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Paul M. Ellwood, Jr., M.D., is regularly cited as one of the most influential figures in American health care over the past fifty years, advancing ideas for the fundamental transformation of the American health care system. Widely known as the "father of the health maintenance organization," he not only coined the term, he played a major role in bringing about structural change designed to simultaneously control cost and promote health by replacing fee-for-service with prepaid, comprehensive care. More recently, Ellwood has advanced an agenda for monitoring health outcomes, so that patients, providers, and payers can make health care decisions based on real information about what treatments and providers are actually effective.

Ellwood began his career as a pediatric neurologist, specializing in polio at the height of the international polio epidemicin the early 1950s. When the epidemic subsided, thanks to the vaccine introduced by Jonas Salk, the Sister Kenny Institute, which Ellwood directed, filled its vacant beds with children suffering from learning disabilities. According to Ellwood, one evening while doing rounds amid crying children, it struck him that they were making decisions for economic reasons (the need to fill hospital beds) that were not in the best interests of patients. His growing conviction that this calculus – putting the interests of health care providers over patient well-being -- characterized the American medical system in general, led him to conceive of and advocate for alternative approaches.

Health Maintenance Organizations and Managed Competition
In 1970 Ellwood was invited to consult with President Nixon's staff to reshape national health policy. Ellwood advanced the idea of giving consumers a choice among health plans that would compete on price and quality. He coined the term Health Maintenance Organization, or HMO, to describe groups of physicians who were pre-paid on a per-patient basis (capitation) instead of a fee-for-service arrangement. While the term “HMO” was Ellwood’s, this institutional model already existed in the form of the non-profit Kaiser health plan in California. Ellwood argued that creating a system of many competing HMOs would give health providers an incentive to keep patients well while driving down health care costs. Doctors would promote preventive medicine and would be less inclined to order costly procedures that had not been proven to improve health outcomes. Ellwood’s work with the Nixon administration culminated in the passage of the Health Maintenance Organization Act of 1973. The result was a dramatic change to the landscape of health care in the United States – the proliferation of HMOs, Preferred Provider Organizations (PPOs), and Independent Provider Associations (IPAs) alongside traditional fee-for-service arrangements. In 1971, Ellwood founded the Jackson Hole Group, a “loosely organized but highly regarded” group of politicians, providers, and policymakers who came together in Ellwood’s home in Jackson Hole, Wyoming, to talk about how to change the health care incentive structure. A key member of the group was Alain Enthoven, a Stanford economist who was instrumental in shaping the concept of “managed competition” in health care. By influencing policy, as well as the decision-making of some in the health care and insurance industries, Ellwood and his colleagues would have a major impact on the changing shape of health care for decades.

Controversy Over HMOs
Subsequently, when the Clinton administration was grappling with health care reform, the Jackson Hole Group, according to the New York Times, was “one of the most important influences in the shaping of the Clinton plan.” The plan was called managed competition, and two of its most prominent advocates from the Jackson Hole Group were Ellwood and Alain Enthoven. In essence, the concept was that groups of health care providers and insurers would compete with each other to get the business of large cooperatives seeking insurance. In the end the Clinton reform plan collapsed. By then, the Jackson Hole Group had distanced itself due to disagreement about the degree of regulation the plan sought to impose, and Ellwood had become a pioneer in outcomes management. The spread of HMOs and other pre-paid health plans has spawned significant debate about the impact on quality of care. From the beginning, critics argued that pre-paid competitive plans like HMOs provided incentives for doctors and hospitals to “skimp” on care. Many have complained that the plans restrict providers’ autonomy and patients’ choice of doctors. On the left, advocates of a Canadian style government health plan have argued that the Managed Competition approach enriches the insurance industry at patient and taxpayer expense and relies naively on free market forces. Many proponents of the managed competition approach, including Ellwood, argue that regulations built into the legislation have undermined the market competition that was meant to enable patients and providers to choose among plans based on quality and cost. Ellwood has repeatedly expressed disappointment with the way his concepts played out. “What went wrong?” he reflected in 2011. “Political expediency in the initial plan designed to promote HMO growth led to the inclusion of three mistakes: for-profit plans, independent practice associations, and the failure to include outcome accountability.” Ellwood was particularly adamant about the last. Without measures of health outcomes, which he had advocated from the beginning, there was no way to really know how the changes in health care organization were affecting patients. More important, there was no way to ensure that patients and providers were making good decisions. And there was no way to hold health providers accountable, to ensure that they were not reducing costs in ways that hurt patients.

