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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowIndianapolis Business Journal convened a panel of experts at its Health Care & Benefits Power Breakfast on Sept. 25 to talk about Obamacare, consolidation and the “Cadillac” tax.
The panelists included Alex Azar: president, Lilly USA; Julie M. Carmichael: system vice president and chief strategy officer, St. Vincent Health; Dr. Aaron E. Carroll: director of Center for Health Policy & Professional Research, Indiana University School of Medicine; Stephen L. Ferguson: chairman, Cook Group Inc.; Robert Hillman: president, Anthem Blue Cross and Blue Shield; Dr. Dexter Shurney: chief medical officer and executive director of global health and wellness, Cummins Inc.
The moderator was IBJ health care reporter J.K. Wall.
The following is an unedited transcript of the discussion:
WALL: I'm going to start with Julie
Carmichael about hospitals, they've been in the news
a lot recently. There have been some cuts at
hospitals which has been out of the ordinary since
they've been such a steady business, steady employer,
at least from an outsider's viewpoint. St. Vincent
had to lay off nearly 900 people earlier this year,
IU Health announced it's going to lay off 800, the
other local hospital system, Community Health, has
made some cuts in smaller batches over the last
couple of years, as recently as last week. Can you
describe for us, Julie, the various factors, and I
know there are many, that are really kind of driving
hospitals to the point where they need to make those
cuts and what's that going to mean, how are hospitals
going to operate differently going forward?
CARMICHAEL: Well, I appreciate the question,
and thank you for the invitation to be here this
morning. I've had the pleasure to sit in the
audience and observe the panel but never the
opportunity to be one of the panelists, so it's nice
to be with everyone this morning. The simplest
answer to the question is that health care providers
across the country and here in Indiana are going
through a transformational change. We are under
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increasing economic and competitive pressure and for
St. Vincent's specifically we really have experienced
declines in our budgeted volumes, we've also seen the
mix of services that we provide to our patients
changing pretty dramatically, and then we've also
begun to experience declining reimbursement, and so
those three factors really led us to make the
proactive decision, however difficult it was, that we
needed to reduce our workforce in order to remain
competitive and focused on our mission. It was a
very difficult decision and one that we took great
time and attention to think through and although we
made it and tried to be as kind and compassionate
with our associates and contracted associates, I know
that the decision we made impacted so many valuable
employees and their families, but we felt we needed
to take that proactive approach to really prepare for
the transformation that we're undergoing to preserve
our financial viability and to continue to be able to
provide services in the communities where we have
hospitals. Going forward I think that's a question I
get frequently is, you know, "Is this it, will there
be more?" I think we are going to continue to remain
active in our attempts to improve our cost position,
to increase the quality of care that we're providing,
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but, in effect, we need to continue to be focused on
delivering more value to our health care customers.
In addition to monitoring the volume, we'll keep a
close eye on where we're delivering services and
start to make adjustments as location sites of
service change, and then we're also looking at a
series of transformational business projects as well
as price-reduction initiatives so that we can
continue to position St. Vincent Health in a way that
we can lead the market in terms of quality, safety
and patient experience. So while I would like to say
that we are well into that transformation, I really
think that we're at the beginning of the journey,
we're likely to see this continue for some time not
only in Indiana but across the country and you'll see
us make additional realignments as we continue to
find ways to sort of transform the way we're
delivering patient care.
WALL: Okay, thank you. And what happens in
hospitals is, of course, a function of lots of
things, we've got changes in the law, we've got
changes in what employers are doing, what insurers
are doing. Does anyone else on the panel have some
thoughts on changes in those areas that you think are
ultimately playing into the hospitals having to make
?
some of the cutbacks that they have made recently?
Anyone can jump in here.
FERGUSON: Well, from the device industry and
from the state's point of view, we're one of the
leading states in terms of medical device
manufacturing and development. It's impacting us in
two or three ways. As hospitals are impacted, then
it's changing the relationship. It used to be more
of a physician relationship, more one of educating
the physician on new technologies and new devices.
It's moving much more to a business side where you're
dealing with the business side of the hospital rather
than the physician side, so that's making a change.
I think probably two other impacts of the Act itself
is, one, the device tax which is having a major
impact on the industry and, as people know, it's a
tax on gross sales and so that drops the bottom line
if you combine that with the difference in our tax
rate in this country being at 30, 35 percent and
there's a manufacturing deduction of 9 percent, so it
will probably end up affecting the manufacturing cost
rate of around 32 percent, but it's 12 and a half
percent in Ireland, 15 in Canada and around the
world, and so you get a lot of recruiting from those
because they realize that putting your value-addeds
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or economics 101 in locations where the tax rate's
that differential and then you add the device tax on
top which amounts to about a 27 percent increase in
your federal tax rate starting in 2013 and you
combine that, you're going to see I think a major
shift in the industry in overseas manufacturing. We
manufacture 80 some percent of our devices in the
United States, 57 percent of our sales are outside of
the United States and growing rapidly. It will
probably be that 75 percent of our sales will be
outside the United States. We prefer to manufacture
here but the pressures are getting such that I think
many device companies are going to make that
decision. We've made a decision not to move anything
out of the country and we're going to maintain, but
the growth in new manufacturing will be outside the
country given the current circumstances.
WALL: You're having to go to a central
committee at hospitals to make a sales pitch now on
new products rather than doctor to doctor?
FERGUSON: Yeah, in the purchasing and what
they're looking for and what we're responding to is
ways to — Device sales are about 6 percent of the
health care costs and the hospital is probably 50 to
60 percent that are in wages and salaries and
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employee costs, so we're a small part but we're the
easiest part to put pressure on.
WALL: So you can't pass on the tax very
easily.
FERGUSON: Yeah, so we're looking at ways to
partner with the various health and it's becoming
dealing with larger organizations to save them money
and show them how they can save money and be more
efficient in their relationship with us as a
manufacturer.
WALL: Does anyone else have thoughts on
foreseeing pressure on just providers in general,
what are some of the underlying factors driving that?
Dr. Carroll?
