWSPAPERS: Now, there are other healthcare systems in the United States that also invest in primary care, that also allow communication between doctors and patients. Is there something about the co-op model particularly that makes that more likely?

ARMSTRONG: Probably a couple of things, although you know it’s hard to compare our model with you know generically a lot of other systems. First, as a cooperative, we do have a governance structure where our Board of Trustees, my boss, are patients that we care for and are elected from among the patients. And as a result, there’s a kind of accountability to making sure that our decisions about the care system or the decisions about premiums and benefit structures are all vetted and endorsed by and supported by the patients who are fairly directly – I mean very directly affected by those decisions.

Beyond that, we, as I said before, are bringing together this financing model with a care delivery model so that the innovations that we’re able to invest in through that system are going to be the innovations that patients will really experience quite directly. Their access to electronic records, their access to their physicians, the integrated nature of a care delivery system – these are all features I would expect patients to be able to experience if a cooperative in the form of Group Health Cooperative is replicated in other areas.

LEVEY: Now, do you think your cooperative is about – what – 60 years old. Is that right – 50 – 60 years old?

ARMSTRONG: Sixty – 1947 is when we were founded. Yes, that’s right.

LEVEY: And there are a number of other cooperatives I know around the country that have slightly different models that don’t have this kind of integrated delivery system that way that you do. If one were to create one from scratch, where you group together a number of consumers and presumably tried to get a network of providers, hospitals, et cetera, together, how easily do you think that could be done and how long would it take to essentially replicate your model?

ARMSTRONG: You know it’s hypothetical. I would say that I am an expert on running our system, not necessarily on creating our system. It is complicated, but I think there are ways in which you can create many of the basic features that allow an integrated system that is consumer-governed to exist.

And that the hardest part of – in my view, the hardest part of replicating what is valuable about Group Health is the investment in a different kind of payment mechanism for holding together a care delivery system and creating integration and alignment in our care delivery system that focuses the different components of that delivery system on a single common goal, which is the better health for our patients. In our fee-for-service system, that is really antithetical actually, this idea of a common goal shared by the different providers.

And so I think, frankly, overwhelming care systems that are designed around the fee-for-service reimbursement schedules is probably the greatest barrier or the greatest hurdle to replicating this.

LIGHTMAN: I want to go back to your point about accountability because a report I saw said that fewer than 1 percent of enrollees voted in the last Board election. Is that figure accurate? And if it’s not, please correct me. And if it is, what does that say about accountability?

ARMSTRONG: To be frank, I don’t know exactly what the percentage is, but it is a relatively small percentage of our members. While voting is an act of active consumer participation, the principles and the ethic within our organization shows up in all sorts of different ways that are, frankly, quite pervasive. Our Board of Trustees, as I mentioned before, are elected by a vote of our membership, but we hold community – our consumer – patient council meetings in our medical centers all across the state. Our board meetings have open sessions where people are invited to come.

And once a year we hold our annual meeting where we fill an enormous ballroom full of Group Health members, our patients, to come and hear a report from me on our annual status of the organization. We bring policy experts from around the country in to speak to the group. The group votes on bylaw changes to our constitution. And so it is – there are a lot of different ways in which this ethic or this principle of active consumer governance plays itself out beyond just voting for the trustees.

LEVEY: Have you been able to track at all the way that the consumers, the members are behaving in a way that may be different from your traditional relationship between a patient and his or her medical system or his or her insurer? We certainly hear a lot in the – in the current environment of patients who have disputes with their insurers about what should and shouldn’t be covered. And of course there are cases of complaints about poor care. Have you been able to show at all that either of those are less than the average because of this kind of cooperative arrangement?

ARMSTRONG: Off the top of my head, I really don’t have statistics that compare us to some of our community averages. I can tell you, though, that we have a process of appealing coverage decisions that involves members of our – of our consumer governance process. So, people who are patients who are enrolled in Group Health participate in a process by which these decisions get made.

