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.