Efficiency Matters: Inducing Moore’s Law in American Care Delivery Arnold Milstein, MD, MPH IHA P4P Conference February 29, 2008 g:\hcgb\mas\milstein\meetings\IHA P4P 2.29.08 (LA)

To Afford Expanded Coverage and a Continual Inflow of Medical Miracles, New Health Policy Must Accomplish Two Jobs (while improving health outcomes) “Translational Efficiency” Lower total cost of care by ~ 35 percentage points from average levels to current benchmark levels “Knowledge Turns” Lower total cost of care by >2.5 percentage points every year thereafter via discovery of leaner care methods (Read Andy Grove ’06 JAMA article)

A Converging National Path to Moore’s Law in Health Care A Converging National Path to Moore’s Law in Health Care? (Three Simple Rules) Moore’s Law High Rule III Clinical Reengineering Larger annual gains in quality and affordability by “learning organizations” Rule II Performance Sensitivity Faster uptake & discovery of “better, faster, leaner” care delivery innovations Efficiency of Health Benefits Spending (Health Gain / $) Rule I Performance Transparency Performance-sensitive health plan design and/or provider payments Universal hospital & MD transparency on effectiveness & efficiency Low 2005 Evolutionary Path 20XX

3 High-Friction Dilemmas Unit of accountability? Allocation of net savings? Minimum validity threshold for consequential performance reporting? (Customer decides) (Every level of influence) (Ask Solomon) g:\hcgb\mas\milstein\meetings\IHA P4P 2.29.08 (LA)

Mission Summary An increasing fraction of Americans and their purchasers cannot afford wasteful conventional care methods Necessary acceleration of “translational efficiency” and “knowledge turns” will only occur if customers become much more performance-sensitive Regional differences in physician public-mindedness will resolve 3 high-friction dilemmas differently The price of tepid incrementalism is two deaths per hour in working class households