Our desire is for those issues to be addressed through the relationship that our providers have with our medical providers, that our patients have with our medical providers. Our feeling is that if patients are engaged in a deep, effective relationship, particularly with their primary care provider and the team of people that works with them, that there won’t be the miscommunication, there won’t be the issues that often leads to those kinds of concerns. And so, I don’t know the data, but my belief is that the principles we apply to our relationship with patients will serve us well with respect to that information.

LIGHTMAN: Let me address the issue of cost and consumers. Again, reports I’ve seen – authoritative reports say that annual premium increases were roughly 12 percent during this decade in Group Health. Again, correct me if that’s wrong. Twelve percent is well above the rate of inflation, so what incentive is there for the healthy consumer to join a co-op?

ARMSTRONG: Well, first, I would look at the inflation rate for the premiums for Group Health relative to the inflation rate for our competition in this marketplace. And I think if you did, you would find that we are better than our competitors by some incremental amount, not by an enormous amount. So, that really would be the point of reference.

Second, what I would say is that Group Health is serving a region in our country that is you know costing the average enrolled person or the average patient quite a bit less than the costs incurred by patients in other parts of our country. So overall, Group Health is contributing to performance on a cost-per-member per-month basis in a region that’s demonstrating excellence, actually setting certain standards in the Medicare program, as an example, that most other parts of our country would be envious of.

LIGHTMAN: (INAUDIBLE) if this 12 percent is correct, and I have every reason to believe it is, that’s still three, four, even five times the rate of inflation during the decade. Why? Why is it so – what?

ARMSTRONG: Well, you know you would – you would turn to you know answers to that question that apply not just to Group Health, but to the healthcare industry much more broadly. And the answer you know is in the form of demographics, new technology, new drugs – you name it. Group Health, as an integrated care system that cares for the overall health for the population of patients that we serve, is influenced by those very same issues.

But the difference at Group Health and the difference in this integrated model is that we believe that by engaging our providers and our patients in an integrated care delivery system, that we can manage care rather than managing the actuarial risk of this population. We believe that we can invest in innovative approaches to, not just how our care system works, whether it’s in primary care and specialty care or you know in our hospitals, but we can engage our patients in an active relationship through access to their clinical information, through you know being participants – active participants in decisions where we know their preference is very influential in what actually the treatment is that they end up pursuing.

This kind of engagement is part of what we believe will drive down those expense trends and are part of a care management process that I truly hope ends up becoming part of how the federal reform discussion unfolds. And that – my hope, too, is that the attention that Group Health is getting as a cooperative model helps to amplify the importance of this kind of delivery system reform.

LEVEY: Let me – let me ask you a little bit about that if I could. I realize you’re 3,000 miles away, but from what you see of what’s in the healthcare bills thus far, we’ve heard a lot of talk about just creating co-ops. You’re talking about something a lot bigger than that, which is actually changing the way that medicine is practiced in this country. Do you see in what’s being talked about in Washington the kinds of delivery system reforms that could achieve the results you’re talking about?

ARMSTRONG: I am seeing glimpses of it. I would just say, first, to answer your question sort of indirectly, the discussion largely about the public option and the public plan is you know – is really missing discussion about healthcare delivery system reform. To the degree that a public plan is simply a vehicle, whether it has much of a life span any longer or not, I’m not really sure, but to the degree it’s simply a vehicle by which we can impose Medicare rates on our providers and basically overall lower the reimbursements to our providers, it’s a proposal that does nothing to change the way in which the care delivery system actually works.

If a cooperative, on the other hand, is a vehicle by which we can use federal policy to begin to force regions, to begin to imagine how the care delivery system might be reorganized through payment reform, through pushing the integration of care systems, through the engagement of patients in governance but also in their own care process, I think those are the kind of principles that are really going to make a difference. And as the co-op discussion unfolds, my hope is that that’s where you begin to see more discussion about the healthcare system itself.

