William F. Jessee, M.D., brings a wide range of experience to his job as president of the Medical Group Management Association, which represents the interests of 185,000 physicians in more than 7,100 medical groups and other organizations. Before joining MGMA last year, he served for three years as vice president for quality and managed care standards at the American Medical Association, where he led the development and implementation of the American Medical Accreditation Program. Jessee's clinical background includes stints as a practicing pediatrician and emergency physician. A founding board member of the International Society for Quality in Health Care, Jessee was its president from 1989 to 1991. He is an adjunct professor of health policy and administration at the University of North Carolina's School of Public Health, where he taught full-time from 1980 to 1986. Jessee is a 1972 graduate of the University of California, San Diego Medical School. He served in the U.S. Public Health Service from 1973 to 1976. He spoke recently with Senior Contributing Editor Patrick Mullen.

MANAGED CARE: Within groups, what are the hot compensation issues right now?

WILLIAM F. JESSEE, M.D.: How to do it. Last year, for the second time, we analyzed practices that were better performers on a series of financial measures from our cost survey. With the Wharton School of Business, we went into about 10 of those practices and used a case-study approach to try to understand to what they attributed their good financial performance. Virtually every one of them said that their physician-compensation plan was a key factor in their success, but no two of them had the same physician compensation plan.

MC: So it helped that physicians were satisfied that they had a fair, equitable system?

JESSEE: Exactly. Physicians understood what their compensation plan was. It's got to be sufficiently transparent so that physicians understand that there is a relationship between what they do and what they make.

MC: And there's not a black box between those two.

JESSEE: That's right. Some things that plans have done to try to give physicians incentives are well-intentioned, but they're so obscure as to be unlikely to have much impact on a physician's day-to-day decision making. For example, look at what Aetna U.S. Healthcare has tried to do in offering quality incentives. It's a nice concept, but it's very difficult to get physicians to pay attention when those incentives may relate to only 1 out of every 20 patients. The additional income it brings to practices is so low, you're just not going to get much bang for the buck. It's fascinating to me that with as much as we know about the art and science of medicine, we've been very slow to apply the same kind of experimental method to the business side of medicine.

MC: Just the phrase "business side of medicine" raises the hackles of some physicians. Is that part of the problem?

JESSEE: That may have been part of the problem historically. I'm not sure that's the case anymore. There is a growing recognition among physicians that if you really want to control your medical practice, you can't just be a technician. You have to understand how the medical service is most efficiently and effectively provided. And it's not just a matter of the finances — it's also a matter of understanding things like work flow. To be effective and efficient in your practice, you have to understand that not all patients are booked in 15-minute intervals. There are actually tools and techniques to optimize patient flow . None of us learned any of that stuff in medical school. Doctors are running small businesses, and in some cases fairly good-sized businesses, depending on how many are in the group. They need to understand enough about the business side to be effective partners with their administrators in making sure that the whole operation runs efficiently and effectively.

MC: What's your read on the state of relations between physician groups and managed care plans? Is there still a fair amount of animosity?

JESSEE: It has the potential to get significantly better. Physicians I talk with look at events like United HealthCare's decision to no longer require preauthorization of medical decisions, and their reaction is like the Missouri motto: Show me! They're waiting to see if other plans follow, and whether the result is really going to be less micromanagement of their care decisions.

MC: Or if the gate merely moves from the primary care physician to the specialist's appointment desk. What other problems are your members having with managed care plans?

JESSEE: One thing that still drives physicians crazy, and which generally is not being addressed, is the lack of consistency in medical management rules across plans. If there's a theme I'm hearing, it's doctors asking things like why the rules for doing a hysterectomy should vary according insurance plan. That's going to be tough for plans to address, because so many of them have invested a lot of money into developing proprietary guidelines or medical management models. If you push medical directors, they would all agree there's no reason why the rules should be different — because the science behind the guidelines ought to be the same.

MC: But it's hard to go back to the board of directors after you've spent several million dollars on your own system and say, 'We're going to throw it overboard.'

JESSEE: It's hard for them even to get together with other plans and talk about common protocols because of concern about antitrust issues. Medical directors of the not-for-profit plans in the Boston area have formed their own not-for-profit corporation. They are using that corporation to develop common protocols for everything from credentialing to guidelines for elective admissions. The rationale is that the science ought to be consistent regardless of who the payer is. Competition among plans ought to be on things like customer service and quality of service. It's sort of a refreshing attitude. Whether they'll be able to pull it off, and whether it will be replicated elsewhere, is another issue entirely.

