In 1953, Marion Folsom left his role as treasurer of the Eastman Kodak Co. to serve his country as undersecretary of the treasury and then secretary of health, education and welfare in the Eisenhower administration. When he returned to Rochester, N.Y., in 1958, Folsom brought with him some new ideas about health care. He was resolved to harness the purchasing power of the private sector to get the best deal for the community.

Since then, the business community in Rochester has fostered (even demanded) collaboration among health care providers to help manage the cost of care and improve quality for the benefit of employees and the community.

Rochester still leads the country as a beacon of high performance on cost and quality. For Medicaid, the city was hailed by New York Gov. Andrew Cuomo as the most cost-effective in the country. In Dartmouth Atlas and commercial spending analyses, Rochester is a high-value performer. And for commercial self-insured employers like Paychex, the results are remarkable: low deductibles and co-payments not seen by most Americans since the 1990s. If value and affordability are important, we should continue to learn from Rochester.

To fully understand the Rochester story, I reached out to several experts: Jim Block, M.D., a former CEO of Johns Hopkins Health System and Case Western Reserve University who was a young intern in Rochester in the 1960s; Linda Becker, a former senior executive of Xerox and Kodak who for the last 15 years has served as a business community leader and board member of the Rochester General Health System, one of the two principal integrated systems in Rochester; Becker's husband, Larry Becker, the recently retired head of Xerox’s health benefits program, who serves on numerous boards and has a long history of galvanizing the Rochester business community on health care; and Jake Flaitz, a benefits consultant with a distinguished health care career as a hospital administrator who for the last 12 years has been head of benefits at Paychex.

The early days

In 1969, Block returned to Rochester to focus on care for underserved communities. He developed pioneering initial public offerings with the local medical society, built Kaiser Permanaente-like groups to serve the new Medicaid population and started HMO-like organizations for underserved populations, including an HMO for the chronically mentally ill. Perhaps the most notable of these pioneering health services activities was his role as the first leader of the Rochester Area Hospitals Corp.

In the late 1960s and early 1970s, New York Gov. Hugh Carey promised voters that he would rein in public expenditures on Medicaid by slashing budgets. But Rochester business leaders strongly urged the governor to “stay the hell out of Rochester,” because things were going so well in both cost and quality.

In the 1970s, as health care costs continued to rise, four prospective payment pilots were initiated to reform Medicare in Maryland, New Jersey, Washington state and the cutely titled “province of Rochester.” In the Rochester model, reimbursement rates were standardized for all the players, and revenue caps were placed on the industry, as well as a cost-sharing arrangement (shared savings between providers and purchasers on a 50-50 split). After the pilot experiments finished, Rochester had the lowest costs and the highest quality.

Block told me a funny story of how he and his colleagues went to Washington, D.C., with a multimillion-dollar check to return money to the federal government because of the savings they had achieved with the program. They anticipated a ceremonial greeting in Washington with handshakes and accolades. Instead, the assistant secretary of the U.S. Department of Health and Human Services under the Reagan administration chided them that the model was “too socialistic up there in Rochester.” Instead of selecting Rochester as the model for the nation, the New Jersey experiment was chosen because it was less "socialistic" and not as complicated to administer.

The early days of Rochester provided other useful insights. A full 3 to 5 percent of the Rochester Area Hospitals Corp.’s revenues were set aside for an innovation fund. The fund allowed for what we would now call health services research and clinical analytics — developing measures of outcomes and measuring both care and cost carefully.

When I asked Block what the relevance of the early Rochester experience was for today’s health challenges, without hesitating, he said, there are two forces at play: “We’re moving decision-making from D.C. to the states and communities, and we are moving risk for the cost and quality of care back to those states and communities. Regardless of the political direction, these trends seem inevitable.”

Block agreed that these changes are further intensified by employers such as Disney, Boeing, Microsoft and others focusing more on accountable care organizations and shared savings arrangements to reduce costs and improve quality. Block added a fourth contemporary driver: big data. Clinically, and in cost and quality, big data can help steer the selection of provider partners and the management of the entire system. Finally, Block pointed to the role of professionalism (not just financial incentives) in building high-performing clinical teams. As he told me, “We were careful not to monetize health professionals with productivity goals, but rather to support the pursuit of effectiveness and accountability, which resulted in greater efficiency.”

Recent history

When I asked Linda Becker whether the Rochester experience still has relevance today, she was quick to point out that Rochester enjoys the fourth-lowest commercial premiums in the country and the lowest on Medicare cost according to the Dartmouth Atlas (some 21 percent less than the national average). Becker attributes these successes to Rochester’s continued ability to cooperate. She also cited the early history of Marion Folsom and the Rochester Area Hospitals Corp. and how they provided the platform of collaboration that exists to this day.

Rochester's history has not been without its rocky patches. In the early 2000s, some of the collaboration started to unravel as the two main systems, University of Rochester and Rochester General, started competing more aggressively. The business community, however, encouraged renewed cooperation and collaboration.

As Linda Becker told me, employers realized “they can’t expect hospitals to collaborate if they didn’t do it themselves.” Employers then embarked on several initiatives over the coming years that really galvanized the community to improve health and health care. Here are some examples.

