Category Archives: Operations

Support Pesonnel

Does everyone who collects a pay check in health care really understand the mission and their individual role?  Rhetorical.  It seems that over the recent decades the health care system has been more about the industry itself and less about what it was designed to do.  A lot of self-serving interests.

An organization begins to die the day it begins to run for the benefit of insiders and not the benefit of the outsiders.”  -Peter Drucker

Just in case anyone has forgotten.  The mission is to deliver health care to patients.  Financial success is important to sustain this mission but the bottom line must be secondary.  Competing with the health care system across town is important but if you focus on the mission you will win the competition.

The engine of health care is the interaction between patients and their physicians.  The physicians guide and drive the care.  And the best health care occurs where the best doctors practice.  All others in a health care organization are support personnel.  If you have never been face to face with a person asking for help for a potentially life-threatening illness then your job is to support the person who does that job.  If you have never been in an operating room attempting to correct a life-threatening problem then your job is to support the person who does that job.

This is not about elitism.  This is more about reality, good business principles and how to create a successful health care organization.  Everyone in a health care system presumably was hired to do a job that was important to patient care.  Every employee, from hospital CEO to parking lot attendant, needs to simply realize why patients walk in the door and who they walk in to see.

The New C-Suite in Health Care

Health care version 1.0, run by physicians and other providers, did not work due to an unrestrained utilization of resources.  Health care version 2.0, run by corporate forces, also has been a failure.  For the past several decades the focus in health care has been about the business of health care.  A model of corporate medicine has emerged and proliferated and it only works well for those whose job it is to manage the bottom line.  Now we are told (finally) that the future of health care is value.  And we are told that the numerator and denominator of value are quality and cost respectively.  In theory this will be a transformational change in health care that will require a complete overhaul in operations.  But unfortunately nothing is happening at the front lines.  Most likely because those currently in charge know nothing about quality but rather are business people.  A meaningful change in health care will begin with a substantive change in leadership.

  1. CCO: Chief Cultural Officer.  The most important person in the C-Suite.  The CCO will be the relentless agent of change.  The CCO will establish the environment where quality care happens.  A Donabedian disciple of quality who realizes that structure and process guarantees nothing.  Care will always be patient focused.  Care will always be evidence based.  Sets the standards and acts as a role model for providers at every level of the organization.
  2. CAO: Chief Alignment Officer.  The CAO will serve as the intermediary between quality and cost.  Understands the importance of the bottom line which is second only to great care.  Will interact with and align the providers with the payers and others whose job it is to maintain the bottom line.  Will share information between the two sides on an ongoing basis so that the value equation is maximized.
  3. CPO: Chief Practice Officer.  Possibly the most difficult job on the list.  The CPO will be responsible for transforming the practice of medicine.  The current model will be deconstructed and rebuilt.  The medical staff will first and foremost be dedicated to evidence based practice and will be provided with all of the time and resources to do so.  All unnecessary and ineffective processes will be eliminated so that providers can use that time for better purposes.  It’s not about compliance anymore.  The future will be about a medical staff that is self-motivated to be the best that they can be and doesn’t need high-priced babysitters to follow them around checking boxes on paper.  The CPO will make sure that their medical staff is functioning at the highest possible level.  The CPO will also assure that they medical staff will make every decision based upon the patient’s best interest.  Always.

There will be additional new and innovative positions designed to completely change health care.  These positions will all be held by physicians who have demonstrated a selfless commitment to patients and the profession.  They must be innovators.  Incremental change won’t work.  Lastly, they must be courageous.  For several decades health care has been shaped and managed by non-physician administrators who now will need to be displaced.  Someone will need to help them see how little they actually contribute to the process of delivering health care.  They won’t go quietly.  There will be an incredible amount of self-preserving rhetoric.  Keep the focus on patients, quality and care and the good guys will persevere.

The new C-Suite will meet regularly with community members to receive feedback and assure that the new model is meeting the needs of the people that they serve.

So hopefully a complete change at the leadership level will result in the transformational change in health care that is necessary: The transition from the emphasis being placed on volume to the emphasis being placed on quality with the result being value.  This isn’t bad news for everyone currently in the C-Suite.  Will keep the CFO.  Someone needs to understand how to depreciate equipment 🙂

Evidence Based Medicine. Evidence Based Reform?

