Medicaid Director Brings Value-Based Health Care and Stronger Leadership Skills to California

Toby Douglas, Medicaid Leadership Institute

    • April 26, 2011

The Problem. Toby Douglas is responsible for one of the largest Medicaid programs in the country. In 2010, California's Medi-Cal program had more than 7.5 million beneficiaries, almost half of whom were children, a budget of more than $42 billion and about 3,000 employees.

Medicaid is the second largest driver of spending in California, which had a $20 billion budget deficit in 2010. Not only is Douglas trying to maintain high-quality services in light of budget realities, but he also wants to transform Medi-Cal to provide value: quality care and outcomes at the right cost, and a program prepared for health care reform.

Fellowship helps California Medicaid director innovate and lead. Through the Robert Wood Johnson Foundation's (RWJF) Medicaid Leadership Institute, Douglas learned how to begin to transform Medi-Cal into a public health insurer focused on value and how to become a more effective leader. The institute is a fellowship program designed to help Medicaid directors enhance their leadership capacity through classroom training, access to national experts, networking with peers and a required practicum. See Progress Report.

"I wanted to be in an environment where I was learning about cutting-edge things and how to transform Medicaid," instead of focusing only on the day to day, said Douglas, a fellow in the institute's inaugural Class of 2010. He added, "The leadership institute gave me the opportunity to learn about things I wouldn't get in my job and the opportunity to interact with other great leaders in Medicaid." With just six fellows, four multiday classroom sessions, and a "leadership coach," Douglas had ample opportunity to share ideas and challenges with other state Medicaid directors and to build his leadership skills.

The leadership component of the Medicaid Leadership Institute taught Douglas how to share his vision for Medi-Cal and empower his deputy directors to carry it out. "It helped me really drive home the intersection between being a leader with a vision and a leader who is giving the right level of management and support to my deputies so we could follow through with our objectives," he said.

Acquiring knowledge that will be essential to implementing the Affordable Care Act in California is another benefit of the program for Douglas. "Health care reform will continue to transform the way Medicaid is structured and positioned within the broader health system. The leadership institute gave me the opportunity to understand new concepts in health care financing and delivery, which will be essential pieces in ensuring the success of health care reform," he said.

Practicum: Creating a value-based health care system. Douglas took his first steps toward implementing value-based purchasing during his required Medicaid Leadership Institute practicum after learning about the concept from institute faculty member Michael E. Porter, Ph.D., the Bishop William Lawrence University Professor at the Harvard Business School.

Value-based purchasing involves organizing high-volume, specialized care in practice units around specific medical conditions. In practice units, physicians and others work together in a way that creates value for the patient, rather than for the business unit (e.g., radiology or cardiology), and payment is designed to support accountability. For example, all health care providers caring for a child with a heart condition would work together to make sure the child receives the right treatment at the doctor's office, hospital and physical therapy facility.

"I wanted to focus on an approach where we could get better value out of the system, better ability to measure outcomes and provide incentives to our providers to make the right decisions about the best type of care to provide," said Douglas.

Porter and one of his colleagues, Jennifer Barron, a senior researcher, helped Douglas and his Medi-Cal team design their project, which used value-based purchasing in the care of children with special medical problems (brain tumors, lymphoma, leukemia, sickle cell disease, cystic fibrosis, cardiac conditions and spina bifida). Throughout the practicum, Barron continued to provide technical assistance.

In November 2010, California received a federal 1115 waiver to test a variety of innovative coverage approaches in Medicaid. Under this waiver, the state will implement four pilot programs focused on children with special health care needs, including one that uses the principles of the value-based purchasing model. Douglas's team has been working with provider groups and consumer groups to develop these pilots and expects them to begin by the end of 2011.

RWJF Perspective. RWJF sees the Medicaid Leadership Institute as an opportunity to strengthen state Medicaid programs while providing a source of expertise to Foundation staff and other programs.

"Medicaid directors don't get a lot of training, and they're managing care for the sickest and neediest people in their states," said Deborah Bae, the current RWJF program officer for MLI. "The Medicaid Leadership Institute gives the fellows the skills, space and time to learn about and pursue innovation and to think long term and strategically," said RWJF's special advisor for program development Nancy Barrand, the first program officer for MLI.

Barrand also emphasized the program's importance to RWJF's health care coverage strategy, since Medicaid is a substantial component of health care reform. Beyond that, it is relevant to many other programs across the Foundation, including those related to the criminal justice system, supportive housing and online communication for care providers. "Many programs depend on Medicaid or could leverage Medicaid to grow," she noted.