As I have stressed in my book Potent Medicine and in other articles I have authored payment reform is one of three critical factors required to transform health care. In this issue of Health Affairs, there are several opinion pieces describing what we need to do next. This includes getting capitation right. In the article by Frakt and Mayes Beyond Capitation: How New Payment Experiments Seek To Find The ‘Sweet Spot’ In Amount Of Risk Providers And Payers Bear lessons learned from the 90’s capitation experiences are discussed. In their words “We offer lessons learned and assess the extent to which these lessons have been applied in the development of contemporary forms of provider cost sharing, particularly accountable care organizations, which in effect constitute a search for the “sweet spot,” or appropriate place on a spectrum, between providers and payers with respect to the degree of risk they absorb”. This is the critical point in ACO development; where does the risk reside? In the 90’s we learned that having primary care providers take financial risk for the entire patient experience was a disaster. Experiments to understand what level of risk is appropriate for ACOs are clearly what is required. At the moment most of these experiments involve only shared savings. But there are some early adopters of a more aggressive approach.
In an experiment in California global payments to ACOs appear to be promising. Here’s the abstract from an article by Paul Markovich entitled A Global Budget Pilot Project Among Provider Partners And Blue Shield Of California Led To Savings In First Two Years. “Health care plans and providers in the private sector are developing alternative payment and delivery models to reduce spending and improve health care quality. To respond to intense competition from other organizations, Blue Shield of California created a partnership with health care providers to use an annual global budget for total expected spending and to share risk and savings among partners for providing health care. The patient population consisted of certain members of the California Public Employees’ Retirement System in Northern California. Launched in 2010, the pilot accountable care organization in Sacramento provided a framework for operations and established goals and financial risk arrangements. The model shows early promise for its ease of implementation and effectiveness in controlling costs. During the two-year period, the total compound annual growth rate for per member per month cost was approximately 3 percent, or less than half the rate at which premiums rose over the past decade. Some of the savings stemmed from declines in inpatient lengths-of-stay and thirty-day readmission rates. Results suggest that the approach can achieve considerable financial savings in as little as one year and can gain wide acceptance from reform-minded providers”.
Of course the key is “reform-minded providers”. In our experience I would say it is also true that reform-minded insurers are also required. Insurers are reluctantly getting into the payment redesign game in some cases coming kicking and screaming. In Wisconsin Anthem Blue Cross, WEA Trust, WPS, Unity, Physician’s Plus and Dean Health Plan are leading the way.
Another interesting experiment is focused on getting patients involved in the decision of choosing their providers using quality and cost data. Here’s the abstract from the article entitled Payers Test Reference Pricing And Centers Of Excellence To Steer Patients To Low-Price And High-Quality Providers. “Hospitals frequently exhibit wide variation in their prices, and employers and insurers are now experimenting with the use of incentives to encourage employees to make price-conscious choices. This article examines two major new benefit design instruments being tested. In reference pricing, an employer or insurer makes a defined contribution toward covering the cost of a particular service and the patient pays the remainder. Through centers of excellence, employers or insurers limit coverage or strongly encourage patients to use particular hospitals for such procedures as orthopedic joint replacement, interventional cardiology, and cardiac surgery. We compare these two types of benefit designs with respect to consumer choice and how they balance price and quality. The article then examines their potential role in the policy debate over appropriate coverage and cost-sharing requirements”.
The biggest problem with this effort is clearly the data. Most insurers do not have enough data to make statistically significant comparisons on cost or quality of provider performance. In Wisconsin and a few other states an All Payer Claims Data Base has been created in which 75% of the states resident claims data is aggregated. From this robust data base accurate comparisons can be made on cost and utilization. But this isn’t a quality data base. The Wisconsin Collaborative for Healthcare Quality(WCHQ) reports quality outcomes on the physician groups in the state. WCHQ has recently partnered with Consumer Reports to build a consumer friendly quality report which accurately depicts physician group quality outcomes. Our goal at the Center is to build this robust reporting system throughout the country at which point we will have the data to differentiate care on the basis of better value defined as Quality/Cost.
Finally, the voice of employers is heard in this article.Large Employers That Have Lived Through Transformation Say Payment Reform Alone Won’t Cut Costs And Reengineer Care.Martín J. Sepúlveda and Helen Darling point out “In this commentary we discuss large employers’ perspectives on three particular challenges that payment reform alone, as important as it is, may not be sufficient to address: high health care prices, inefficient and complex systems, and an outdated work environment ill designed to meet the pressing goals of better health care at lower cost”.
Of course, what health care organizations require is a proven operating system that improves efficiency and creates a modern environment for delivering care. You guessed it the authors are pointing to lean in healthcare. Most employers must deliver on operational excellence every day to stay in business. For some reason healthcare has avoided this with devastating effect.
I think these four articles in addition to others in the September addition of Health Affairs support my contention that we need payment redesign,transparency of quality and cost performance data, and delivery redesign using a proven operating system called lean healthcare. With these in place we will be in a position to mend a seriously ailing industry.