Living-well initiatives: An early pioneering project in the early 2000s was to encourage community members to “eat well and live well” by consuming more fruits and vegetables and monitoring their exercise. For 16 years, employers in the community (now a total of some 500 companies) have their employees participate in this program, which was originally pioneered by the leaders of Wegmans Food Markets.

An engaged and enduring purchaser community: Every Thursday for the last 15 years, human resource and benefits leaders from local businesses and employers such as the Rochester Institute of Technology, University of Rochester, Kodak, Xerox, Bausch and Lomb, Wegmans and Paychex have gathered to discuss how they can keep costs down and improve quality. Larry Becker and Jake Flaitz are long-standing members of the Thursday group and explained to me the keys to success. “We all had longstanding relationships in the community,” Becker told me. “CEO support was key,” both men stressed, “but they also delegated and empowered the [human resources] and health professionals to do the work and bring expertise from the companies, such as Six Sigma capabilities,” Flaitz said. Both men agreed persistence was key: “We stayed on message for the long haul.”

Wellness and prevention initiatives: Rochester has made the monitoring of high blood pressure a communitywide concern. Faith-based organizations, barbershops and other local institutions are empowered to collect the blood pressure of community members, and they have helped to build a registry of 150,000 people. Anyone, regardless of insurance coverage, who is identified as having high blood pressure, is referred for immediate treatment. Ongoing financial support for such initiatives is raised through a tax on hospitals of $23 per hospital discharge. While yearly comparisons are tricky because of constantly evolving national clinical standards for blood pressure management, the best available data are impressive: In 2010, the blood pressure of 62 percent of Rochester residents was under control; it’s now estimated to be 78 percent.

The 2020 commission: The business community still provides oversight and management of the number of beds in the community, which has led to a 91 percent occupancy and full use of hospital capacity during flu season. This has forced hospitals to be parsimonious in their length of stay.

Technology assessment: More than 20 years ago, Rochester established its Community Technology Assessment Advisory Board. The board has been assiduous in managing deployment of MRIs, positron emission tomography scanners and robotic devices within the community. The PET scanner is on a large trailer; it spends half the week at one hospital facility and half at a competitor hospital to prevent the unnecessary duplication of equipment. Hospitals and other providers have to submit new technology applications to the board for approval, for both inpatient and outpatient technologies.

Chronic care innovation: Rochester successfully secured one of the largest Center for Medicare & Medicaid Innovation initiatives (a $26 million grant) to evaluate new care coordination programs, including what many are terming “upstreaming” activities in the management of chronic illnesses. These interventions include cooking classes and social determinants of health approaches.

The best little RHIO in America: Regional health information organizations across the country have struggled to bring stakeholders together and find a sustainable business model. Yet, Rochester has a successful RHIO with all health care facilities participating and 1 million patient records. It enables all providers to seamlessly share imaging and other lab results and prevent waste and duplication of tests.

Developing leadership competencies: Linda Becker is a pioneer in creating an ongoing fellowship program, now in its fifth year, for senior executives and physicians across the entire value chain, including providers, payers, employers, community agencies, long-term care providers and suppliers. Using Baldrige Award–like principles, fellows are exposed to finance, legal, process and managerial excellence activities. National thought leaders and experts have educated 217 graduates over its five-year existence. Part of the leadership program involves a “Shark Tank”-type exercise, which has helped invest in innovative and collaborative projects at the community level.

Physician alliance: The Greater Rochester Independent Physicians Association, formed in the late 1970s, is still one of the key platforms for collaboration and contracting with doctors. In addition, each of the major systems has its own accountable care organization that works closely with local insurance partners Excellus and MVP.

Increasing transparency: Linda Becker points to ongoing initiatives to encourage greater transparency on price and quality to help consumers navigate the system. We’ll stay tuned for news on this front.

Many health services research junkies will appreciate that Rochester was the story of the ’70s and ’80s when corporate giants such as Xerox and Kodak ruled the Rochester roost. Since then, Kodak has gone from 60,000 employees in the Rochester community to fewer than 3,000. But as Linda Becker told me, “Now we are a large community of small companies,” many of them entrepreneurial technology spinoffs from the corporate giants and their staff.

Lessons for the field

There are a lot of local experiments on payment reform that are worthy of consideration: the Massachusetts top-down approach of monitoring cost and quality (which seems to be working), along with Maryland’s all-payer rate setting, which many argue is a model for others. We will focus on these in subsequent columns.

The Rochester experience provides great insights on a number of factors and forces relevant today that we don’t often discuss:

  • Managing bed and technology capacity is a fundamental tool for reducing cost.
  • An engaged business community — activated to do more than simply play with benefit design, and engaged in the measurement and management of health care delivery — ensures high quality and low cost, and eliminates unnecessary resource use and capacity.
  • As more burden is placed on state and local communities for risk and financial responsibility, local communities must figure out the best way to come together to serve the people.
  • Going upstream to the determinants of health — diet, nutrition and exercise — is critical in primary prevention such as blood pressure measurement.

As Flaitz told me, the Rochester story reflects a local culture that has been built where all stakeholders recognize that “we are all in this together.” We need more of that in America.

Ian Morrison, Ph.D., is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to AHA Today and a member of Speakers Express