Stanford's big health care idea: how an unconventional team of doctors figured out how to provide high-need university employees with better health care, for less money.

• Author: Boerner, Heather

When Arnold Milstein arrived at Stanford University in 2010 to create the Clinical Excellence Research Center, he already had several careers' worth of experience in medical innovation. He had been in private practice as a psychiatrist; founded a health care consulting company; examined the organizational structure of hospitals and private practices, poring over the data on the quality of health care; and applied what he learned to improve care for Boeing employees in Seattle and hotel workers in Atlantic City. The biggest lesson he took from all those experiences was that American health care was ill-serving the very people who needed it the most. He had come to Stanford to study ways to make health care work better.

Tall and slim, with a kind face and short hair cropped straight across his forehead, the sixty-seven-year-old Milstein explains the problem succinctly: "It's a 5/50, 10/70 world." That is, 5 percent of patients account for 50 percent of health care spending, and 10 percent account for 70 percent, whether they're insured privately or by the government. These high spenders are the sickest and frailest, patients Milstein calls the "medically fragile."

At Stanford, in sunny, health-conscious California, Milstein saw the same thing. As a member of Stanford's employee benefits committee, which oversees the university's self-funded health insurance plan, he knew that medically fragile Stanford employees were sucking up the vast majority of health care spending and straining Stanford's system, without many signs of improved health. He had a theory for why this was happening. The patients weren't the problem; the problem was that the health care system was treating them the way it treats everybody else.

Milstein also had a theory for how to solve the problem. What if you took the concept of an intensive care unit--a single location that pulls together all the personnel and technology needed to care for the sickest patients in a hospital--and applied it to patients who were well enough not to be in the hospital but a lot sicker than the average patient in a primary care doctor's practice? Some of these people are old and frail, but many are young, hold down jobs at Stanford, raise families, and coach Little League, even though they have one or more chronic illness, like diabetes, depression, or cancer. They are among the most expensive to care for not just because they are sick, but also because the health care system is inefficient and disorganized when it comes to taking care of their multiple conditions. Why not organize the care around them the way a hospital organizes all the nurses, doctors, and technology needed for patients in the ICU?

Through his experience with Boeing and in Atlantic City, Milstein knew that the hardest part of setting up this new model of care would be not the patients, but the limitations of the current system, which organizes individual physicians around individual appointments, not overall patient health. Years ago, he said, he had realized that for this kind of project he would need what he jokingly called a "mission impossible" team, one willing to organize a radically new kind of primary care practice. He immediately thought of Alan Glaseroff, a "diabetes guru" who ran a private practice and led a group of 240 physicians in California's Humboldt County. Glaseroff's group had figured out how to control diabetes far more effectively than most primary care practices without raising costs. So Milstein invited Glaseroff to meet; Glaseroff, in turn, invited Ann Lindsay, Humboldt County's public health officer and the co-owner of Glaseroff's own private primary care practice--and his wife. Milstein asked the couple if they would consider bringing their innovative model of care down from the forests of Humboldt County to the rolling hills and shopping malls of Palo Alto. It would be part of a new clinic, Glaseroff remembers Milstein telling him--Stanford Coordinated Care, or SCC--that would be "designed specifically for the 5 percent of people who cost 50 percent of the money." The pair decided to give it a try.

If you exit the eight-lane freeway that bisects the hills just south of San Francisco, pass the turn for the local community college, and travel up a winding hill dotted with eucalyptus trees, you'll find a wood-shingled bungalow with a sign next to the door: "The Emerald Hillbillies." The name is a play on the grandiose name of the town, Emerald Hills, and the doctors who...