CARROLL: Sure. Well, I mean it's very hard
to turn on the TV and not see somebody talk about the
fact that we're spending too much on health care.
Just to throw out numbers, if it's 2.7 trillion or
2.8 trillion or 16, 17, 18 percent of GDP, the one
thing everybody seems to agree on is that it's too
much, we need to spend less, but I think we don't
often consider the fact that money is not being put
into a pile and burned, that gets fed back into what
everybody up here does, it's the health care system,
it pays wages, it pays for devices, it pays
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hospitals, it pays nurses, it pays everything, and
regardless of the mechanism by which we reduce health
care spending, if we reduce health care spending,
there's less money going into the pile for everyone
to take revenue out of, and so all of these changes,
while they can be conveniently blamed at the moment
on the Affordable Care Act, likely would've occurred
with much of the economic downturn anyway. Health
care spending growth had been growing upwards of 9
percent for a number of years and last year it only
grew at 4 percent. Many people think that's because
the economy slowed down. Part of that probably is
because changes and mechanisms that are coming down
the pike with respect to the law, but if everybody
keeps pushing for reduced growth of health care
spending there will be reduced money and that will
cause a lot of these changes we're seeing regardless,
and so we've pitched this battle and we've pitched
this discussion much in the way that it's been
focused on health care reform, it's been focused on
Obamacare, it's been focused on changes that are
occurring, but even if that were to go away tomorrow,
health care spending has been slowing down, and in
the past few years, while there's been reduced job
growth in pretty much every sector in the United
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States, health care has actually been increasing and
it was increasing throughout the recession and it was
increasing throughout the economic downturn. There's
going to be repercussions of that, we had to take the
hit eventually and it's coming due now and I think a
lot of the reductions in labor and a lot of the
complaints we're seeing from many sectors of the
health care industry right now are because there's an
economic downturn and we're trying to slow spending
and that will have ramifications regardless of the
politics and the law.
WALL: Anyone else have thoughts here? Well,
let's talk a bit about ObamaCare directly, or at
least one part of it. The law, maybe intentionally
or not, has been adding some momentum towards
consumerism, you've got an increasing number of
employees who have high-deductible health plans and
then once the exchanges start up there's broad
expectations that the most popular plans there will
be ones with pretty high deductibles as well. What
does this kind of continuing consumer trend mean I'd
be interested to hear in your various businesses?
I'll start with Alex Azar and he can talk about what
it means selling pharmaceuticals.
AZAR: So increasing consumerism in health
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plan selection is absolutely happening, it's
happening both in the employer market with high-
deductible plans as well as now through Part D which
operates as an individual insurance market and then
with the new exchanges it will also be individual
based, so we've got experience there. If you set
these systems up right with increasing consumer
choice and with the consumer having more skin in the
game on the choices that they make, this can be a
very good thing, so an educated consumer with choice
really can be at the centerpiece of the system. If
you look at Part D where we set up the senior citizen
drug benefit under Medicare, since it was launched
you've seen over 90 percent approval ratings on the
program. It has had 40 percent lower expenses than
what the Congressional Budget Office predicted at the
time that it was passed, and it's been calculated
that on average every senior citizen in the system is
saving $1200 per person in hospital, nursing home,
and other medical expenses by virtue of having that,
so those systems of the consumer in the driver seat
really can work well. I look at these things from
the perspective of what's going to sponsor and
support innovation here in the United States and the
best choice and best medical care for patients and as
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long as there's a competitive insurance system, a
genuinely competitive insurance system where the
patient is in the driver's seat, at the end of the
day the system will produce rational outcomes because
if the patient isn't getting access to the innovative
devices or drug therapies or physicians that they
believe they need, they're mobile, they can choose to
go to a different health plan, so if Rob's team
doesn't set up their benefit design in a way that
appeals to consumers somebody else will come in and
do that and they will be mobile. Where you get
nervous is where the government has a dominant role
in it or if one plan has a too dominant role in it
and there's not effective choice because you want
folks to be able to choose the Cadillac plan and the
Yugo plan and the Chevy plan and to take their
dollars and as long as that's happening, if we've got
a service offering in the pharmaceutical industry, if
we've got a service offering that delivers value to
the patient, we think they're going to choose that
service offering.
WALL: Who else has thoughts on this? Rob
Hillman, I suppose you do.
HILLMAN: Yeah, I mean there's been a lot
recently in the news and a lot of conversation in the
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marketplace as it relates to consumerism and not only
consumerism but the fact that technology now is
really catching up with the concept of consumerism.
I think everyone who is a believer in free-market
economics understands that if you have free markets
and if you have competition, to Alex's point, then
you'll produce a good outcome ultimately for
consumers because competition ultimately is good for
consumers and we know that competition ultimately is
what improves quality and will lower cost in the
long-run, so the technology has really caught up with
the concept of consumerism to some degree and there
are organizations out there like Castlight, which, I
mean, their entire business is around trying to build
transparency in such a way that it's easy to access,
it's very consumable to allow people to have an
opportunity to make a real choice and ultimately
hopefully create a market for health care. However,
I would just mention that it's not the Holy Grail, I
think some folks try to put that label saying if we
can create this market for health care that, although
it will improve quality and lower prices, that that's
the end-all-be-all, that's the answer in this
competitive market, but it's really only about a half
of the total equation, I think. Ultimately what
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we're trying to do is deliver the appropriate care at
the appropriate time in the appropriate setting at
the appropriate price and transparency gets to about
half of that, maybe place and price, but
appropriateness of care and whether people are
receiving care at an appropriate time, transparency
doesn't do so much for that, so I think it's an
important piece of the puzzle but it's not the entire
answer.
WALL: Dr. Shurney.
