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Fostering Rapid Advances in Health Care Learning from System Demonstrations . Committee on Rapid Advance Demonstration Projects: Health Care Finance and Delivery Systems Janet M. Cowgan, Ann Greiner, Shari M. Erickson, Editors Board on Health Care Services INSTITUTE OF MEDICINE OF THE NATIONAL ACADEM/E' THE NATIONAL ACADEMIES PRESS Washington, D.C. www.nap.edu L .,

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THE NATIONAL ACADEMIES PRESS 500 FIFTH STREET, N.W. Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences' the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. Support for this project was provided by the National Academy of Sciences. The views presented in this report are those of the Institute of Medicine Committee on Rapid Advance Demonstration Projects: Health Care Finance and Delivery Systems and are not necessarily those of the funding agencies. International Standard Book Number 0-309-08707-4 Additional copies of this report are available from the National Academies Press, 500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropoli- tan area); Internet, http://www.nap.edu. For more information about the Institute of Medicine, visit the TOM home page at: www.iom.edu. Copyright 2003 by the National Academy of Sciences. All rights reserved. Printed in the United States of America. The serpent has been a symbol of Tong life, healing, and knowledge among almost all cultures and religions since the beginning of recorded history. The serpent adopted as a logotype by the Institute of Medicine is a relief carving from ancient Greece, now held by the Staatliche Museen in Berlin. .

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1 I ~ ~~r r~- 7 ~~ -~ Goethe ,:::::,:,! :~Es Sag a. ~~ _ '''-'-'! . . is INSTITUTE OF MEDICINE ~ ME -~0~! IDS Shaping the future 10r Health

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THE NATIONAL ACADEMIES Advisers 10 the Nation on Science/ Engineering/ and Medicine The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. Me National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration arid in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering. lbe Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. Wm. A. Wulf are chair and vice chair, respectively, of the National Research Council. ., www.national-academies.org

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COMMITTEE ON RAPID ADVANCE DEMONSTRATION PROJECTS: HEALTH CARE FINANCE AND DELIVERY SYSTEMS GAIL L. WARDEN (Chair9, President and Chief Executive Officer, Henry Ford Health System, Detroit, Michigan ANNE M. BARRY, Acting Commissioner, Minnesota Nepal latent of Finance, St. Paul ROBERT A. BERENSON, Senior Advisor, AcademyHealth, Washington, D.C. DONALD M. BERWICK, President and CEO, Institute for Healthcare Improvement, Boston, Massachusetts BRUCE E. BRADLEY, Director, Health Plan Strategy and Public Policy, General Motors Corporation, Detroit, Michigan CHRISTINE K. CASSEL, Dean, School of Medicine and Vice President for Medical Affairs, Oregon Health and Science University, Portland KAREN DAVIS, President, The Commonwealth Fund, New York, New York DON E. DETMER, Dennis Gillings Professor of Health Management, University of Cambridge, United Kingdom, and Professor Emeritus and Professor of Medical Education, University of Virginia, Chariottesv~le ARTHUR GARSON, JR., Dean, School of Medicine and Vice President, University of Virginia, Charlottesville LARRY A. GREEN, Professor of Family Medicine, University of Colorado, Denver, and Director, The Robert Graham Center, American Academy of Family Physicians, Washington, D.C. JOSEPH P. NEWHOUSE, John D. MacArthur Professor of Health Policy and Management, Harvard University, Cambridge, Massachusetts WILLIAM L. ROPER, Dean, School of Public Health, The University of North Carolina at Chapel Hill WILLIAM M. SAGE, Professor of Law, Columbia University School of Thaw, New York, New York MARLA E. SALMON, Dean and Professor, Nell Hodgson Woodruff School of Nursing, Emory University, Atlanta, Georgia WILLIAM W. STEAD, Associate Vice Chancellor for Health Affairs, Director of the Informatics Center,and Professor of Medicine and Biomedical Informatics, Vanderbilt University, Nashville, Tennessee EDWARD H. WAGNER, Director, W.A. McColl Institute for Healthcare Innovation, Center for Health Studies, Group Health Cooperative of Puget Sound, Seattle, Washington IOM Council Liaison MICHAEL M.E. JOlINS, Executive Vice President for Health Affairs and Director, Robert W Woodruff Health Sciences Center, Emory University, Atlanta, Georgia Study Staff JANET M. CORRIGAN, Director, Board on Health Care Services ANN GREINER, Deputy Director, Board on Health Care Services SHARI M. ERICKSON, Research Associate Special Consultants RICK CURTIS, President, Institute for Health Policy Solutions, Washington, D.C. RONA BRIERE, Briere Associates, ~c. v .

