Today, the healthcare sector commands 17.4 percent of the Gross Domestic Product and on average, each American expends nearly $5,500 per year on healthcare. More troubling is that nearly 30 percent of the $2.5 trillion, or $750 billion, is spent on unnecessary, inappropriate care and administrative functions. Clearly, this type of care does little to improve the health of the nation.
Equally alarming is research, which has documented that spending more, does not result in better care. In fact, more care and more costly care often translate into worse health outcomes. This is counterintuitive to the American psyche, where more is better.
Moreover, healthcare spending is not distributed evenly across the population or across medical conditions. Five percent of the U.S. population suffering with the most complex and extensive medical conditions account for almost half of total spending. Across the population curve, 20 percent account for 80 percent of total U.S. healthcare spending.
It has been repeatedly demonstrated that treating patients with several co-morbid chronic conditions costs up to seven times as much as treating patients who have only one chronic condition. In the wake of national health reform, the health industry (health systems, health plans, providers and policy makers) will need to assure that the care Americans receive is the best it can be — accessible, timely, appropriate, high quality and high value. The organizations that can unlock the keys to that puzzle — that is, the organizations that effectively innovate care coordination and delivery processes to achieve clinical transformation — will lead the next phase of healthcare delivery.
Innovation and clinical transformation
Health Systems, like all businesses, must innovate or risk being replaced by alternative organizations that can better serve the needs of their customers (patients, physicians and payors). The rate and extent of innovation required is proportionate to the level of instability in the environment in which they operate. Today, most would agree that the healthcare industry has become a very dynamic, often chaotic business, filled with opposing stressors that threaten the very existence of its component parts. Consequently, it is critical that hospitals and health systems innovate and transform in order to compete in the new, developing markets.
Aligning all the parts of an enterprise toward clinical transformation will be a monumental undertaking for health systems that choose this path. The clinical transformation framework we have developed encompasses six areas of focus. They are (1) imbedding a population health management program as foundation of wellness, (2) transforming clinical operation for chronic disease patients who are high-risk and high-cost, (3) effectively managing transitions of care to eliminate gaps and reduce clinical set-backs, (4) building, maintaining and managing a provider network, (5) redesigning payment structures and incentives and (6) deploying information systems and analytics as enablers of the other 5 areas of focus.
Barriers to clinical transformation
Unfortunately, health systems suffer from a myriad of barriers to business innovation and therefore clinical transformation. They can be divided into structural, process, competency and cultural barriers.
Structural barriers. Inflexible hierarchies with strong command-and-control architecture exemplify a structural barrier. Because command-and-control structures tend to be easy to develop and equally straightforward to monitor, they have long been touted to align strategy, execution and feedback loops. Adjusting or fine-tuning the structure to meet the ever-changing needs of the organization however proves to be near impossible. Moreover, the resulting relationship between senior executives, managers and employees is, at best, based on respect and obedience.
In addition, departmentalization based on specialty creates another structural barrier because of the coalescence of only like-individuals into a group. Over time, the group tends to overvalue its own contributions and undervalue the contributions of others. The group develops illusions of invulnerability, stereotypical views of others, safeguards against new or opposing ideas and rationalizes or discounts threats, thereby creating actual and figurative silos that undermine cross-pollination of ideas and innovations.
Process barriers. Probably the most substantial barriers found in health systems are process barriers. There are few, if any, formal processes to support creativity and rethinking of the healthcare delivery processes. Typically, learning transference is not encouraged and seldom measured. Furthermore, information-gathering systems, including competitive intelligence, tend to be insular. A manager may have some information on new processes being implemented at nearby health systems, but not non-hospital facilities and most have little appreciation of the impact of disruptive technologies that may affect their specialty.
Competency barriers. Barriers to competencies begin with manager selection. The selection process seldom evaluates the manager's breadth of knowledge, lateral-thinking skills, ability to persevere in face of impediments, or facility to think in terms of patterns instead of algorithms, qualities associated with creativity. Few organizations have educational programs aimed at fostering creativity and system redesign.
Cultural barriers. There is no doubt that hospitals are among the most regulated businesses. These regulations and examinations foster a culture that abhors risk, distrusts intuition and penalizes non-conformity. Almost exclusively, the focus of hospital management is on what is currently taking place at the organization and how to bring activities "in-line."
This is further reinforced by metrics that are focused on either lagging or current indicators. Hospitals measure admissions, visits, revenue and full time equivalents monthly, some even weekly. Much of the emphasis is on short-term gains and results. Few hospitals measure their executive team’s performance on leading indicators such as learning, innovation, or new business development. These are just a few examples of cultural barriers that hospitals face.