Years ago physicians took the easy way out and allowed non-physicians to manage their profession.  Probably seemed like the right thing to do at the time.  Let someone else worry about the bottom line.  Patient care was less complex.  There were adequate resources and everyone was happy.  However, this complex model grew and continued to devour health care resources.  As resources became more limited the tensions grew those who were once in charge of managing health care finances now were impinging on the practice of medicine.  Their solutions were predictable.  They showed up in physicians offices on a monthly basis with a profit and loss statement.  Physicians were told to see more patients and do more.  With no sense of what was best for patients and the profession and with no strong leadership physicians took the path of self-preservation.  And now we have a crisis.

In the practice of medicine the most important guiding principle should always be evidence-based practice.  Decisions regarding patient management are/should always be based on what the data shows is best.  This strategy will optimize patient outcomes and minimize cost.  The result is value.  With so much at stake shouldn’t the same standards be applied to health care reform and management?

In November 2013 a publication in the Journal of the American Medial Association titled “The Anatomy of Health Care in the United States” provided insight into the demographic and economic realities and trends over the past decades.  HCR encourages the interested reader to obtain a copy and read the entire article so that HCR is not accused of “cherry-picking” select pieces of information.

One of the most telling pieces of data is in Figure 2 which looks at trends in health care expenditures by category.  From 2000-2011 the category with the highest growth rate is in fact administrative costs with an annual compound annual growth rate of 5.6%.  This was followed by hospital and other care facilities at 4.2%, prescription drugs and equipment at 4.0% and professional services at 3.6%.  So the sector with the largest growth in cost over the past decade was a sector that had no direct connection to patient care.  Was this growth used to make care better or more accessible?  Doesn’t seem so.  Rather, these data show that we have invested in making the system more complex than it probably needs to be.  How efficient do these administrative costs perform?  Figure 13A shows the inefficiency of health care in comparison to other industries.  Health care utilizes @ 800 revenue cycle FTE’s per $1 billion of revenue.  This appears to be anywhere between 4-10x that of other industries.  Does this administrative excess adversely affect patient care?  Most likely.  Figure 13B show that @ 13% of funds spent on physician care is related to billing and insurance related costs.  The money in this case isn’t even the biggest problem.  Instead, if we currently spend $70B (13% of total costs) on billing and insurance related costs for physician care just think of the wasted time involved.  Time that could be utilized toward making care better.  Why won’t some leaders acknowledge the administrative cost and burden on health care?  Naive?  Threatened?

No data is perfect and it should all be scrutinized.  Data is by definition historical so one must always incorporate some prognostication and educated guesses into decision-making.  In addition one can not be dogmatic and rigid and allowances for situational discretion must me made.  But data should always be the starting point.  Leaders in the health care industry must address the issue of administrative excess.  Not doing so means losing an opportunity for significant savings.  It also calls into question priorities and motivations.

It seems that significant cost reductions can be achieved by reducing administrative costs.  Eliminating people and processes that have done nothing but sustain the status quo must be a priority.  This will result in an entirely new dynamic between providers and administration.  Changing the culture is the only pathway to success.

Communities Fix Leakage

Medical homes and neighborhoods are becoming popular models for quality and cost-effective health care.  The concept is right on track.  A connected group of health care providers discussing cases, sharing information and working together for the best interest of the patient.  But not everyone gets it.

Recently an organization in the midst of creating a new health care integrated delivery system recognized that patients were being sent out of the system for referrals to specialists or testing.  Can’t ignore that this is a problem.  Their answer was to assign administrators to physicians to carry out daily interrogations.  Seriously!  No vision.  No thoughtfulness.  If these are the leaders charged with creating the strategy for the future there could be big trouble looming.  But what else would you expect?  It is the way of corporate medicine led by non-providers.  Band-aids and goon squads.  A short-term, rather than long-term, view of the bottom-line.