MC: You are part of an industry work group helping advance development of computer-based patient records. How much of the challenge is technical, and how much is physician behavior? For example, physicians generally learn to do the same sorts of things on an initial exam, but there is no consistency in terms of how they define those elements and what precisely they do.

JESSEE: And there's no commonality of the definitions of a lot of those data elements, and a lot of information can't be moved from one system to another.

MC: Is this something that will take another 20 years to get right?

JESSEE: It could. I hope not. One of the few areas where there ought to be some role for the government in health care is in trying to create consistency in the format and content of patient records. We talk a lot about unnecessary variation in medical practice, but there's at least as much unnecessary variation in the mechanisms for documenting medical practice. Efforts to try to standardize the record format have met with greater or lesser degrees of success. Like many things in health care, everybody agrees that there ought to be more standardization. So you get 20 different people trying to create standards and end up with 20 different standard approaches. One thing the Health Insurance Portability and Accountability Act of 1996 did was to put some burden on the Secretary of Health and Human Services to make recommendations to Congress on a variety of standardization activities. If it doesn't get bogged down with all the vendors taking a position against it — because whatever standard they come up with is going to be different from what they've got — it has the prospect for moving the idea of an electronic record forward.

MC: How has the Internet changed the landscape?

JESSEE: The Internet has radically changed the ground rules. One of the biggest barriers keeping medical groups from using electronic records was the need for a significant up-front capital investment, and the need to try to get everybody in the group to agree on a particular record format or product. It was a career-limiting step for a lot of practice administrators to recommend that the group put $100,000 or so into an electronic medical record system, only to have one of the physicians go to a meeting two weeks later and find that somebody else has a product that was more user-friendly at half the price. So most of them just wouldn't take that risk, and just continued to use paper records. Now, if you have a 10-physician group, you can let one person subscribe on a monthly basis to an Internet based application service provider and keep records on the Internet. The other nine doctors don't necessarily have to use the same record format. There's no capital investment, because the software resides on the Internet server. That holds a lot of potential. A couple of vendors that I'm familiar with have moved very quickly to offer Internet-based applications at pretty reasonable prices per physician.

MC: Are your members more enthusiastic about web-based products because they use the web for other things and they're used to it?

JESSEE: That is a factor. Physicians are both excited by the prospects the web offers and at times perplexed by the number of options, and thus a little paralyzed about which way to go. MGMA is developing directories of web-based medical office management applications to help them sort through and understand the products. Still, trying to keep up with the pace of change is extremely difficult.

MC: I understand that some new Internet-based coding tools create a visit note that the doctor can give to the patient.

JESSEE: One of them has the ability for the patient to access that note over the web. It has links embedded into it so you can go online to get patient-oriented information. A lot of vendors are starting to look at ways of improving the capture of information for purposes of billing and medical records. It also is a source for creating new tools for patients to learn more about their illnesses. That will lead to a more informed and participative relationship between the physician and the patient.

MC: What stands in the way of wide adoption of Internet-based electronic medical records?

JESSEE: A big barrier is that a lot of the people who are writing really nifty software have never taken the time to go look at what happens in a physician's office and try to fit the acquisition of information into the work flow. If you think a physician is going to examine a patient, and then go to another place and sit down to type in a record of the visit, you've got another think coming. One challenge for software and device makers is to find ways to make it easier for physicians to acquire information during the patient encounter, rather than making information entry another step of the process.

MC: Some vendors are promoting a hand-held tool that the physician can use to enter information during the patient encounter and then upload to the record.

JESSEE: It's a step in the right direction. The basic structure of what a primary care physician does when seeing a patient is pretty much the same in 2000 as it was in 1950. When you take the blood pressure you put a manual sleeve on people's arms, listen to the pulse through a stethoscope, and then write down the number someplace. When you start thinking about it, that's stupid.

MC: You can go in a drugstore and put your arm in a sleeve and have your blood pressure taken electronically, so the tool certainly exists.