I was asked by the I.O.M. to review this extensive document. For the most part I think they got it right. There are some weaknesses in this review and, although the final document is not actually released, I have a couple of concerns.
First, there is too much emphasis on technology as the answer to the health industry ills. I have visited 116 hospitals in 11 countries in the last seven-plus years and I find two problems almost everywhere I go. As long as hospital leaders and doctors think they have the latest and greatest bar coding system or EMR or other technology they are doing everything they can to deliver patient safety. That thinking could not be further from the truth. Technology is only a tool that may or may not help to support care delivery processes. I find most organizations have no clue what the current state of the process is. They haven’t mapped out the patient experience and the process is generally in chaos because there is little or no standard work in place. In addition, I also find there is no “system” in place to assure problems are identified on a daily basis and solved by front line staff. Most organizations have a typical top down management structure that Deming called “management by objectives.” In fact, a continuous improvement culture is supported by what Deming described as “mangement by process” (Out of the Crisis 1983). I can count on one hand the number of health systems that have a management by process system in place.
The second weakness is the lack of focus on the principle that 99% of the problem in healthcare today is faulty processes not faulty people. In the 1960s the FAA took the airline industry by the horns and mandated fail safe process implementation. This was at a time when there was a plane crash every other week with hundreds dying at a time. Aviation is now known as one of the safest industries because they have adopted processes that prevent human error. This is what we are fundamentally missing in healthcare. Standard work for care processes leads to zero errors. Members of the Healthcare Value Network prove this every day. Using standard work St. Jude’s has had zero ventilator associated pneumonias for three years in a row. Mercy Hospital–North Iowa has had zero lab specimen tube errors for two years. ThedaCare has had zero medication reconciliation errors for 5 years running.
I have published extensively including in my new book Potent Medicine the three things required to fundamentally transform American healthcare: payment that rewards value, redesign of care processes using lean, and public reporting of provider performance. I would have liked to have seen the I.O.M. report emphasise public reporting more strongly. It did mention this in several sections.
Despite my above criticism I think this report is a welcome addition to the literature on the problems facing healthcare and a good set of recommendations to address them. I am particularly happy with the clear focus on building a continuous improvement culture. I’m also in complete agreement with the focus on the unnecessary deaths occurring every day in our hospitals. These unnecessary deaths should be the only confirmation required for healthcare leaders and boards to sprint to change. As this report points out we have so much to do to make healthcare safe but we also have a direction ahead.
With 10,000 hospitals the largest of which has 6500 beds, China healthcare is like everything else in the massive country. The scale is unfathomable. But as I have found visiting 11 countries over the last five years, the problems are exactly the same in China as everywhere else: the costs are sky rocketing, the quality is not reliable, and mostly not measured, and there is no transparency of performance.
China delivers most care through hospitals. There are outpatient clinics in many cities but the Chinese consider them inferior to the care they receive at hospitals. So you can imagine the bottleneck when hundreds of millions of Chinese try to get care care every day at the hospital. As is true in the U.S. when care is designed around the provider. A friend who’s mother was in the Internal Medicine hospital at a large multi-hospital complex had been in a bed for 20 days. Nothing was happening. Then the friend went to the surgical hospital (a completely separate building on the same campus) and pleaded with a surgeon to come and see the patient. The surgeon on seeing the patient transferred her to the surgical hospital (wheeling the patient out the door and across the street literally) performing surgery the following day. This is the ultimate silo thinking but is not much different than American hospitals I’ve visited.
During our visit we were invited by the Chinese Hospital Association to deliver a session on lean in healthcare. Initially, the officials thought a room accommodating one hundred would be fine. Because of interest they moved us to a room seating 300 and it was mostly filled. After the conference many Chinese doctors approached me very excited. There is a lot of pain. With huge need to deliver better through-put at lower costs the Chinese including party leadership are looking for help.
My first book, On the Mend, was introduced in Mandarin with great fanfare. We gave out 300 books to attendees who were elated. We also visited two Chinese hospitals during the visit. These were both top notch hospitals for China. One thing was clear, they have a lot of technology. Everything from robots to iPads, but missing was standard work processes. As we know technology without process doesn’t deliver better results just more expense.
China has much to gain with lean. Because of a very large burning platform(1.3 billion people) it wouldn’t surprise me if they beat the U.S. to the punch.
The nation is looking for answers to the healthcare mess. The financial media is scouring the world for anyone with a clue as to what really to do. Recently CNBC has focused on work done at the Center. They published an editorial I wrote http://www.cnbc.com/id/48608480 which outlines the three components of true health reform. These are: care delivery redesign using lean principles, transparency of cost and quality outcomes, and payment that rewards patient value. These principles are the cornerstones highlighted in my new book Potent Medicine: A Collaborative Cure for Healthcare. In the book we recommend practical solutions that have been working in Wisconsin and could work for the rest of the country and the world for that matter.