It’s easy to be critical.  But if criticism is genuinely intended to make a situation better an alternative must be offered.  Enter the concept of community.  Community can be defined in many different ways based on context.  But the most applicable here is that a community represents a group of unified individuals with shared values.   A community completes the home and neighborhood theme.

If the above mentioned integrated delivery system truly had visionary leadership they would have recognized that the fix for leakage is community building among the providers.  A referral from a physician to another physician for specialty services or to a site for testing is first and foremost based on trust.  In turn, trust is based on relationships.  A patient who has a bad experience with a referral holds the referring physician accountable even if they don’t vocalize their displeasure.  If a physician has had a good experience with a specialist why would they want to change and risk a bad experience for themselves and their patients?  How do you help them transition?  It’s not with daily interrogations.  The better way is to help them build relationships within the community of providers within the system.  It’s a process of an introduction followed by assimilation.

Community building.  Like culture this concept will make some nervous.  The most nervous will be the ones that think interrogation is the answer to leakage.  Communities, like culture, evolve and emerge.  Wouldn’t it be great if all of the physicians in an organization could meet even every week to discuss issues?  Yes it would but the reality is this can’t happen.  However, for the past 20 years technology has helped to form communities.  Could this be the better answer for leakage?  Not just a static web page for physicians but rather a site that allows for community building.  One that includes robust communication channels between physicians.  A site that includes forums where voices are heard.  A site that forms the foundation of collegiality and trust among the providers so that referrals can be made voluntarily and with confidence.

So the leakage problem is one of many that new health care entities need to address.  Some will bring out the rusty tools and grind.  Not a working brain in the bunch.  Others will sit and think before they act and listen to the voice of the soldier on the front line – the physician.  It should be obvious which approach is more likely to be successful in the long run.

First, Let’s Fire All the Managers

Strong words.

Hyperbole from irritated health care providers distraught with years of dealing with a growing health care bureaucracy that adds cost with no clear value in return?  Nope.  These are the words of Gary Hamel.  Mr Hamel is a management expert who founded Strategos, an international management consulting firm.  He has been credited as one of the originators of the concept of core competencies.  In 2008 The Wall Street Journal listed him as one of the world’s most influential business thinkers.  In 2009 Fortune magazine called him “the world’s leading expert on business strategy”.

First, Let’s Fire All the Managers was the title of an article written by Mr. Hamel that was published in the Harvard Business Review in December 2011.  The first sentence in the paper states that  “management is the least efficient activity in your organization”.  Mr. Hamel then goes on to explain how an ever-expanding hierarchy of managers comes with an excessive financial and productivity cost to an organization.  Too many people telling other people what to do and not enough people doing things.  The message seems to be that leaders should spend resources on delivering the product or service not in creating a hierarchy.

There is evidence that an excessive managerial hierarchy is pervasive in the health care system.  In 2013, The Institute of Medicine published “Best Care at Lower Cost.  The Path to Continuously Learning Health Care in America.”  A very striking table in this publication lists the estimated sources of $765 billion of waste.  Excess administrative cost is responsible for $190 billion.  That amounts to @ 25% of all of the waste.  It is likely that a large proportion of this excess administrative cost is directly related to an excessive managerial hierarchy.  And every provider will tell you that it is rare that a manager or administrator ever asks if there is a way that they can help you provide better care.  Rather, they focus on how you can generate more revenue.  A product of the current, and hopefully at some point historic, model of volume driven corporate health care.

What is the ideal ratio of managers and VPs to health care providers?  One is often referred to data from the Medical Group Management Association (MGMA).  These data are backward and sideways looking.  Is anyone looking toward the horizon?  Does anyone look at that 25% of excess cost as a target for cost savings?  In a previous post here at HCR titled “Tell Me What You Do Again And Why It’s Important?” a scenario was depicted where every manager and VP was asked to justify their value to the organization by answering one simple question: How do you help providers deliver value (evidence based and cost-effective) driven care?  Not being willing or able to pursue this issue translates into leaving $190 billion dollars on the table.