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REVIEWERS This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the NRC's Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institu- tional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We wish to thank the following individuals for their review of this report: GERARD F. ANDERSON, Professor, Department of Health Policy and Management Medicine and Director, Center for Hospital Finance and Management, The Johns Hopkins University RANDALL R. BOVBJERG, Principle Research Associate, The Urban Institute DAVID C. CLASSEN, Associate Professor of Medicine, University of Utah and Vice President, First Consulting Group ROBERT M. CRANE, Director, Kaiser Permanente Institute for Health Policy, Kaiser Foundation Health Plan, ~c. SH BERRY GLIED, Assistant Professor of Public Health, Columbia University BONNIE LEFKOWITZ, Consultant DENISE LOVE, Executive Director, National Association of Health Data Organizations BLACKFORD MIDDLETON, Clinical Informatics R&D, Partners HealthCare System ALAN NELSON, Special Advisor to the Executive Vice President, American College of Physicians- American Society of Internal Medicine LEN NICIIOLS, Vice President, Center for Studying Health System Change JANET OLSZEWSKI, Vice President, Government Programs and Regulation, MCARE, University of Michigan NANCY A. W~TELAW, The National Council on the Aging . ., Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations nor did they see the final draft of the report before its release. The review of this report was overseen by ELAINE L. LARSON, Professor of Pharmaceutical and Therapeutic Research, Columbia University, School of Nursing and BRADFORD H. GRAY, Editor, The Milbank Quarterly and Director, Division of Health & Science Policy, New York Academy of Medicine. Appointed by the National Research Council and Institute of Medicine, they were responsible for making certain that an independent examination of this report was earned out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution. . . V11

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Foreword In June 2002, Health and Human Services Secretary, Tommy Thompson, met with leaders from The National Academies, including the Presidents and selected members from the Institute of Medicine, the National Academy of Sciences and the National Academy of Engineering. Paramount among his concerns were the serious problems confronting the health care delivery system, including rapidly rising health care costs, serious quality and safety shortcomings, growing numbers of uninsured, racial and ethnic disparities in access and quality of care, and workforce shortages. The Secretary challenged the National Academies to identify several bold ideas that might change conventional thinking about the most serious problems facing the health care system. Throughout our history, the Academies have welcomed tough assignments. Since our founding in ~ 863, we have called upon leading scientists to examine difficult problems and produce original insights or solutions. The recent report, Making the Nation Safer, describes a wide range of threats to homeland security and recommends actions to protect the nation against terrorism. The current crisis confronting the nation's health care delivery system is no less important to our long-term national interests. O The TOM responded to the Secretary~s challenge through the Committee on Rapid Advance Demon- stration Projects: Health Care Finance and Delivery Systems. The committee was charged with identify- ing a set of demonstration projects that have the potential to lead fundamental change in the health care system. The ideas presented are bold, and testing them will require resources. However, the scale of the problem requires not only paradigm shifting ideas, but a rigorous and full scale testing of those ideas before they are considered for national implementation. Under current assumptions, the Medicare trustees project that in 75 Years. health care could account for 40 percent of GNP. Chancing that traiec- :- _ r__J__ _ .~ - . . ~ . ~ . . .. . ~ . .. ... tory w111 require wide rangmg reforms and changes on the part oi consumers, employers and health care professionals alike. The Secretary's request to the National Academies and others to think creatively and unconventionally is an important step in creating alternative paths to assure quality health care for the American people without preempting other vital national interests. Sharing the Secretary's sense of urgency, the IOM committee has moved expeditiously to identify a set of demonstration projects intended to produce model delivery systems within 5 years. As a country, we must now begin the challenging task of building a health care system for the 2ISt century. Harvey V. Fineberg, M.D., Ph.D. Presidlent,, Institute of Medicine November 2002 1X