ECHEVARRIA: You’re watching “Newsmakers” with Scott Armstrong. He’s the President and CEO of the Group Health Cooperative. Joining him in questioning are Noam Levey of the “Los Angeles Times” and “Tribune” Newspapers, and he serves as their Health Reporter, and David Lightman of McClatchy Newspapers. He’s their National Reporter. Mr. Lightman?

LIGHTMAN: Thank you. We may need a separate half-hour show for this, but I’ll try anyway. Regulation – who regulates? What do they regulate if you set up a national system of co-ops?

ARMSTRONG: You know I – again, I’m very proud of how well I’m able to run Group Health Cooperative. But in terms of setting federal policy around how you regulate things, it’s really beyond my ability to comment to specifically.

I would say that there need – at least in general terms, there needs to be a rational federal set of standards. But my view is healthcare is local, and different states have insurance commissioners and have regulatory structures that work and that work well for a reason. They need to continue to be relevant to how those regional care delivery systems and regional plans also work. Beyond that, it’s – until there are some specific proposals to react to, it’s very difficult for me to comment.

LEVEY: Let me go back, if I could, for a moment about what you were just talking about regarding creating co-ops and imbuing in them presumably the ability to do the kind of creative delivery system reforms that you’ve been talking about, can you talk a little bit about sort of how Group Health came together as a co-op and how both the cooperative structure worked initially as well as the provider network that grew up around that?

ARMSTRONG: Group Health was founded in 1947. It was a group of innovative, forward-thinking local community leaders along with physician leaders and others who were worried about the cost of healthcare, were worried about the unexpected expenses and believed that there was a better way to put together a care system and prepaid financing.

We still have active in our consumer governance some of our founding members, in fact, who were participants in these great debates where people mortgaged their homes to help fund upfront this Group Health Cooperative ideas and it’s incredible the stories that they tell. What’s also incredible is how over 62 years, we still endorse, live by, are successful because of some of those very same principles that those founding members were inspired by when they put Group Health together.

Consumer governance, prepaid access to primary care, assurance that your care is the concern of our care delivery system over the course of time through the full continuum of different care providers, you know active knowledge of our care system about what’s happening to our patients every step along the way – those are features now that have helped Group Health to become more than 620,000 member plan.

We’re a big, complex organization serving – with more than $3 billion in annual revenues. And yet these principles that were true to our founders continue to distinguish us today, and I believe are the kind of principles that really would be valuable components to whatever unfolds in the federal reform discussion.

LEVEY: So, would that mean in other words to replicate what you have done in presumably less than 60 years, would it require, then, that you have both a pool of customers as well as a ready network of doctors, clinics, and hospitals that would sort of all have to come together probably together at the same time?

ARMSTRONG: I think you would have to make investments in a not-for-profit organization in a process where you have patients actively involved in as consumer – in a consumer governance structure of some kind. Probably (ph) most important, you will need to build a care delivery system that’s either employed or engaged in some kind of prepaid – I hate to use the term, but I will – capitated (ph) kind of payment structure, and you need to build an organization that can bring this upfront financing into alignment with a care delivery system that you know you are constructing such that you can invest in those innovations that our current fee-for-service reimbursement model simply does not promote.

And I think that there are many examples around the country we – where we are making good progress already on creating some of the features that I’m talking about. There are large, integrated group practices that are already you know – you know doing the kind of work that I’m talking about and you hear many of them referenced on a regular basis.

The idea that in Medicare we would be contemplating bundled payments or some kind of premium payments for good quality care or great outcomes, these are the kind of policies that I think begin to start stepping us toward what I believe you would have to do if co-ops were to become – or something like a cooperative was to become more of an organizing principle.

LIGHTMAN: Well, as you say, the models are there, the discussion has been extensive, and yet still the politics, as you know, is a problem. What’s the biggest misunderstanding people have about co-ops?

ARMSTRONG: Well, first, you are right. I have been very impressed by the difference between the policy discussion and the politics of all of this, but you all probably are less surprised by that than I – than I would be.