SHURNEY: Sure. Yeah, I think that
transparency is a good thing, and so Cummins has been
doing this for almost a decade, in fact, with
transparency as well as making sure that employees
understand how their dollars are being spent and
having these accounts set up on their behalf, they
are transferrable and portable and can go with them,
and we really look at this in two different ways, we
look at the quality aspect and we also look at
engaging our employees and there's really no better
way of doing this than through some of these
transparency tools. Bob mentioned Castlight and we
implemented Castlight in April of this year and to
date we have about 65 percent of our population that
has engaged that tool and we like it a lot because
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our employees like it, so they're using it, they're
excited about it, they go out and sort of look at
where they can go and how much it's costing them, as
well as the quality aspect, again, so we think that
it's a great tool to engage our employees. I would
just comment in terms of I agree it's not the Holy
Grail but instead of saying that it's perhaps 50
percent of the equation I would say that maybe it's a
third of the equation, so I think that the
transparency is a third of it, I think that allowing
incentives is probably another third so that everyone
in the marketplace is really marching towards a
common goal, a common good, and then the other thing
I think is also something that we're very excited
about and that's on the demand side, so we've been
very proactive, if you look at the things that we've
done for quite a number of years, in engaging our
employees around prevention, around well-being, so
you hear us talk a lot about well-being and so when
you can really engage your employees and get them to
take on the role of self-management, that's a big
thing, too, so if you think about the number of hours
that are in a year, 8,760 hours, someone can check my
math, but I think that's about right, then you think
about the time you spend in front of your physician
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or provider, it's very few hours, so now you have all
of these other hours that the patient is in charge of
their own health and so that's what engagement is all
about, and so we're trying to really empower, I know
that's an old cliche, old term, but it's coming back
into vogue especially at Cummins, we want to empower
our employees and engage them to do those things
that's really in their best interests and sort of
nudge them, not coerce them, not force them, but to
nudge them to try to get them to do the things that
we believe they're trying to do on their own, and
I'll yield the table here in a second, but an example
of that is if you look at the best-selling books in
the country, they have to do with diet, how to look
better, how to feel better, how to have more
vitality, you look at shows like Dr. Oz and people
really like that stuff, right, and people spend their
own money on nutraceuticals, right, vitamins and
supplements, and so people are really trying to
achieve these goals. Where we see our goal as an
employer or our role as an employer is to help them
achieve the things they're already trying to achieve.
In the past there's been a disconnect where they're
trying to achieve this and we're trying to in some
ways help them but somehow we're missing the boat, so
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we spend a lot of time and energy trying to figure
out how to really help them do what they're trying to
do, and if you think about that, that's very powerful
if we figure out how to do it.
WALL: Who else has thoughts here? Steve
Ferguson.
FERGUSON: A little different approach that
we took. In '93 we realized that our employees did
not have access to primary care and so they were
accessing the system either in the emergency room or
at a higher level of care and so a second thing we
decided, well, we worry about insurance and rates and
how much we're spending and we stopped and said what
we're really interested in is delivering quality care
to our employees and so we set up a primary care
clinic so that all of our employees can go to that
primary care clinic. One of the things we found is
when they brought in their drugs there were a lot of
contraindicated drugs just because they were seeing
different physicians and there wasn't full
disclosure, so we looked at sort of the health
management side of it through the primary care
clinic, which if you ask our employees that's their
Number 1 benefit they would say, you know, they can
go in from 7:30 in the morning until 8:30 at night,
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they can access it, bring their kids in for
physicals, and so it's really been a major — and
then somebody will say "Well, does it cut costs?" I
think probably what it did is it managed the
increased cost, so we have not seen the increase in
cost that you've seen across and have been mentioned
here at 8 and 9 percent, we haven't seen those type
of increases, so it's been really a positive but it's
been a little more of an approach rather than just
giving them the information, it's been "Okay, here is
a way to access the system" and then we can get them
to a specialist if they need to go to one.
WALL: Okay. Dr. Carroll.
CARROLL: I'll briefly add two thoughts. I
think that there's very little dispute — I shouldn't
say that. I think that it makes a ton of sense that
consumerism is very good for innovation, that
competition will drive innovation and we need some
ability to do that in order to avoid the lack of
innovation that would occur with, say, one group
doing all of the work. Having said that, I think
that we are sometimes a little optimistic about the
ability of consumerism to take care of costs, which
are two very different things. About 15 percent of
people in the United States account for about 85
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percent of health care spending, the vast majority,
you cannot incentivize away their trauma care or
their ICU care or a baby in the NICU, they will not
shop for that, and so the idea that we can use
increased cost sharing as a mechanism to radically
bring down the cost of care I think is sometimes
misplaced. Most consumer-directed health care goes
to people who are young and healthy and 50 percent of
people spend about zero every year in the United
States on health care. We can incentivize them all
we like, they're not the drivers of major health care
spending in the United States. What actually are we
spending the money on is not often the things that
can be affected by consumer-directed health care, so
I think that the idea of more skin in the game and
the idea that this greater cost sharing has a place
in the United States health care system and it's
absolutely a tool that we can bring to bear for
certain things to achieve certain outcomes, but I
think we sometimes oversell it in its ability to get
a handle on actual spending as a society.
WALL: Julie Carmichael.
CARMICHAEL: I was just going to weigh in
briefly on kind of the transparency discussion and
the impact that it has on hospitals and our
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relationships with patients and payors. It's a
conversation that I think is going to continue and
should continue until we solve the problem from the
purchaser's perspective and as health care providers
I think we often want to stand behind the complexity
of the issue and say that we really can't be as
transparent as we want to be, but I personally
believe that it's an area that we as health care
providers in the state of Indiana need to take a
stronger leadership role and I'm optimistic that —
You know, in Indiana I think we have a tradition of
being able to solve our own problems and I think we
have a health care community that recognizes this is
an important issue and through a strong leadership
with the Indiana Hospital Association I do think
providers can come together and develop solutions
that can be made available for employers and
purchasers of care. I think one of the challenges
for us is we're a little bit behind the curve on this
issue, we didn't get out in front of it as much as we
needed to and like many things in healthcare I worry
that we come up with a lot of different solutions,
you know, we may have employers going down different
paths to solve transparency and that makes it more
challenging for providers to be responsive and do the
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things we need to do. So I'm hopeful that through
our state hospital association and the leadership
that we have in this community that we can step up
and offer some solutions around transparency that
will really make a difference, and to the points of
the panel, I agree transparency is a piece of the
discussion, it's not an ultimate answer to the entire
problem, but I'm also optimistic that transparency is
going to change the nature of the discussion between
providers and insurance companies and hopefully drive
us to a place where we're more collaborative and we
design new payment models that are more responsive
and create better aligned incentives, as I think Rob
was alluding to.
