Berwick’s appointment a boon for medical device makers?

If you’ve been studying the contents of the recently passed healthcare reform legislation, and you’ve looked in vain for the elements that emphatically implement systemic cost control and improvements in quality of care, President Barack Obama’s nomination of Dr. Donald Berwick as administrator of the Centers for Medicare and Medicaid Services comes as very good news indeed. With this nomination, the president has demonstrated that he fully understands that insurance reform alone — important as it may be — won’t fix the ills besetting U.S. healthcare, and that he is committed to an ongoing process to rationalize and improve the way our healthcare is organized, provided and evaluated.

Administrator of CMS is the most critical healthcare post in the country. As summarized in the Boston Globe, the agency has 4,500 employees, an annual budget of $780 billion and funds the healthcare of more than 100 million primarily elderly or low income Americans — a number that will increase substantially as more and more Baby Boomers qualify for Medicare at age 65 and the Medicaid benefit expansion built into healthcare reform comes on line. The position offers enormous potential for leadership, but requires daunting administrative and political skills. Since its founding in 1977, CMS has had enormous turnover in the administrator’s office, with 10 different presidential appointees approved by Congress and 17 interim or acting leaders.

A number of those Administrators, and virtually all of the interim appointees, have been career agency managers, appointed primarily for their administrative capabilities. After all, the operational mechanics of contracting, managing funds, maintaining program integrity, staffing critical positions, etc., have to be "Job One." Some administrators, the ones most likely to have had even a limited public profile — like economists Carolyne Davis (1981-85) and Gail Wilensky (1990-92), hospital administrator Bruce Vladeck (1992-97) or physicians William Roper (1986-89) and Mark McClellan (2004-06) — have been healthcare policy experts drawn from public policy or economics, or from healthcare institutional settings. This latter group has on occasion been able to provide meaningful policy direction and innovation, but their ability to deliver real change has usually been constrained by the inertia of the giant CMS bureaucracy and partisan congressional conflict over the broad policy principles they advocated. CMS has been under interim leadership since McClellan’s resignation in November 2006.

Don Berwick brings a completely novel skill and experience set to the office. A pediatrician by training, he made his real professional mark as vice president of quality-of-care measurement at Harvard Community Health Plan in the early 1970s and went on to found the not-for-profit Institute for Healthcare Improvement in 1989. His is unquestionably the most highly regarded and influential healthcare quality improvement voice in the U.S. today, and the practical results of IHI-promoted voluntary initiatives such as the 100,000 Lives Campaign and the Five Million Lives Campaign in reducing medical errors and avoidable adverse events and patient deaths are truly remarkable. These programs are built on the three-legged stool of quality measurement, operations research and implementation of best practices. Berwick deals with concrete information about how to measure what goes on in healthcare institutions and how to design and implement changes in care delivery processes in order to improve efficiency, effectiveness and the quality of the experience for both patients and caregivers. No high-concept healthcare policy ideals here, no ideologically based principles or goals — just commitment to a solid grounding in where we are, where we want to be and how to get institutions to commit to the job of moving in the desired direction.

That’s why I believe Berwick has a chance to make an enormous difference. His approach bypasses the most important political pitfalls faced by prior efforts to meaningfully improve Medicare and Medicaid healthcare delivery. Healthcare quality improvement isn’t a political issue; Berwick’s approach to quality improvement doesn’t depend on politically controversial solutions such as capitation payment systems. He should have no trouble mobilizing the CMS bureaucracy to implement quality measurement in its contracting efforts. The groundwork for rewarding hospitals for quality performance is already in place and the opportunity to ratchet up the stakes is there. CMS can’t dictate operational reforms at the hospital level, but it can sponsor larger and more vigorous quality improvement demonstration projects. There is no one in the world better than Don Berwick at mobilizing support for and participation in such projects. There is no reason why, under Berwick’s direction, CMS shouldn’t become the exemplar for healthcare delivery innovation and quality promotion, and I think it will.

Quality promotion and improvement will help constrain the growth of costs, but won’t accomplish the whole task there. That’s another place where Don Berwick’s talents meet current needs so much better than his predecessors — the operations research piece of IHI’s toolkit. We’ll still be looking at the need to deal with system-wide over-utilization of services, cost-ineffective delivery systems, defensive medicine and a host of other factors that contribute to avoidable medical spending. Focus, for a moment, on the “avoidable” piece of that last sentence, because there is no way to avoid the fact that the Baby Boom cohort is entering its mid- to late-60s and that aging will be accompanied by a growing need for healthcare. We’d need to spend an awful lot less per person to make up for the impending explosion in the number of people needing high levels of medical services. But Berwick has demonstrated at IHI that there are tremendous efficiencies to be gained — efficiencies that also lead to predictability and quality — by applying operations research principles to hospital and physician practice processes for care delivery. Again, CMS can and likely will, under Berwick, be a leader in encouraging and providing incentives for the adoption of more efficient delivery models.

What does this mean for medical technology companies and innovators? Only good things. Successful pursuit of cost savings through medical error reduction, elimination of duplicative services, adoption of best practices and streamlining delivery systems for efficiency all help the medtech industry in two ways: Directly, by creating new markets and expanded opportunities for technologies that lower costs, enable improved operational efficiency and help reduce medical errors; and indirectly, by relieving the cost pressures that might, in time, lead to restrictions on the potential market or other innovative therapeutic and diagnostic innovations.

What’s the potential downside of the appointment? Berwick will need to prove himself as the CEO of an enormous enterprise. We know he can lead, innovate and inspire. We know he’s well-positioned to deal with Congress and has an enormous fund of goodwill in the healthcare policy and delivery worlds. But he will need to hold tight to the many operational pieces that make up CMS, including huge contracts with fiscal intermediaries, massive information systems upon which the functioning of one-third of the healthcare system rely, and relations and communications with 100 million-plus beneficiaries. He will need to put the right assistants and deputies into the right positions, oversee their work and take responsibility for management of the total mission. It isn’t an easy job, and the managerial track record isn’t there yet. Those who know him aren’t worried, but that’s where to look for signs of trouble

Edward Berger is a senior healthcare executive with more than 25 years of experience in medical device reimbursement analysis, planning and advocacy. He’s the founder of Larchmont Strategic Advisors and the vice president of the Medical Development Group. Check him out at Larchmont Strategic Advisors.