I – you know it’s hard to say, I think that it’s really hard to say what would be the – it’s an endless list. I think I would just say that.

LIGHTMAN: Give me one.

ARMSTRONG: Sorry?

LIGHTMAN: Give me one. Give me one misunderstanding that you …

ARMSTRONG: Yes, I’m sorry.

LIGHTMAN: … that you want to clear up here on the show.

ARMSTRONG: Yes. Well, I think that the fact – I mean a lot of people have had this perception of cooperatives as being kind of this folksy kind of unsophisticated organization that is really built around you know old notions of what HMOs used to be, you know that created restriction to access and you know compromised on the quality of the investments that they made and so forth. And for anyone that would at Group Health Cooperative today, you would see that it’s really quite different from those old, dated perceptions.

You may know that Group Health recently was named by “Consumer Reports” as the number one HMO in the entire country. You may not know that the Puget Sound Health Alliance is a regional organization endorsed by Starbucks and Boeing and health plans and other providers in the area, and they publicly report through their report card on the quality of clinical care against a series of specific measures. Group Health care providers on 15 different measures most recently were rated number one in – on 11 of those measures.

And on and on and on there are all sorts of evidence that demonstrates that this is not your grandmother’s HMO. I mean this is a model that is working in this marketplace that offers insight into how this federal reform discussions really could unfold.

LEVEY: I realize we’re putting you on the spot here a bit as the representative of co-ops and their history, but as you probably know, there’s a long history of failure in the co-op world of healthcare as well. Can you talk a little bit about why so many of the co-ops that have started over the course of the last 50 – 60 years are no longer with us?

ARMSTRONG: Well, as your question implied, you’re right, I don’t really pretend to have a great answer to that question. I would presume, however, that it may go back to the comments I was just making, and that is running Group Health Cooperative is a complex business. We have more than 9,000 employees; we have a medical group of almost a thousand doctors; we collect more than $3 billion in revenues on an annual basis. This has to be run and managed in a way that is up to the challenges of such a complex organization.

And I think people have been led to believe that cooperatives aren’t like that for some reason. And I guess part of that reason is that many of them weren’t and that they aren’t with us any longer because they weren’t so well run.

ECHEVARRIA: We have time for one more question.

LIGHTMAN: Again, try to tell me in lay terms you’ll have a cooperative, but people could also choose their own doctors. And as I understand it in your state, a small percentage of people use the cooperative. So, on a national level, if only 10 percent of people use the cooperative, how would that solve the current healthcare dilemma in this country?

ARMSTRONG: In our system, there are 600,000 people who choose a group health insurance plan. Two-thirds of those patients get their care within our medical centers with our physicians. Those patients who get their care within our care delivery system, we have a relationship with them that allows us to implement the kind of innovations I’ve been talking about.

For the rest of the patients, I think you’re right. I think it’s difficult without some kind of payment reform to make a change in how those patients’ care would be improved. But I think ultimately the answer is applying to care delivery systems a different approach for payment that aligns each of those providers around a common goal. That goal is the health and the improvement of the health of the patients that that group of physicians cares for.

ECHEVARRIA: Scott Armstrong is the President and CEO of Group Health Cooperative. Mr. Armstrong, thanks for your time today.

ARMSTRONG: It’s my pleasure.

ECHEVARRIA: Noam Levey, we’ve heard a lot about the local scene, so to speak when it comes to healthcare co-ops. Is there anything that you heard in there that causes you pause or at least gives you some reflection as a discussion takes place of how this model might apply to a larger model?

LEVEY: Well, I thought Mr. Armstrong talked about particularly at the end in terms of the complexity of his organization as well as the sophistication of both the insurance component of Group Health as well as the – what he talked about the delivery system. I think rightly suggests that if you’re going to go down a co-op route, it’s a lot more complicated than just getting a bunch of people in a room together and figuring out a way to swap money so that everybody’s insured. And you know I think that’s instructive in terms of when we talk about, well, how do you create one of these things or more of them around the country.