WALL: Going down the line, Alex Azar, you
got to start it, do you want to add anything more on
transparency or consumerism?
AZAR: Well, let me tell you a story because
I think this issue — I've been a big proponent for
over a decade of increasing transparency and the
high-deductible health plans and at Lilly we have a
high-deductible health plan, consumer-directed plan
that's very effective, but the best example of
consumerism in a competitive system really is how
that Part D exchange has been set up, you have highly
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competitive plans where everybody has a choice of
multiple plans, you have transparent drug
availability and pricing available through the Plan
Finder tool on Medicare.gov and you've got highly
concentrated powerful intermediaries, plans able to
negotiate with the drug companies driving costs down.
Where you don't see that is necessarily yet in the
traditional medical benefit side of things and I
think there with the exchanges, the Obamacare
exchanges, that's going to be one of the real
challenges because the plans that we're seeing are
probably going to have higher deductibles and have
more restrictive provider networks in them as a way
of keeping costs down on the exchange plans. So I go
to my doctor and they suggest a very simple
diagnostic test. Well, I pretty soon am sent over to
the hospital side of things, which seems strange to
me and I'm at least a health care person and so I
know to be very suspicious now once a band has gotten
put around my wrist, "Why are they doing that? I've
had this before and I've never had a band put around
my wrist." So then I'm sitting in a lab area and I'm
getting increasingly suspicious and I go up to the
front desk and I say "How much is this going to
cost?" "We can't tell you." "No, no, you're going
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to tell me." "No, we won't tell you." "No, you're
going to tell me," and finally after about a half an
hour of me getting close to yelling and screaming I
learned that they were going to charge me $5000 for
this simple diagnostic. I went online. There are
many really good sites online that you can find out
what something ought to cost. This should cost $550
if it's done in a doctor's office as opposed to in an
outpatient hospital setting. So I challenged them
back, my insurance company didn't have much of a
negotiated rate off of it, I said "I've got a
consumer-directed plan, this is coming out of my
pocket, this isn't some deal between you and an
insurance company, this is a deal between you and
me," and they said "Well, we'll give you a cash
discount, $3000," and I said "For that differential I
can buy a first-class ticket and fly back to
Washington, spend a weekend at the Four Seasons, go
to my doctor there, have the test done in his office,
have the results shipped back, fly back first-class
and I'm still ahead financially." So it's just an
example of we've got a long way to go on getting
insurance companies, hospital systems, physician
networks to really make consumerism a much better
process that works for the individual consumer. I'm
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a highly educated, you know, I've got the money to
pay it if I want to pay it, consumer. We've got a
long way to go I think in setting up the infra-
structure and the systems on the medical side of this
and perhaps the exchanges will actually incent plans
moving towards more of that.
WALL: I want to come back to the exchanges.
I was interested as we talked about consumerism and
transparency and they are closely related but not
identical things, almost everyone said it's good but
it's not enough and Dr. Shurney started talking about
some other things that are needed. I'd be curious to
hear from the panelists what else does the health
care system need, even if it had what it needs in
terms of consumerism and transparency, what else
would still be required to really get to the place we
want to go? Dr. Carroll, do you have thoughts on
that?
CARROLL: So, you know, it's fascinating
because we always sort of do this, we imagine that
there's sort of some Shangri-La if we could just get
there, but the problem is that when you talk about
health care systems in general, there's sort of three
things you always have to consider, they would be
access, how can people get it, how much does it cost,
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and what's its quality, and depending upon who you
talk to, I had a professor back in medical school who
was a health economist who talked about he called it
an iron triangle because what made it an iron
triangle is you can only fix one of those things by
making the other two worse. Maybe at best you can
make two of them better but it's going to make the
third worse. I can make the system more universal
tomorrow, that will cost a lot of money. I can make
the system incredibly cheaper tomorrow, but that
means a reduction in quality or the access is going
to go down. I can make the system the best in the
world unequivocally, but, again, that has to cost
money where everybody can't have it. We imagine some
system we can just get to that's going to be
universal, the best in the world, and somehow cheaper
all at the same time, that's not going to happen.
Anyone who tells you so is either lying or a
politician or both. We can do one of these things.
The Affordable Care Act's main goal at heart was to
improve access, that was its major thrust, that has
been sort of the major push in sort of part of the
country to make our system more universal to get the
number of uninsured closer to zero. The problem with
that is it costs money, it's going to cost, the
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original estimate was upwards of a trillion dollars
over a decade. As you keep pushing that decade back
it's going to be even more money. People worry that
that will have a reduction in quality. Yes. If I
want to make the system incredibly cheaper tomorrow,
if I want to make it much cheaper, then either we
can't get it as universal as quickly as we would like
or the quality won't be as good. Yes. So when we
talk about consumerism, as I said before, I think
consumerism is a way sometimes to improve quality,
but it's not going to solve all three things at the
same time. I think wellness programs are an
excellent way to try to encourage people to be
healthier, I think it's an outcomes good, it's a
quality good. I don't think that they are a panacea
for the cost of the United States health care system
because so much of what we spend money on isn't
caused by a modifiable risk factor. We can talk
about all of these things, transparency, they're sort
of bullets to try to make a change to the health care
system that likely will have some impact on cost, on
quality and on access. The problem is that we all
can't even agree on what we want to fix, you know, we
want all three at the same time. That is almost
impossible. There are solutions out there to make
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our system more accessible, there are solutions to
make it higher in quality, there are solutions to
make it cheaper, there are almost no solutions that
will do all, and I think part of the problem we have
with the debate in this country is that we don't
decide what we want to do first, we just want it all
and then when things don't work we react, so you will
see lots of articles about the Affordable Care Act
coming out about how they're going to impact quality,
about how they're going to impact cost. They will,
because it was about access. We can have other types
of reform that will try to do different things but
nothing is going to be perfect and as long as I think
we cast about for one magic silver bullet that will
cover everything we're not going be able to sort of
move forward as we would like.