JESSEE: That tool is there, but it's not in most physicians' offices. Most thermometers today are electronic, but what we've not done is to go the next step of trying to figure out how to feed that data into the record. If we can start thinking about those approaches we're going to become much more efficient in integrating electronic devices into the practice.

MC: What is MGMA's patient safety initiative about?

JESSEE: Medical errors became a real hot item during a slow news day right after Thanksgiving, when a report from the Institute of Medicine got leaked. It was under development but not yet ready for publication. I went out and picked up my newspaper in Denver. The Page 1 headline read, "Malpractice kills tens of thousands."

MC: As though all those deaths happened the previous afternoon.

JESSEE: It definitely put a very negative spin on what was otherwise a very valuable report. MGMA announced in October that it would launch a patient safety initiative. It made us look prescient when the IOM study got as much play at it did. The information on safety in health care organizations is not new. There's been a long record of studies that have shown that hospitals are hazardous places. We understand, fairly well, some of the reasons why those hazards occur in hospitals. As an industry, we've been slow to come to grips with the risks and figure out how to reduce them. MGMA decided that this was going to become one of the next big public issues. So we launched our initiative with the idea that our unique niche and opportunity to make a contribution is in better understanding and reducing risk in ambulatory care settings. Most of the research and most current efforts focus on hospitals. As more care that used to be done in inpatient settings moves to outpatient settings, there's no question that the risk will probably increase in outpatient care.

MC: Where's the health care industry heading over the next several years? Are we going to continue to see essentially a for-profit system with hundreds of companies, or might something else come down the road?

JESSEE: I wish my crystal ball were more clear. Without question, there's been a lot of retrenchment going on. I've known David Jones at Humana for a number of years. David is amazing because he is constantly reinventing his business.

MC: Sure. It started out as a nursing home company and has been several things since.

JESSEE: Yes, and from what I understand he's in the midst of reinventing Humana again. That's to be admired, because there's a recognition that if this model doesn't work it's time to change and try a different one. The conclusion I would draw out of what has happened to the for-profit managed care industry is that centrally managed network models don't work. Unfortunately, even some of the models that were most effective, which tended to be group or staff models, jumped into the network model. They thought that was the only way to grow and be competitive. Harvard Pilgrim is a classic example. Harvard Community Health Plan was a very successful staff-model HMO. When it decided that to remain competitive it had to merge with a bunch of other people and develop a network model, it started getting into trouble. If there's a lesson to be learned, it's that what made group or staff models work was the interaction that took place among physicians who knew each other. They had a shared-practice style and were able to be critical of each other's practice patterns.

MC: Over-the-shoulder peer review.

JESSEE: That worked very well. Then we started getting to the point where a network was a bunch of doctors who had absolutely nothing in common other than that they were all under the same contract. Then we tried to manage their practice patterns through a corporate medical management model. We've had a good national experiment on this, and we've shown that it doesn't work very well in the long haul. My sense is we're probably going to see a return to smaller group models. I don't know what the right size of that group is. We've proven that very large IPAs don't work particularly well, and that very small physician groups are too small to be able to manage risk. Something in between offers the most effective way to optimize utilization of services and maximize quality. Whether it's for-profit or not-for-profit is an open issue.

MC: There's some selling to be done to Americans. Organizations like Kaiser Permanente have come to be seen as old-fashioned in some way, even if they were delivering excellent medical care.

JESSEE: I also think that we went through a cycle where consumers were so removed from what their health care cost that they were part of the problem. We're seeing the pendulum swing back. When my management team talked about the increase in health care costs we were seeing for our 180 employees this year, we started talking about the incentives we have. Denver is a high-penetration managed care market. All but about 20 or so of our employees elected an HMO option, but we provide very little incentive for our employees to be prudent in their use of services.

MC: There have been countless trends in health care over the years that became all the rage then imploded. Are there any trends you can see now that your members are starting to buy into that they ought to be careful about?

JESSEE: I cannot help commenting on how similar some of the irrational expectations people have about some Internet companies are to the irrational expectations that people once had for practice management companies.

MC: So the word of caution would be the same as it might be for any Internet investment. The rules of business haven't necessarily all changed.

JESSEE: I would encourage people to look for the fundamental underlying value of any organization that you're thinking about using for a provider of any kind of service, rather than at whether it's the darling of the stock market today. Because investor sentiment could all change pretty quickly.

MC: Thank you.

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