In January 2015 a Forbes’ magazine article headline, “UnitedHealth’s
$43 Billion Exit From Fee-For-Service Medicine” for some reason
struck me as funny. It’s not as though it was new information. Back
in July 2014, Forbes ran an article, “Blue Cross’ $65 Billion
Move Away From Fee-For-Service Medicine.” Both articles discussed
the transition to “value-based payments” and connecting health
outcomes, performance and quality of care to economics. Somehow this shift
in payment methodology is shaking the hospital industry in to a massive
operational improvement frenzy. Today, January 26, 2015, HHS Secretary,
Sylvia M. Burwell, issued a press release announcing a HHS goal of linking
30% of traditional, or fee-for-service, Medicare payments to quality or
value payment models by the end of 2016 and 50% by the end of 2018. Secretary
Burwell also set a goal of tying 85% of all traditional Medicare payments
to quality or value by 2016 and 90% by 2018.
These announcements have made operational improvement the critical objective
for most providers. Remove waste from the system. Increase productivity.
Reduce supply costs. Improve revenue cycle performance. Improve patient
satisfaction. Reduce length of stay. Decrease infection rates. The list
goes on… I recently received my 2015 Buyer’s Resource Guide
from the Healthcare Financial Management Association. It is the who’s
who of companies that can fix anything operationally wrong in a hospital.
But is this really what is needed…?
In 1998, I read Kevin Kelly’s book, New Rules for the New Economy
- 10 Radical Strategies for a Connected World. For those of you unfamiliar
with Mr. Kelly, he was the editor of the magazine, Wired. It was chapter
10 that stuck with me, “Opportunities Before Efficiencies, Don’t
Solve Problems; Seek Opportunities.” The essence of the chapter-“There
is more to be gained by producing more opportunities than by optimizing
existing ones. Productivity, however, is exactly the wrong thing to care
about in the new economy.”
So as I read the UnitedHealth article, it struck me healthcare is entering
a new economy and bound and determined to fix everything not working in
the old one. When one pauses and thinks about this, it does seem strange.
But when an industry as large as healthcare undergoes a shift in payment
methodology, a new economy is bound to be created.
I pulled out the book so that I would get this quote accurate-
“The problem with trying to measure productivity is that it measures
only how well people can do the wrong jobs. Any job that can be measured
for productivity probably should be eliminated from the list of jobs that
people do. In the coming era, doing the right thing is far more fruitful
than doing the same thing better.”
So what does all this have to do with operations? One can find many different
estimates of how much of the $3 trillion U.S. healthcare budget goes for
unnecessary treatments, duplicative treatments, defensive medical treatments,
waste in the system, etc. In an article about Blue Cross moving to value-based
payments, 30% is the quoted number. Does that mean organizations are looking
for 30% performance improvements? Good luck!
In market-driven economies, competition motivates innovation, which creates
better processes, better products and services and lowers costs for existing
products and introduces new products with higher prices. Profitability
becomes an objective measurement of future existence. Experts generally
agree, healthcare has not been a market-driven industry. With the transformation,
to the new value-based methodology it appears the industry is self-disclosing
healthcare hasn’t been market based.
At church on Sunday, our pastor was talking about the many time saving
devices we now possess from desk-top computers, lap-top computers, smart
phones, tablets etc,. Even with all these time saving devices, we still
lead hurried, not-enough-time kind of lives. And yet most of us couldn’t
live without them. Has our personal productivity improved or has the technology
just provided us with the “opportunity” of doing something
we couldn’t do before? This is the point Kelly was making between
pursuing opportunities vs. optimizing efficiency. Even in the corporate
setting, most research hasn’t found significant increases in productivity
related to computer technology. This has even been given a name, “the
In our future scenario planning exercises, RMHA learned the importance
of understanding real time developments and the opportunities they presented.
Taking advantage of these early opportunities generally prepare an organization
for following opportunities. This is where tomorrow’s operations
will be born. This is also where yesterday’s operations should be
disbanded. Before continuing a Frederick Taylor industrial turnaround
plan, stop and determine what is the opportunity the proponents of “value-based
payment” methodologies are really trying to create? Is the patient
in the center of the room or the insurer? How will the patient know the
care is “value-based?” What’s the intersection between
consumerism and value-based payments? Are employers being included in
the conversation? These are just examples of the questions that need to
be discussed in creating an operations plan.
Hospitals are filled with knowledge workers as defined by Peter Drucker.
Attempting to convert to a manufacturing-based fix that ignores these
knowledge workers and attempts to convert the hospital into an assembly-line
model, is only solving half of the value equation.