WALL: Go ahead, Steve Ferguson.
FERGUSON: To follow up on that point, from
our view at Cook we think that we need to have direct
access to primary care and everybody needs to have
that, you need to have coordinated care so that
you've got somebody coordinating the care because we
don't feel like people understand enough to
coordinate their care and make some of those
decisions, and I think we need electronic medical
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records and we see that as where health care reform
should've gone were at those three levels. To the
other points here, we're self-insured, so if you look
across this the driver of our costs are the outliers
that you can't do anything about, somebody has a
motorcycle accident, there's a premature birth, high-
cost things that really are the things that drive our
costs. The primary care side and the ordinary care
of our 8000 employees here in Indiana, the basic care
and the primary, with the clinic we've got pretty
much control of that, but it's the outliers and no
matter what you do you aren't going to solve that guy
riding his motorcycle down the road and those type of
things.
AZAR: We've got a whole host of issues to
address, we've got patients that are in medical homes
like Steve just mentioned, we've got to aggregate
care better across the bundled services. Right now
every incentive in the system from the Medicare fee-
for-service system on down creates a disaggregation
of how care is delivered rather than a continuity of
care, we need better health IT, we need more
consumerism and competition in the system, but the
thing that I've really been befuddled by in the last
several years is we do not ever discuss the role of
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innovation, we talk about cost, we talk about milking
cost out of the system but we so often forget to
speak about the importance of continued innovation in
driving lower costs and driving better health care
outcomes. We've increased the life expectancy from
1900 to 2000 from 47 years of age to 78 years of age,
and there was a study done at Columbia University
that showed that the increase in life expectancy in
the 1980s and '90s, 40 percent of that increase in
life expectancy in the '80s and '90s was attributable
to the introduction of new molecular entities, 40
percent of the increase in life expectancy over two
decades just from the introduction of new medicines
and yet we are not speaking about this role of
innovation at all in this country and nowhere. We're
maniacally focused on milking costs out of the system
as opposed to thinking about the balance of spending
wisely as an investment to reduce effective costs in
the long term.
WALL: And system-wide do you think that
innovation can help control the costs?
AZAR: Absolutely. I absolutely believe
system wide it can help control costs, but more
importantly it can also deliver better health
outcomes. I've long had this fight about is 16
?
percent of GDP too much to be spending on health care
and, honestly, I don't think there is a number that
is right or wrong there as long as it's efficiently
spent, as long as it's delivering outcomes. In
Britain it's about 8 percent. We're at 16. Do we
get twice the quality of medical care and outcomes
than the British do? I don't think so. So there's a
lot of inefficiency in that 16 percent, which is a
problem, but I don't think there's a magic number
sustainable, not sustainable. I think we make
individual choices and as a society we make choices
about the value of health care in our lives and the
value of it versus additions to houses and other
priorities that are perfectly appropriate value
choices that individuals and societies end up making,
and so if innovation leads to dramatically better
outcomes but at a cost I might make that trade-off
also.
WALL: Who else has thoughts?
FERGUSON: On that same point, if you think
back when my father died of a heart attack in the
'50s, there was no treatment, you know, you go home
and rest, and then Bill Cook comes along and you get
access to the circulatory system, you get bypassing
and you get stenting, et cetera, et cetera, along
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with the new pharmaceuticals that came along that's
completely changed that. Now, is it more expensive
than him going home and dying? Yes, it is more
expensive, but what the outcomes are, you know, if I
had had the same treatment in 1993 I wouldn't be here
20 years later. So I think part of the cost there is
we are making people healthier, they're living
longer, that's more expensive, but it may be
something we all choose and that does cost money.
WALL: Dr. Shurney.
SHURNEY: I would just say also that we
probably need as a society to focus more on health
versus health care and we spend a lot of time
focusing on health care and 3 percent of the dollar
spent in health care go towards the prevention and
wellness side and 97 percent go to taking care of
people after they've become ill, so I think we need
to spend and focus a little more time trying to keep
the healthy people healthy and if we would just be
able to do that, there's still going to be some
catastrophic cases, but if we could just focus on
keeping the healthy people healthy, then that would
be great. If you look at the CDC numbers in terms of
what they expect the percent of the population who
become diabetics over the next 20 years it's
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astounding, they're predicting that one in three
people will become diabetic, and so if we can keep
the healthy people healthy, we can prevent some of
those people from becoming diabetic, I think that's a
big win, and so I think we need to look at that. The
other thing is that if you think about the cost of
most health plans, 60 to 70 percent of most of the
costs are really for some chronic diseases, such as
diabetes, cardiovascular disease, that are actually
preventable. Framingham studies going back 10, 20
years ago following and tracking people can show that
these things are really preventable. If you look at
the study that was done by the National Institute on
Aging and National Geographic, a study called "The
Blue Zones" and you look across the world in terms of
places where people live to be over a hundred years
old, routinely these are places that really don't
have a lot of high-tech medical innovation, they're
places like Costa Rica, they're places like Italy.
There is a place in the United States that also is
one of the blue zones. So, again, it's really the
life-style and some of those things that those people
are doing in those regions and so I think as a
society we need to pay a little more attention to
that.
?
WALL: I'm going to ask one more question and
then we'll go to audience questions. Rob Hillman,
I'd like to ask you about the exchanges that
officially get going in six days. As an insurer
you're knee-deep in that process. Can you talk to us
about how you expect this roll-out of the exchanges
for individuals and eventually small businesses
buying health insurance to work, whether you think
that will work well or poorly, and just what sort of
system do you think we'll have once the dust settles?