Hospitals and doctors still get paid based on the sickness care model. It should be no surprise why 30 day readmission rates for common clinical conditions haven’t changed over a three year period: Hospitals get paid to readmit patients not to keep them out of the hospital. Even though penalties are about to be applied by Medicare for readmissions the penalties do not outweigh the benefit for hospitals.
It’s very difficult to get the entire team required to reduce readmissions to work together. In some cases, the hospital has no control over the outpatient side of the business leading to little connectivity of the clinicians critical to move the readmission metric. Add to that negative financial consequences of reducing readmissions and nothing changes.
At ThedaCare, 30 day readmission rates for the common conditions identified in Kaiser Health News have dropped to U.S. benchmark performance of around 8% and guess what’s happened? Commercial insurers and Medicare have reaped benefits while ThedaCare suffers the financial result of fewer patients in hospital beds. ThedaCare is participating in the Pioneer ACO model. Clearly, Medicare needs to pay differently and the Pioneer may be the way to do it. But the payment change is not coming fast enough. ThedaCare and others such as Harvard Vanguard Medical Associates in the greater Boston area have proven readmission rates can be dramatically reduced. The problem is they are jeopardizing financial results to do the right thing.
We need more significant payment experiments such as what is happening at the Partnership for Healthcare Payment Reform http://www.phprwi.com/ and the Pioneer ACO model for the industry to truly reform. Grant funding from government and private foundations should be funneled in this direction as quickly as possible if we are going to get on top of the cost and quality crisis.
As lean thinkers we need to keep in mind the “enterprise wide” value stream. This means understanding every step in the customer’s experience from time to when an abnormality occurs to cure. But what if there is no process to identify abnormalities? Today we have a process that is perfectly designed to deliver poor health outcomes for farmers. It goes way beyond whether we actually have the right providers and care processes designed correctly in a medical clinic. More and more our thinking has to shift to understanding the entire customer experience. This includes understanding their work, where they live, what their access to healthcare is etc. ThedaCare’s Community Health Action Team found that most rural Wisconsin farmers were fearful of doctors and refused to go to the clinic. So, the team brought nurse practitioners to them piggybacking off the local agriculture extension service. The team had to build trust before it could save lives. The natural place to start was the extension.
In the adjacent article from Commonwealth the program to address the needs of farmers in rural Wisconsin is highlighted and brought to national attention. The importance of this work,however, is the difference in thinking about the health of a relatively isolated population. This thinking can be applied to any population of individuals from inner city America to the farm fields of Wisconsin. The point being that lean thinking is very applicable to population health and if it was utilized more often community health teams such as the Rural Health Initiative in Wisconsin would be the rule rather than the exception.
The Center’s three-pronged strategy for true health reform relies on two parts of the bill that are most important — payment reform and the release of Medicare data with public reporting.
We believe the experiments established by CMMI to test bundled payments, comprehensive primary care payments and the Pioneer ACO program, which moves to global payments in year three, are all fundamental to the redesign of American healthcare.
The Medicare data release rules are cumbersome at this point. However, officials at CMS have been trying to work with both private parties and state governments to release this data in a format that is useful to providers and the public. We continue to work with CMS to make this happen.
Finally, our work in delivery redesign is creating much more efficient and higher quality care delivery. The reduction in CMS payments over the next few years is motivating providers to improve performance, and we believe the lean methodology which we continue to teach and facilitate is the only established approach to meet these challenges.
Inova has been working hard to deliver better value to customers using lean. The executives are taking this thinking now into new payment methods as this article in the Washington Post clearly articulates.
AHRQ releases it’s state health rankings once a year. Wisconsin and Minnesota have been competing at the top for years and this year Minnesota won out in a close race. There are many good things happening in both of these states including transparency initiatives, lean healthcare, and major payment reform initiatives. Those that argue these states just have better demographics should know that in Wisconsin alone there were 1.1 million medicaid members in 2011. That is nearly 20% of the population at the poverty level yet look at what can be achieved when a collaborative multistakeholder group in a whole state works together to deliver better health.
There is much that remains to be done but these results give others hope that it’s possible to improve the health of an entire state.
Lean in healthcare is beginning to take off. Five of the eleven high value health systems in this new report have deeply committed to transforming the entire organization using lean practices and principles.
ThedaCare, Virginia Mason, and Denver Health have been using lean as a transformational set of principles for years. All three have been highlighted in multiple peer reviewed publications and have proven track records. Kaiser Permanente has established the Santa Clara Ca. hospital as the “model line” for KP’s experiment to determine if the method will be applied across the hospital system. Cleveland clinic is transforming the lab and pathology institute using these principles.
None of this is surprising. The core concept of delivering improved customer value is at the heart of the lean transformation. The healthcare industry now realizes that it is critical to improve quality and reduce cost at the same time. Lean delivers both and is the only reliable known method to consistently deliver improved value to patients.
It’s helpful that the IOM is calling out these organizations as examples of great performers that the industry should be carefully studying.