One of the main themes of HCR is to redefine the practice of Medicine and establish a new culture.  The anti-corporate health care culture.  The first step in eliminating the cost of unnecessary managers and administrators is to empower providers.  The providers then must accept the new responsibility and be held accountable.    Providers have been kept in the dark regarding the operations of health care.  If providers were empowered with financial data and became active participants in the health care delivery process layers of unnecessary managers could be eliminated.  Or better yet they can refocus their efforts toward helping providers deliver better care.

There are $190 billion sitting there.

Fixing the Four Ring Problem: Driving Uniformity and Mediocrity

So do non-physician leaders and executives really know how to drive quality in the health care system?  Is the focus correct and do they really understand patient care?  The premise here at HCR is that most do not.  This is not an elitist stance.  It is just impossible to manage something so complicated without ever having done it.  A recent example follows.

A health care organization noted that it had an issue with patients getting timely access to the physicians.  There are some conditions that require urgent but not emergent care.  And from a business aspect if a patient can’t get a timely appointment with a physician then they may end up at a competitors place of business.  The problem is an important one.  The problem of access to physician care is complicated and there are multiple layers.  The administrative fix is a four ring rule.  If a patient calls a physicians office and does not get a person and an appointment in four rings then the call will get forwarded to a call center where a call center person will insert that patient into a slot in some physician’s template somewhere.

The first issue to get off the table is that, like in all occupations, there are physicians who simply want to do the least amount of work and collect the highest possible salary. has acknowledged the importance of physicians taking responsibility for restoring the profession of medicine (see: “Nobility Obliges” and “Guilty as Charged”).  The first place to look is always into the mirror.

The problems and issues that affect timely access to physicians are not uniform.  It is likely that there are four groups.  The first group (Group 1) are physicians who have built practices that realize the importance of getting patients into the office quickly and have the people and processes in place to make that happen.  The second group (Group 2) are physicians who realize the importance of timely access but do not have the people or processes in place to allow for it to happen.  The third group (Group 3) are physicians who don’t currently recognize how important timely access is but can be educated and are willing to change.  The fourth group (Group 4) are physicians who don’t acknowledge the importance of timely access and likely never will and are resistant to change.  One could obtain the distribution of the groups with the appropriate data mining.  The optimal fix for the access problem would in fact be four separate fixes.  Complicated but precise.

The alternative is a generic, universal fix applied to all physician offices.  A centralized call center and a rigid physician template.  All calls not answered on the fourth ring to a physician’s office would then be forwarded to a 100 person call center where a person who likely has no medical training will answer the phone.  The call center person will likely listen for key words from the caller-patient and then insert them into one of thousands of physicians templates that have been created.  It’s the M.B.A. fix.  It looks great on paper.  But it will only partially correct the problem of patients not being seen in a timely manner.  And at what cost?

The problem with this or any generic fix is the unintended consequences.  And also, these generic and universal fixes usually result in uniformity and mediocrity rather than the ultimate goal of best practice management.  Have the following issues been considered?

1) The physicians who are now performing well with respect to patient access are potentially penalized.  What if these physicians get most but not all calls on the fourth ring?  And what if the patients who gets a recording are called back very promptly?  Those patients who would have been called back are now likely to be inserted into another physicians template.  This could adversely affect the physician’s practice.  Even though the patient was accepting of the process.

2) Patients are often referred to a certain specialist based on a referring physician developing a level of trust with the specialist.  That trust is based on the specialist providing quality care and maintaining communication with the referring physician.  The incentive to do so by the specialist will be diminished and the previously invested hard work becomes negated.

3) Physicians have become specialized and sub-specialized.  Can an untrained person in a call center really connect a patient with the best person to provide best care within the larger group of physicians?  And if a bad outcome occurs because of an inappropriate referral is it justified because the four ring metric was hit?

4) And honestly, will this generic fix do anything to make the unmotivated physician be more receptive to change?

Applying a one-size fits all fix to problem is never the well thought about fix.  Does it make sense to break down practices that may be working fine to help others that are broken? Uniformity and mediocrity or best practices?  Four rings of the phone or quality outcomes?  Fixing health care is much more complicated than four rings of the phone.

Tell Me What You Do Again And Why It’s Important?

