Operations

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 productivity paradox.”

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.