In order to re-orient the healthcare delivery system, the leadership must develop a clear and compelling CT vision and relentlessly communicate it to the health system team. The system leader should champion the requisite organizational structure, culture, processes and competencies that simultaneously reward improved margins and productivity, as well as breakthrough thinking and growth.
Overcoming barriers
The most difficult barrier to overcome is culture. Culture is created by consciously and thoughtfully selecting members of the CT team who possess creativity and fostering that creativity with suitable reward and boundary systems. The traits that should be considered in the selection process are many, though an individual need not posses all of them to be selected. In actuality, executives should guard against picking an "isolated genius," but rather individuals proficient in "social creativity."
The characteristics that should be considered include passion, comfort with ambiguity and change, desire to create, sharp decision-making and predilection to dream. These individuals are often seen as champions of causes, unconventional thinkers adept at abstraction, consummate learners who see every failure as an opportunity to improve and optimists who can face the brutal reality of the situation.
Structural barriers can be overcome by developing a clinical transformation team comprised of individuals who are not naturally aligned. This promotes cognitive conflict, resulting in more creative solutions.
Process barriers might be resolved by committing adequate resources to creativity and innovation.
This begins with a declarative sanction of the activities by the highest levels of the organization.
Then both money and, the often-overlooked, time are budgeted for the activities. It is worth repeating that the team and individuals must have discreet resources at their disposal if they are to succeed. They will likely not meet the objectives if this is an additional task to accomplish within their already busy workdays. As often noted, when time is not carved out, universally, managers deal with what's urgent rather than what’s important.
In addition, when funds are not properly allocated, it sends a strong signal that senior executives are not serious about the clinical transformation program. In addition, teams should be entrusted with considerable freedom over the means by which they accomplish their charter. The senior executive’s role is to assure that the team is not venturing into areas well beyond the firm’s mission and value system.
Guiding principles
Clinical transformation efforts should focus on the following guiding principles to carry out its innovation and transformation mission.
1. The patient-provider relationship is central to innovation.
2. Learn from positive deviants. Learn from the extreme, not the mean.
3. Backload constraints instead of frontloading them.
4. Collaborate with creative rule breakers.
5. Follow your vision, be accountable, be persistent and be brave enough to act on your passion.
Clinical Transformation will elevate those who embrace it the ranks of an elite group of health organizations (Mayo Clinic, Dartmouth-Hitchcock, Keiser Permanente, Intermountain Healthcare, Geisinger Health System and Johns Hopkins Hospital and Health System) that endeavor to solve the health industry's most vexing problem — to provide accessible, timely, appropriate, integrated, high quality and high-value care.
A dedicated team of innovators from the areas of information technology, operations, finance, performance improvement, learning and training and clinical medicine and led by a visionary, persuasive leader with deep and expansive knowledge of the healthcare delivery system and its constituents is the best recipe for success.
Dr. Boutros is an executive with a 20-year record of success leading hospitals. He is President of BusinessFirst Healthcare Solutions, an international advisory firm to health systems. He has led successful projects focused on strategic repositioning, operational redesign, clinical and physician integration and Accountable Care Organization development.
CBO's Report on Medicare's Demonstration Projects: What the Numbers Really Mean, and Why They Matter
4 Points to Assess the Success of a Pilot ACO
Equally alarming is research, which has documented that spending more, does not result in better care. In fact, more care and more costly care often translate into worse health outcomes. This is counterintuitive to the American psyche, where more is better.
Moreover, healthcare spending is not distributed evenly across the population or across medical conditions. Five percent of the U.S. population suffering with the most complex and extensive medical conditions account for almost half of total spending. Across the population curve, 20 percent account for 80 percent of total U.S. healthcare spending.
It has been repeatedly demonstrated that treating patients with several co-morbid chronic conditions costs up to seven times as much as treating patients who have only one chronic condition. In the wake of national health reform, the health industry (health systems, health plans, providers and policy makers) will need to assure that the care Americans receive is the best it can be — accessible, timely, appropriate, high quality and high value. The organizations that can unlock the keys to that puzzle — that is, the organizations that effectively innovate care coordination and delivery processes to achieve clinical transformation — will lead the next phase of healthcare delivery.
Innovation and clinical transformation
Health Systems, like all businesses, must innovate or risk being replaced by alternative organizations that can better serve the needs of their customers (patients, physicians and payors). The rate and extent of innovation required is proportionate to the level of instability in the environment in which they operate. Today, most would agree that the healthcare industry has become a very dynamic, often chaotic business, filled with opposing stressors that threaten the very existence of its component parts. Consequently, it is critical that hospitals and health systems innovate and transform in order to compete in the new, developing markets.