HILLMAN: How did I know you were going to
ask that question, J.K.? I guess what I would first
say is I would look at what's going to occur here in
the next six days or what's going to occur on January
1 of 2014 as Health Care Reform 1.0, I think many of
the panelists have already mentioned, there's still
quite a journey here for our country, I mean we have
some incredibly difficult decisions to make about
what will we want government to play in our health
care, how do we want taxpayers to participate in our
health care system, and ultimately how much do we
want to spend and for what we're spending are we
getting the most bang for our buck. So when I look
at 2014, everything changes, particularly if you are
enrolled in an individual or a small group plan, and
?
that means every product changes, rates change,
networks change, everyone has a decision to make. If
you're in that market you have a decision to either
participate in a health plan either on your own or
through an employer or you make a decision to pay a
penalty, but everyone's got a decision to make, so I
would say that I think on October 1st the only folks
that may be out there looking around, maybe you,
J.K., to see what's out there, I really think that
crickets are going to be chirping on October 1. I
think that once social media gets ahold of this and
people are twittering about health plans and checking
out what other people are doing on their Facebook
pages it will begin to gain traction because that's
how people buy today and people are going to be
looking at what's my friend doing, what's my cousin
doing, what's my coworker doing, that type of thing,
but without question it's going to be quite a bit of
disruption just because everyone needs to make a
decision. So we know, as has been publicized, if
you're with an Anthem plan and you're in the
individual market, it's going to be a much, much
narrower network. I will tell you that on average
across our individual block of business I anticipate
that rates will go up on average 47 percent, but I
?
look at everyone in the room and if you're in the
individual market none of that applies to you because
no one in the room is average, right, so there's
incredible disparity between how you get to this 47
percent, on average 47, but you have situations with
individuals with rates well over a hundred percent
increases and you have increases and you have
actually rate decreases. So depending on where you
are today in terms of your age, your total
demographic, your health status, your benefit plan
that you have today, all of that is a driver in terms
of what this is going to have in terms of impact on
you and the decisions that you're going to make
really going into January 1. We're obviously going
to have more people covered. Our projections are
that out of the 800 and some odd thousand uninsureds
in the state of Indiana about 250, 60,000 of those
will actually purchase a product on the exchange,
others will take the penalty because, remember,
still, the competition in this environment is not,
although the other issuers are going to participate
on the exchange, they are not Anthem's competition,
the competition is the penalty, right, that's who we
are competing against because can you get a premium
that is attractive enough to compete with the
?
penalty, that's why narrow networks and whatnot are
so important because you have to find a way to get to
that premium level to compete. So there's going to
be a lot of disruption, I think there's going to be
an incredible amount of confusion. I was in
Greenfield, Indiana, it wasn't a meeting quite like
this, on Monday of this week, I was telling the story
at the table, it wasn't a broker meeting, a bunch of
rubicons that basically put a press release out and
said "The president of Blue Cross is going to be at
the auditorium of the hospital, anybody come in who
wants to come in and talk to him," okay, so it was —
WALL: You're a brave man.
HILLMAN: We had seniors, we had farmers, we
had hospital administrators, we had physicians, we
had people who are in the individual market, we had
people who were unemployed, you name it, and the
amount of confusion and the lack of information that
people are still operating on is really quite scary
and that's going to be a very key contributor to this
disruption because people really don't know what to
do. In fact, I mean look at it, President Clinton,
Hillary Clinton and the President are out there still
selling the program this week and trying to encourage
young people to enroll and trying to tell them what a
?
good deal this is, so that kind of just gives you an
indication of what I think we can expect. There's a
lot of drivers here that are just going to create a
lot of disruption. Now, long-term, I really view,
again, the Affordable Care Act is the first step,
it's not the end-all-be-all on October 1 or January
1, it's really the beginning, okay, it's where do we
go from here, sort of to Aaron's comments, so we
still have issues around affordability, we have
issues around access to health care, I mean we fully
anticipate that wait times are going to go up in
physicians' offices, so how can we create more access
to primary care. What's going to happen with
employers and our small group employers in
particular, how many of them are going to dump
coverage? How much will the new rules change? Okay,
we all I think fully expect that the rules are going
to change and continue to change for years to come.
So I'm optimistic, I think that the goal was to
provide coverage to more people, more Hoosiers, and I
think ultimately the Affordable Care Act has really
got us started on a conversation that we probably
should've been having years ago. When I talk to
Julie and I talk to other hospital executives there's
a tremendous sense of urgency that we all have around
?
the affordability and access issues, so it will be an
interesting journey, but it's not the end-all-be-all.
WALL: Well, great, that's very helpful.
Does anyone else have thoughts on the exchanges or
even sort of how the Affordable Care Act will play
out kind of at large? Somebody does, I know.
CARMICHAEL: Well, I mean, we could talk
about the exchanges for a full day or maybe a week.
WALL: You could have a whole conference
about it.
HILLMAN: Or several hours.
CARMICHAEL: But nobody would stay. But
we've been looking at the exchanges and the impact
and trying to decide what it means for our business.
I agree substantially with what Rob has said. Our
approach to the exchanges this year is to take a
pretty cautious step into that and just participate
in one plan. I think one of the things I'm most
interested to find out from the exchange is whether
or not the concept of a narrower network is going to
appeal to consumers, I think that's something we
tried off and on in this market for years. It's
never really been a very attractive product and I
think this will be an opportunity over the next 12
months or so to see whether or not individuals are
?
willing to have less choice in exchange for some
better pricing and once we get through this initial
year of the exchange then I think we will be able to
develop a broader, more full strategy to deal with
exchanges going forward.
WALL: Anyone else?
AZAR: I'd say there are four implementation
questions that I'm focused on and going to be just
watching having been through the Medicare Advantage
Part D roll-out. One of them is going to be looking
at nondiscrimination provisions, just how does that
shake out among exchange plans because they're really
relying on the states to prevent essentially
beneficiary skimming of plans, drawing in just the
healthy folks and figuring out ways to not get the
unhealthy folks in as you look at your actuarial
benefit, so how does that shake out in practice? Is
it adequate and has there been adequate provision
made there? There were a lot of protections in Part
D, more state-based now, how does that shake out?