If health care was deconstructed back to first principles all that would remain would be a patient and a physician.  Reconstruction would then involve adding components that enhance the value of the service provided from the physician to the patient.  There are so many people and layers now.  Health care has become incredibly complex but there is no clear evidence that this complexity translates into better care.  Maybe just another great example of a Rube Goldberg machine.  Could it be that there are people and their processes in this system that just add expense with no significant return on care delivery, quality improvement or cost savings?  There has always been a tendency to make things bigger but not necessarily better.  How much waste is present in the administrative suites?  There are personnel hired whose job on paper is related to making care better or more cost-effective.  They never come in contact with a patient.  An objective person would assume that this requires a close, collegial working relationship with the physicians delivering that care.  Is this occurring?  Can the physicians in the system attest that certain non-patient contact personnel actually enhance care?

The Institute of Medicine (IOM) has estimated that as much as 25% of the excess cost in the health care system can be attributed to excess administrative costs.  This amounts to $190 billion dollars.  Another $130 billion of excess cost is from inefficiently delivered services.  These inefficiently services are occurring in the era of managed corporate medicine.  Every player in the system needs to contribute to the mission of making health care better and affordable.  This includes providers, patients, payers and those in health care administration.

The return on investment of everyone who collects a paycheck from a health care system should be assessed.  Special attention should be focused on those who never come in contact with a  patient.  It is likely that the return in this group is especially low and great cost savings, without compromising care, could be obtained by eliminating or at least reducing these positions.  To assure that the process is objective a committee composed of many disciplines could be assembled.  Those who have no patient contact would be given a certain amount of time to research and prepare a presentation.  They would then present to the committee.  Each non-patient contact employee would have to present evidence that justifies their existence in the system.  Is there an evidence based argument that their position improves quality or decreases cost?  Some have minions of staff and resources.  Is it all necessary?  If there is an evidence based benefit to the position?  Could it be done more cost-effectively?

The delivery of health care from a physician to a patient, as well the administration of that health care, must be evidence based and simplified.  It’s the only pathway to quality and efficiency.

Open-Book Management for Health Care

One of the great mysteries in the health care system involves trying to asses what care really costs.  Many of the thought leaders in the reform movement are convinced that more transparency in pricing and cost will allow consumers (read patients and payers) to comparison shop and use basic economic pressures to obtain value.  A great idea.  What about the pressure on providers to deliver value?  Wouldn’t it make sense to have the  providers on the front line equally educated with respect to price and cost?  If providers understood price and cost they would be in a better position to provide value to the consumer.  Most front line providers (physicians, nurses, others) are as equally in the dark as patients and payers with respect to price and cost.  This information seems to be locked away in an administrative vault somewhere.

Open-book management is a strategy in which the financial information of a business is shared with employees at every level.  The concept was originated in 1993 by a business author by the name of John Case who worked for Inc. magazine at the time.  It  gained popularity when a then manager by the name of Jack Stack and a group of employees purchased a failing business unit within International Harvester and transformed it into a successful venture.  Mr. Stack went on to write about the experience in two books: “The Great Game of Business” and ” A Stake in the Outcome”.  Mr. Stack stresses a culture of ownership.  One of the main themes is that if employees are engaged, educated, encouraged and have equity in the outcomes then you have leveraged an important aspect of success.  A nice summary of the key points in the later book have been outlined by a business consultant by the name of James Altfeld and are available as a pdf file here.  If the concept of open-book management sounds good start with this review.

Is the timing right for open-book management to be applied to health care?  If providers knew the cost factor associated with each process and piece of equipment and office supply it would likely be eye-opening.  Many expensive habits and routines could and would be abandoned.  Even in the world of evidence based medicine and comparative effectiveness research the cost factor must be understood.  If research demonstrates that two treatment are equally effective but there is a significant cost differential then cost should be the deciding factor.   Every provider must first and foremost do what is best for patient outcomes and only providers are in a position to decide what is best.  Why not empower the same group with cost and financial data as well.  It just makes too much sense.

While some have described a downside to open-book management there seems to be no reason, other than protecting turf, that this methodology should not at least be trialed with physicians and other health care providers.

If it works with those on the floor of the factory is there any reason to think that it wouldn’t also work with trained health care professionals?