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Acknowledgments The Committee on Rapid Advance Demonstration Projects wishes to acknowledge the many people whose contributions made this report possible. First and foremost, special thanks goes to the consultants listed below who provided their insight, support, and expertise to the project. DAVID W. BATES, Chief, Division of General Medicine, Brigham and Women's Hospital, Boston, Massachusetts MOLLY JOEL COVE, President, Health Technology Center, San Francisco, California ARNOLD S. MILSTEIN, William M. Mercer, Inc., San Francisco, California PATRICIA SALBER, Medical Director, Managed Care Health Care Initiatives, General Motors Corporation, Larkspur, California EDWARD PI. SlIORTLIFFE, Professor and Chair, Department of Medical Tnformatics, Columbia University College of Physicians and Surgeons, New York New York Several other individuals also made important contributions to the committee's work. They include David Doolan of Hunter Health in New South Wales, Australia; Christopher Koppen of the National Association of Community Health Centers; Freda Mitchem of the National Association of Community Health Centers; Patricia Rutherford of the Institute for Healthcare Improvement; David M. Stevens, Ilealth Resources and Services Administration; Kenneth E. Thorpe of the School of Public Health at Emory University; Tricia Trinite of the Health Resources and Services Administration; Nancy Whitelaw of the Henry Ford Health System and the National Council on Aging. We would also like to thank the following institute of Medicine staff members for their valuable contributions: Philip Asp~en; Wilhelmine Miller; and Dianne Wolman. X1

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Contents EXECUTIVE SUMMARY eeeeeeeeeeeeeeeeeeee~eeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeaeeeeeeeeeeeaee..eeeeeeeeeee..eeee..eeeee..eeeeeee 1 1 TIIE TIME FOR CHANGE HAS COME eeeeeeeeeeeeeee~eeeeeeee~~eeeeeeeeeeeeeee~eeeeeeeeeeee~eeeee~~~eeee~ see 17 Origins of This Report 19 Criteria for Selection of Demonstrations 19 Supporting and Evaluating the Demonstrations 21 Other Possible Demonstration Areas 23 2 CI1RONIC CARE REDUCING THE TOLL OF CLONIC CONDITIONS ON INDIVII)UALS AND COMMUNITIESeeeeeee.~eeeeeeeeeeeeeee.~.eeeeeee.~. 27 Summary Description 27 Background 28 Amp 29 30 36 Demonstration Attributes ............................................. Possible Demonstration Expansions............................. 3. PEUMARY CARE 40 STELLAR COM1\'IUNITY EIEALTI~I CENTERS e.~eee. 41 Summary Description... Rid ~l~m-~1 amp Demonstration Attributes ...................................................... 42 46 47 4. INFOEU`IATION AND COMMUNICATIONS TECHNOLOGY INFRASTRUCTURE A ``PAPERI~ESS', H h,ALTEI CARE SYSTEMe.~.eee.~. 57 Summary Description 57 n~k~^llna 5 8 60 61 64 Demonstration Attributes .......................................................................... Making Progress Toward a National ICT Infrastructure 5. STATE HEALTH INSURANCE: MAKING AFFORDABLE COVERAGE AVAILABLE TO ALL AMERICANS 69 Summary Description Background Demonstration Attributes ..... Implementation Issues.......... Q . . . X111 69 69 .71 72 76

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XIV CONTENTS 6. LIABILITY: PATIENT-CENTERED AND SAFETY-FOCUSED, NONJUDICIAI COMPENSATION 81 Summary Description Background ......... Goals................................ Demonstration Attributes GLOSSARY AND ACRONYM LIST ., 81 82 85 85 ....................................................................................... 91