The data interchanges are beyond complex, the IRS has
to share all the tax information with the Social
Security Administration, which has to share with the
Department of Homeland Security, which has to share
with CMS, which has to share with the state Medicaid
?
plans and the Veterans Administration. All of this
has to float around in the ether as people enroll to
check eligibility and subsidy levels and nobody has
to be able to invade the system and have a privacy
breach on any of our tax and Social Security
information. I'm glad I'm not in charge of that. So
that working well and complying with privacy is going
to be a key question. Is there an adequate Plan
Finder tool where beneficiaries, prospective
beneficiaries, can just find a plan in a
knowledgeable way as individuals? And then finally
is the network robust enough, are the pharmacies, are
the doctors, are the hospitals adequate and are the
benefit packages robust enough? Those will be the
kind of things I'm looking at.
WALL: Well, let's go to an audience question
here. Steve Ferguson, you talked a bit about a
primary care clinic that you set up at Cook. This is
a question from the perspective of small companies.
What can they do to either provide primary care or in
other ways help their employees gain access if they
only have, say, 75 or a hundred employees? If you
want to answer that, that's fine, or if Dr. Shurney
wants to jump in here, that would be great.
HILLMAN: J.K., we talked a little bit
?
earlier, I personally believe that given the number
of people that are going to be coming into the market
and seeking health care, many of which have never had
insurance before, are going to have an incredible
amount of pent-up demand for services, it's going to
be taxing on our primary care physicians, so I
personally believe, and this is a very good question,
that access to care is kind of the new benefit that a
lot of employers are looking at. In fact, I mean
we've had conversations with employers and with
providers of health care about how can employers buy
blocks of hours of time from providers, okay, so that
they can ensure that they have access for their
employees to primary care, so obviously a clinic is a
good example, but you may also see a point in time I
believe where payors or issuers, like Anthem, would
go to a provider system and say "We would like to
purchase from you a block of hours for our insureds,"
okay, and then as I mentioned earlier, technology is
getting to the point now where you can actually
deliver a very efficient physician encounter or
primary care visit through online technology. We're
rolling out online technology, it's going to be a
free service to our employers. Ultimately, after we
get over a couple of hurdles with the Indiana State
?
Medical Review Board, we look for the ability to
actually issue a prescription as a result of those
visits, people will be able to pay for those visits
online during the visit, have it run through their
benefits, but the technology is also at a point where
we have customers who are not only looking at not
only the online visits but you can actually sit in a
kiosk in a private area and upload biometric
information to a physician through an online
encounter by blood pressure and things of that
nature, and that's back to the innovation that Alex
was talking about earlier. I think the technology is
there and that's why we also see so many companies
like Microsoft and Google and GE and others who are
very, very interested at getting into the health care
space and taking the technology they've developed and
really applying it to very new and innovative ways to
enhance access.
WALL: You were talking about — Oh, go
ahead, Steve Ferguson.
FERGUSON: We're looking to provide good
health care to our employees and we think that starts
with primary care and getting access to primary care
on a routine basis and so that was the reason we went
there and then we could do referrals to where we
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thought the appropriate location was. I think
primary care, I agree that the demand for it — It
looks like to me the place that people are going to
access primary care is going to be at Walgreen's,
CVS, Walmart, where they've got easy access and
people know they have these walk-in clinics and I
think that's going to solve some of the demand
problem, but I think that's going to be one of the
first places people look.
WALL: Dr. Shurney, go ahead.
SHURNEY: I would agree with these comments,
so Cummins has had on-site clinics in the
occupational space for a number of years being a
manufacturer and as many of you know, we're also an
international company, we have employees actually in
190 countries across the world and so some of these
are ex-pats that are coming from the United States
and working overseas, so one of the things that we're
looking to do is expand our capability with our on-
site clinics to also include more primary care than
just occupational medicine but also this virtual
clinic idea that Rob mentioned as well so that our
ex-pats that might be in Indy or someplace else can
actually then have these virtual visits with a United
States physician that could be actually their primary
?
care physician and also it allows us to access
specialists all over the world, so we are looking at
that as well and I think that it will help us in
terms of meeting the challenges that all of us will
have in terms of access to care.
WALL: We've got a couple questions from the
audience related to the expansion of Medicaid that
the Affordable Care Act called for which so far the
state of Indiana has not chosen to do. I'd be
interested to hear from you, and maybe this is sort
of two questions at once, but just in your respective
positions, how is the state's decision to not expand
Medicaid affecting you or how do you expect it to
affect you? Julie Carmichael, I'd be interested to
see how that affects you in your reimbursement and
the money flowing through your system, employers,
maybe if it's affecting you, Rob Hillman, if you have
thoughts, you were talking about access, does having
the Medicaid expansion or not having it affect some
of those issues you were talking about? I'll start
with Julie, can you talk about how it affects St.
Vincent?
CARMICHAEL: Just briefly. I think we're
disappointed that the state hasn't expanded Medicaid
access, we think it's an important program and given
?
where we are in the process of transforming health
care in implementing the Affordable Care Act we are
still going to have lots of people who don't have
access to health care and while we've been supportive
of the Healthy Indiana Plan, its ability to cover as
many people, especially children, as need to be
covered it's just not possible, so Medicaid expansion
is something that we feel strongly about and feel
that Indiana should move in that direction.
WALL: One question I got before this event
was did the lack of a Medicaid expansion contribute
to St. Vincent or other hospitals having to reduce
their workforces?
CARMICHAEL: Not directly. I think, again,
reducing workforce was based on multiple issues.
Certainly lack of Medicaid expansion to the extent
that contributes to some of the reduction in volume
that we've experienced as well as that mix of service
changing, then, yes, but in an indirect way.
WALL: Okay. Does anyone else have thoughts
on this? Steve Ferguson.