ECHEVARRIA: And Mr. Lightman, if there are complications involved, what did he say in his – in our conversation that might clue you to some of those complications?

LIGHTMAN: Well, the – his last comment about provider payments. Obviously he’s well aware that co-ops are not the ultimate solution, if there is such a thing, for the healthcare problem in this country – the healthcare delivery dilemma in this country. He understands that. I think as we said during the show, the problem is the politics. It’s educating people, educating consumers, talking in down-to-earth terms about what this is, and that’s I think the first hurdle.

ECHEVARRIA: When you say – and you said hurdle, you asked him repeatedly about regulation. What did he say or didn’t say that might be interesting?

LIGHTMAN: Well, he said – he reinforced the idea that typically insurance has been a state-regulated function. They’ve been trying – as long as I’ve been covering Congress, 30 years, they’ve been trying to somehow break down those walls. It doesn’t happen. It – I’m not sure it’s going to happen. So, that’s a problem. And again, it goes back to who oversees this. If you don’t oversee – see it on a federal level, then what? Are you going to have this hodgepodge of co-ops all over the country doing all different things? I don’t know.

ECHEVARRIA: And when we talked about cost, you specifically asked him about consumer behavior. Was one of that how they treat this system rather than other systems available for healthcare?

LEVEY: Well, that’s right. And I mean David also asked a good question about their premiums. I mean have they been able to show a difference, not only in whether they’re providing better care and their consumers are happier, but what’s happening with the rate of growth in healthcare cost, which is of course the biggest issue haunting all of this discussion.

ECHEVARRIA: Did he address also how within the system how they (ph) control cost in your mind and is that going to be a concern is this idea goes forward about how you control cost within the system?

LIGHTMAN: Oh, it’s crucial. Yes, absolutely. Again, in the 25 minutes or so he had, did he address it? Well, you really can’t address it in that short a period of time. He’s aware of it – well aware of it. And I think he and others in Washington are doing what they can to address this. But, boy, it’s a problem.

ECHEVARRIA: What would you add to that?

LEVEY: Well, I would just say that, you know, when he talks about integrative delivery of care, I think there’s broad consensus out there that that’s – that is the way that you get better quality when you have your primary care doctor talking to your surgeon, talking to your nurse. When all those people are talking together, you get better results. And we don’t have a system right now where that’s the experience for most patients. They go to a doctor who doesn’t necessarily talk to the specialist who may not talk to the hospital.

And that discussion is a very different discussion than, “Are we going to have a public plan? Are we going to have a co-op? Are we going to mandate that people have insurance?” The problem is that getting to that place, getting to a place like Group Health where you have an integrated system, is potentially very disruptive because you’re banding a lot of people together, and, therefore, very politically challenging.

ECHEVARRIA: As far as this discussion, though, how serious do you think this co-op option that we’ve heard about the last couple of days, how long does this remain in the conversation do you think?

LIGHTMAN: Oh, I think – let’s see, Congress returns September 8, so it’ll last at least a while. I think we have to step back here and look at this as a bigger piece, and that is members of Congress are having serious, in-depth discussions about how to change healthcare in this country. Co-ops are one alternative. Public option’s one alternative. Provider payments, integrated delivery, et cetera, et cetera. We can’t just isolate these things. And that’s what’s so encouraging about all this. We’re discussing it. Mr. Armstrong is discussing it. I don’t know what’s going to happen. Nobody does. But it’s all part of the debate right now.

ECHEVARRIA: Mr. Levey, we have about 30 seconds. What would you like to add to that?

LEVEY: Oh, I would just add that as long as we’re talking about reform in this way and not about death panels and various other things, I think that’s probably a positive.

ECHEVARRIA: Noam Levey with the “Los Angeles Times” and “Tribune” Newspapers – he’s their Health Reporter, David Lightman with McClatchy Newspapers – he’s their National Reporter, thank you both for being on “Newsmakers.”

LIGHTMAN: Pleasure. Thank you.

END