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Q &A WITH PAUL ELLWOOD, JR., MD ‘FATHER OF MANAGED COMPETITION CONCEPT’

Emling, Shelley

ARTICLES

‘My own most compelling interest as a physician was in quality accountability and consumer choices based on quality first and then secondarily, price.’

Paul Ellwood Jr, MD, is like a parent who's upset over the way his offspring has turned out.

Having coined the term “health maintenance organization,” Dr. Ellwood has often been called the father of the managed competition concept. Since the 1970s, when he was an adviser to the Nixon administration, he has worked behind-the-scenes to shape health care policies.

The son of a physician, Dr. Ellwood, now 74, completed medical school at Stanford University in California, where he specialized in neurology, pediatrics, and physical rehabilitation. He founded the pediatric neurology program at the University of Minnesota and went on to become Chief of Inpatient Services at the Sister Kenny Institute in Minneapolis, overseeing its transformation to a renowned rehabilitation center in the late 1950s and 1960s.

Dr. Ellwood began practicing medicine in 1952 but jettisoned his career some 17 years later to figure out how to reform the system after noticing how its flaws affected his own patients. In 1968 he delivered a major address to health insurers in which he urged them to take more responsibility for the cost and quality of health care.

In the early 1970s, Dr. Ellwood founded the Jackson Hole Group, a loosely organized but highly regarded health care think tank consisting of politicians, providers, and policymakers. It was this group, which met in the resort town of Jackson Hole, WY, that came up with the concept of managed competition.

Indeed Dr. Ellwood's group was instrumental in getting legislation passed in 1973 that enabled the creation of Health Maintenance Organizations (HMO).

Later, in the early 1990s, Dr. Ellwood and the Jackson Hole Group stepped into the limelight again when they were recruited to help mold President Clinton's health care reform package.

But when the plan was rolled out in 1993, its emphasis on government regulation contrasted sharply from the group's vision of using free-market forces as an impetus for change. In the end, Dr. Ellwood's group opposed the reform package.

In 1998 Dr. Ellwood fell from a horse and crushed a vertebrae in his neck. Afterwards he said he came to experience the worst of the health care system from the patient's point of view. As an example, he cited the case of a hospital nurse who didn't know how to put back his protective collar, which had fallen off and had been used to immobilize his head.

Today the managed care guru lives on a ranch in Bondurant, WY, population 100, near Jackson Hole. Once again, he is trying to figure out ways to reform a system that, he insists, still needs fixing.

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WHY DID YOU CHOOSE HEALTH CARE POLICY?

I grew up in Oakland, CA, the son of a primary physician. It was just always assumed I'd be a doctor. No one thought anything else. But after 17 years I began to regard the health care system as my patient instead of the children with neurological problems that I had been trained to treat.

I felt medicine lacked continuity and was too fragmented to deal effectively with our patients' problems. There were too many specialties. I am, for example, trained as a pediatric neurologist and a physiatrist. I couldn't understand why the two couldn't be combined. I felt like patients were often being over-treated. For example, I felt stroke victims could learn to speak just as well listening to a radio as having a therapist sit there holding up a picture and saying the word ‘cat’ over and over.

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DID YOU EVER REGRET LEAVING YOUR PRACTICE?

No. I only regretted that I couldn't earn good money doing so. The big difference between policy work and treating patients is time and satisfaction. It's very hard to figure out whether you're making any difference with policy work. As a neurologist, you often get immediate satisfaction from treating a patient. I've also had the disappointment of seeing the country embrace only part of what I had hoped it would. The whole HMO thing was perverted by the desire for maximizing profits.

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HOW DID THE HMOCONCEPT EVOLVE?

In 1973, the legislative act that enabled and stimulated the creation of HMOs was passed. While it took three years, it was relatively easy to get a law passed facilitating a new approach to health care. The hard part was getting HMOs started and persuading purchasers to use them. The reason why the HMO idea had such an impact is that it was relatively simple and sought to attack what everybody agreed was a terrible problem: out-of-control health care costs. The implementation – or should I say marketing – process was more unpredictable and slow.

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It wasn't until the early 1990s that HMOs as a health care delivery model became widespread enough to have any meaningful impact on medical inflation. While individual HMOs like Kaiser Permanente did realize major cost savings long before that time, only in 1993 did the rate of increase in US health expenditures fall to the point where it matched the growth rate of the consumer price index.

Medical inflation has returned and the health system is adrift as too many of the economically driven managed care arrangements have lost their credibility with the public and with medicine as stewards of medical care. Unfortunately, the next phase of reform will be far more complex and problematic to implement and does not naturally follow from the current direction of managed care.

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HOW DID THE HMO CONCEPT GO ASTRAY?

The policymakers and purchasers only understood and embraced the inflation fighting price competition idea. My own most compelling interest as a physician was in quality accountability and consumer choices based on quality first and then, secondarily, price. I could only sell HMOs as an inflation buster.

Outcome accountability and reporting should be required of the next generation of health organizations. We've learned, however, that this form of organizational accountability still has little influence on consumer choices but does influence doctors and hospitals. Consumers do not pay much attention to reports about post-surgical mortality or infection rates. Their view is that the quality of care is primarily attributable to their own doctors' skill and empathy.

One of the main disappointments about managed care is that it did not adopt a longer-term approach to managing patients. The usual medical transaction is the length of a doctor's visit. Medicine continues to be pretty much short-term transaction oriented. HMOs are slightly more committed to prevention but not nearly to the degree I had hoped.

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WHAT ARE YOU DOING NOW IN THE AREA OF HEALTH CARE REFORM?

We've begun to think about replacing or restructuring the HMO idea. One important aspect will be an increased emphasis on having patients play a more significant role in their own treatment. Due to my own recent life experiences, I've learned how little influence patients can exert over their own treatment. The next step then is to get some sort of consensus. Then we need to devise a strategy to implement these ideas. Since we can't depend on the government taking a very active role we will have to rely on the private sector to a large extent. I haven't yet talked to any one in government. Politicians' eyes often glaze up after five minutes of talk about a radical idea so you have to come up with some pretty simplistic notions or at least very carefully formulated ones.

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WHAT IS THE PRIORITY HEALTH CARE ISSUE NOW?

What's likely to be dealt with is medical inflation and the growing number of uninsured, and excess demand among those who are insured. The major issue to me is a drifting, dysfunctional health delivery system. It is too costly and allows too many preventable mistakes. From a policy point of view, I think anyone familiar with health care can sit down in an hour and outline what a better health care system would look like. But I don't know anyone who could tell you how to get there.

©2001 American Academy of Neurology