FERGUSON: Sort of to back up from a public
policy point of view, I was one of the deciding votes
that put Medicaid in when I was in the Legislature, I
think that was a mistake. I think at that point in
?
time it was 50 million state, 50 million federal, and
everybody needs to get the federal money. We looked
at ways to provide that same amount of care and just
done it under an Indiana plan. I think we're at that
same threshold. When I was on the Higher Education
Commission I told the higher education community your
greatest competition for dollars is going to be from
Medicaid. When I see this, they pick up
reimbursement for a short period of time and
everybody looks at that money but the President's
budget he introduced already suggests a 10 percent
reduction in what they're giving them and I think
Indiana can look at alternatives that are much more
cost effective and can deliver quality of care much
better than the Medicaid program and expansion of the
Medicaid program.
WALL: Dr. Carroll, you look itching to
comment on this.
CARROLL: I think I'll just take a slightly
different tack on that. I think Medicaid is an
incredibly cost-effective program. The biggest gripe
is that Medicaid reimburses doctors too little
because it's cheap. It's held down increasing cost
spending greater than pretty much any other insurance
plan out there, it does it by being cheap. The
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government's very good at being cheap. The
government might not be good at innovation, the
government might not be good at many other things,
but at holding down spending it holds the line. The
gripes against the Medicaid expansion come in a
number of flavors, one is that it will wind up being
an increasing burden on states over time, but there's
very little evidence of that. Since Medicaid's
inception in the '60s and '70s, when everybody sort
of came onboard, the government has never once
defaulted on its contribution to Medicaid and really
hasn't cut it back at all and so at any time we can
have any kind of program cut by the federal
government but we know that it's locked in through at
least pretty much a decade and it's a pretty good
deal in terms of federal versus state spending, it's
a significant increase in coverage in Indiana for a
very small increase in the state budget.
FERGUSON: But doesn't that just go for five
years —
CARROLL: No, it goes —
FERGUSON: — and then at the end of the
time —
CARROLL: It ends at 90 percent. Right.
Well, right now it's a hundred percent, which is a
?
phenomenal deal, then it comes down to 90, but still
90 percent versus what states are getting right now,
which is 50 to 75 percent, is still an incredible
deal, especially since we will still be providing
care for many of these citizens and just cost
shifting it onto either hospitals or other sectors of
the economy at this time. The other argument is that
it has a woodwork effect, that if we institute the
Medicaid expansion then lots of people in Indiana who
already qualify for Medicaid will come out of the
woodwork and demand their coverage and they will not
be covered at 90 percent, they will be covered at the
traditional 50 to 75 percent coverage based on state
because they were already eligible and we just
weren't covering them. That's going to happen if we
do the expansion or not. There's going to be a lot
of press, there's going to be a lot of — you know,
the mandate's going to scare some people that are
going to come out looking for their Medicaid.
Regardless, the state cannot refuse them, and so
they're coming out because the Affordable Care Act
has happened, they're not coming out because of
Medicaid expansion. There's lots of other good
reasons from an economic perspective. It's good for
the hospitals, it's good for the economy. There's
?
lots of good studies that show that actually Medicaid
returns a fairly large amount of return for its
investment in terms of spreading the economy in other
ways, it can help people actually get up and go to
get jobs because, again, it provides some measure of
a safety net. It would allow us to reduce spending
on the Healthy Indiana Plan which comes out of
Indiana's pocket. It would actually reduce us to do
some of the things we do in taxes and everything else
right now to cover uncompensated care. Lots of good
studies show that it would actually be a net return
in the short term. The other main gripe is that
somehow Medicaid suffers in terms of quality, that
it's somehow worse, you will hear some people say
it's worse than being uninsured or that it's worse
than having other types of insurance. On its face
value it's hard to imagine how having any type of
insurance is worse than having no insurance. These
are not people at the high end of the socioeconomic
spectrum, it's not like they have a ton of other
options in where they might go to get care. There's
no doubt that the network of Medicaid can be smaller
than many private insurances, that is why it's
cheaper, it is all about trade-offs. We're seeing in
the exchanges that a lot of plans are going to adopt
?
narrow networks because that is cheaper, that's how
insurance often works. We can argue that we want to
have Medicare have a bigger network. That will cost
more money. And so the option that's present to us
right now is not people can have Medicaid or they can
have something awesome and better, it's that the
Medicaid expansion will occur and most of these
people will have nothing in terms of health insurance
coverage, and given sort of the economic incentives
and the fact that the government put up a ton of
money to make this enticing, it makes I think sense
for the state to acknowledge that it probably is in
its best interests to go ahead with the expansion for
now and if we're worried about the fact that the
government could renege and default in the future,
take a tack like Arizona and put it right into the
law that accepts the Medicaid expansion that if
anything changes in the future it will be stripped
away and have to be re-added, we can cover our bases
and protect ourselves if that's really what people
fear, but I guess I would add, I like the way that
you put it, I'm disappointed that we didn't go ahead
with the Medicaid expansion and I hope we do so in
the near future.
WALL: Any other thoughts on Medicaid
?
expansion?
FERGUSON: Well, you got both sides on that
one.
WALL: Another question, this is for Julie
Carmichael. How do hospitals justify the massive
acquisition, building and consolidation rates while
decreasing staff and keeping compensation level? So
I'll just leave it at that.
CARMICHAEL: Yeah, I think that we have seen
a lot of merger and acquisition activity in this
marketplace and the reason for that is that smaller
independent organizations are struggling to deal with
all the changes that are foist upon them. Access to
capital is increasingly difficult even for large
systems and so I just think it's a response to the
competitive pressure and the economic drivers in the
system. I think that it has probably slowed down a
little bit in this marketplace and may continue that
way through the coming year, but as smaller
independent health care organizations struggle to
meet all the requirements of health reform and the
financial pressures they're faced with we will see
more consolidation of health care. What you hope
happens through that consolidation is efficiency and
business transformation that allows us to provide
?
some of those backroom functions and administrative
services, management perhaps at a more centralized
level so that we can drive cost and inefficiency out
of the system, but it's just a reaction to the
environment, the competitive and economic environment
that we're facing.
WALL: All right, well, we're going to wrap
it up there.
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