Outcomes Management
Ellwood’s concern about the importance of measuring health outcomes that would hold health providers accountable for quality dated to the mid-1960s. In 1968, as an adviser to the Johnson administration, he devised the plans for the establishment of U.S. Agency for Healthcare Research and Quality (AHRQ). He would become increasingly vocal about the need for evidence-based medicine and outcomes accountability. In 1988, Ellwood was invited by the Massachusetts Medical Society, which publishes the New England Journal of Medicine, to deliver their annual Shattuck Lecture. He called for “a national data base containing information and analysis on clinical, financial, and health outcomes that estimates as best we can the relation between medical interventions and health outcomes, as well as the relation between health outcomes and money.” He envisioned a sort of health plan “report card” that would allow patients to make informed choices among health plans based on health outcomes for specific conditions and patients’ reports of their satisfaction. Ellwood argues that there is extraordinary variation in the quality-performance of different doctors and health institutions, yet patients, insurers, policymakers and even other doctors have few tools for assessing quality. Similarly, doctors and patients often choose medical interventions with only limited information about the effectiveness of various treatments and how they impact patients’ quality of life; a health outcomes data base would vastly improve the information available when making such decisions. Finally, a health outcomes data-base would guide policymakers and large providers in the overall design of health systems. The Mayo Clinic and some health providers have begun to experiment with outcomes management.

Background
Paul Ellwood was born on July 16, 1926, in Oakland, California. He served in the U.S. Navy from 1944-1946. He was the son of a nurse-turned-homemaker and a dedicated doctor who made house-calls much of Paul’s young life and served inner city patients in Oakland into his eighties. Ellwood earned a bachelor’s and medical degree from Stanford University in 1949 and 1953, respectively. He worked in the Elizabeth Kenny Institute, later known as the American Rehabilitation Foundation, from 1953 – 1971, as a physician and ultimately the Executive Director. At the same time he served as Clinical Professor of Pediatrics, Neurology and Physical Medicine and Rehabilitation at the University of Minnesota, where he founded the program in Pediatric Neurology. He was coeditor of the Handbook of Physical Medicine and received physical medicine’s highest award, the Gold Key. In 1972, he founded Interstudy, a health policy think tank based in Minnesota, where he served as Executive Director. He served as the founder and president of the Jackson Hole Group from 1971 to 2002. Ellwood has three children: Deborah Ellwood, who directs a national consortium of community foundations; Cynthia Ellwood, a regional superintendent in the Milwaukee school system; and David Ellwood, Dean of the Kennedy School of Government at Harvard. On December 8, 1996, The New York Times Magazine ran back-to-back stories about Paul Ellwood and David Ellwood under the cover banner, “What Have the Ellwoods Done to America?” – a reference to Paul Ellwood’s role in reshaping American health care and his son’s role in reshaping the American welfare system.

Quotations about Paul Ellwood

 * “But those who judge Ellwood’s dreams by whether they can be realized are missing the point. The power of Ellwood’s journeys lies less in their completion than in the landscape they change along the way.” -- Lisa Belkin, The New York Times Magazine cover story, December 8, 1996
 * “Ellwood is to the national health care industry as Sony is to the world of electronics. Every few years, he offers up a concept that changes things so radically that no one can remember what things were like before.”  -- Michael Booth, Corporate Report Minnesota, October, 1991
 * “More than anyone else, he has ceaselessly nudged the bloated leviathan of American medical care to get it moving toward the white waters of competition.” -- Edmund Faltermayer, Fortune, 1978
 * “Paul Ellwood has been called one of the most important figures in American healthcare in the last half century. The title is a well-earned product of more than two decades of persuasion and advocacy, blended with disciplined research and a courageous spirit of innovation.”  -- from the citation given to Paul Ellwood when the American College of Healthcare Executives invited him to becomes an honorary fellow, 1987
 * “Ellwood serves us, and the health care system, by clearly describing the key elements and benefits of this vision. The challenge for all of us is to follow Ellwood’s lead and to help explain this vision to the public and to the policymakers so that it can be fully considered as an option in reforming our health care system”  -- Charles R. Buck, Jr., Sc.D., General Electric, forward to “Managed Care:  Strategic Model or Bandage?  A Conversation with Paul M. Ellwood, M.D.,” an interview by J. Zabludoff, Decisions in Imaging Economics, fall 1992
 * “Dr. Ellwood has earned the reputation as one of the health care field’s most accurate futurists. Whether through his discernment of coming change or his creation of it, Dr. Ellwood has frequently demonstrated a visionary ability to understand what health care will become.” -- Who’s Who in Managed Health Care, HealthQuest Publishers, 1994