Kitzhaber Makes National Waves

Governor John Kitzhaber is in demand on national media to describe Oregon's daring experiment to reduce the cost of health care while improving the quality of care for patients, which if it works could become a national model.

Governor Kitzhaber went from a face in the crowd in the First Lady's State of the Union box to a news media headliner talking about Oregon's bold venture into transforming the health care delivery system to deliver better quality at less cost.

The former emergency room physician told national audiences this week he couldn't accept budget cuts that forced low-income and working poor families to access their health care in the ER. He told The Washington Post he still vividly recalls an elderly man who was culled for budgetary reasons from the state's Medicaid rolls, but who showed up at his emergency room after suffering a stroke. "These people don't disappear," Kitzhaber said.

Appearing on NPR's Here and Now show, Oregon's third-term governor explained the approach the state is pioneering to "bend the cost curve" of health care by creating incentives to keep people healthy rather than just treat them when they are sick. 

Kitzhaber focused on the care of patients with chronic illnesses who can avoid hospital admissions and additional prescription drugs through more personalized care, often in the form of a Registered Nurse. He said helping to manage chronic illnesses can result in better outcomes for patients and drastic reductions in medical costs. Another cost driver is untreated mental illness, which can result in frequent, costly medical incidents that are treated, but without getting to their root cause.

When the Obama administration awarded $1,9 billion over five years to Oregon to support its Medicaid program, called the Oregon Health Plan, Kitzhaber says he got a lot of calls from fellow governors wanting to learn the trick. When he told them what Oregon committed to do — to slow the rate of growth in health care spending by 2 percent compared with the rest of the country, or by $4.8 billion over a decade — Kitzhaber noted dryly, "They didn't call back."

Much of the focus of Oregon's cost-control strategy centers on a new business model called coordinated care organizations. It basically involves getting all the medical providers and insurers in a community in one room and persuading them to collaborate on offering evidenced-based treatments and creating disincentives for steps that cost a lot of money, but don't improve patient outcomes.

Cindy Mann, director of the Center for Medicaid and State Operations, told The Washington Post, "Oregon is trying to change the way that health care is delivered with incentives to deliver smarter, better care instead of just imposing budget changes that cut back on health care." John McConnell, a health policy researcher at the Oregon Health & Science University said, "In terms of cost-control experiments, the likes of this we have never seen in health care."

The proof is still waiting for the pudding, but Kitzhaber is confident enough that he banked on $350 million in reductions in Medicaid expenditures in the 2013-2015 biennium, without lopping people off coverage, shrinking their services or squeezing hospital and physician payments.

The laborious process of reinventing the health care delivery system has its built-in tensions. Greg Van Pelt, chief executive for Providence Health and Services in Oregon, said the emphasis on preventive care can turn acute care hospitals into cost centers instead of revenue generators. A strong advocate for coordinate care organizations, Van Pelt said hospital workforces have been shrunk and new protocols adopted, such as reducing elective births prior to 39 weeks, resulting in fewer babies requiring neonatal care.

Kitzhaber's Oregon Health Plan budget recognizes the stress on hospitals and includes incentives for them to alter how they deliver healthcare services — and make money.

"The first few years are going to be very difficult financially, politically and culturally," Van Pelt told The Washington Post. "It'll be about hanging in there. We know this is the right thing for us to do. We all complain about health care spending, but nobody does anything about it. Now, that's changing.

If Kitzhaber has his way and the coordinated care experiment pans out, delivery system reforms could spread to larger populations such as state workers and teachers — and maybe some day to the entire country.

If every state cut its Medicaid costs as Oregon is trying to do, Kitzhaber said it would save the federal government $1.5 trillion, which is more than federal officials apparently are capable of cutting these days.