Aligning all the parts of an enterprise toward clinical transformation will be a monumental undertaking for health systems that choose this path. The clinical transformation framework we have developed encompasses six areas of focus. They are (1) imbedding a population health management program as foundation of wellness, (2) transforming clinical operation for chronic disease patients who are high-risk and high-cost, (3) effectively managing transitions of care to eliminate gaps and reduce clinical set-backs, (4) building, maintaining and managing a provider network, (5) redesigning payment structures and incentives and (6) deploying information systems and analytics as enablers of the other 5 areas of focus.
Barriers to clinical transformation
Unfortunately, health systems suffer from a myriad of barriers to business innovation and therefore clinical transformation. They can be divided into structural, process, competency and cultural barriers.
Structural barriers. Inflexible hierarchies with strong command-and-control architecture exemplify a structural barrier. Because command-and-control structures tend to be easy to develop and equally straightforward to monitor, they have long been touted to align strategy, execution and feedback loops. Adjusting or fine-tuning the structure to meet the ever-changing needs of the organization however proves to be near impossible. Moreover, the resulting relationship between senior executives, managers and employees is, at best, based on respect and obedience.
In addition, departmentalization based on specialty creates another structural barrier because of the coalescence of only like-individuals into a group. Over time, the group tends to overvalue its own contributions and undervalue the contributions of others. The group develops illusions of invulnerability, stereotypical views of others, safeguards against new or opposing ideas and rationalizes or discounts threats, thereby creating actual and figurative silos that undermine cross-pollination of ideas and innovations.
Process barriers. Probably the most substantial barriers found in health systems are process barriers. There are few, if any, formal processes to support creativity and rethinking of the healthcare delivery processes. Typically, learning transference is not encouraged and seldom measured. Furthermore, information-gathering systems, including competitive intelligence, tend to be insular. A manager may have some information on new processes being implemented at nearby health systems, but not non-hospital facilities and most have little appreciation of the impact of disruptive technologies that may affect their specialty.
Competency barriers. Barriers to competencies begin with manager selection. The selection process seldom evaluates the manager's breadth of knowledge, lateral-thinking skills, ability to persevere in face of impediments, or facility to think in terms of patterns instead of algorithms, qualities associated with creativity. Few organizations have educational programs aimed at fostering creativity and system redesign.
Cultural barriers. There is no doubt that hospitals are among the most regulated businesses. These regulations and examinations foster a culture that abhors risk, distrusts intuition and penalizes non-conformity. Almost exclusively, the focus of hospital management is on what is currently taking place at the organization and how to bring activities "in-line."
This is further reinforced by metrics that are focused on either lagging or current indicators. Hospitals measure admissions, visits, revenue and full time equivalents monthly, some even weekly. Much of the emphasis is on short-term gains and results. Few hospitals measure their executive team’s performance on leading indicators such as learning, innovation, or new business development. These are just a few examples of cultural barriers that hospitals face.
In order to re-orient the healthcare delivery system, the leadership must develop a clear and compelling CT vision and relentlessly communicate it to the health system team. The system leader should champion the requisite organizational structure, culture, processes and competencies that simultaneously reward improved margins and productivity, as well as breakthrough thinking and growth.
Overcoming barriers
The most difficult barrier to overcome is culture. Culture is created by consciously and thoughtfully selecting members of the CT team who possess creativity and fostering that creativity with suitable reward and boundary systems. The traits that should be considered in the selection process are many, though an individual need not posses all of them to be selected. In actuality, executives should guard against picking an "isolated genius," but rather individuals proficient in "social creativity."
The characteristics that should be considered include passion, comfort with ambiguity and change, desire to create, sharp decision-making and predilection to dream. These individuals are often seen as champions of causes, unconventional thinkers adept at abstraction, consummate learners who see every failure as an opportunity to improve and optimists who can face the brutal reality of the situation.
Structural barriers can be overcome by developing a clinical transformation team comprised of individuals who are not naturally aligned. This promotes cognitive conflict, resulting in more creative solutions.
Process barriers might be resolved by committing adequate resources to creativity and innovation.
This begins with a declarative sanction of the activities by the highest levels of the organization.
Then both money and, the often-overlooked, time are budgeted for the activities. It is worth repeating that the team and individuals must have discreet resources at their disposal if they are to succeed. They will likely not meet the objectives if this is an additional task to accomplish within their already busy workdays. As often noted, when time is not carved out, universally, managers deal with what's urgent rather than what’s important.
In addition, when funds are not properly allocated, it sends a strong signal that senior executives are not serious about the clinical transformation program. In addition, teams should be entrusted with considerable freedom over the means by which they accomplish their charter. The senior executive’s role is to assure that the team is not venturing into areas well beyond the firm’s mission and value system.
Guiding principles
Clinical transformation efforts should focus on the following guiding principles to carry out its innovation and transformation mission.
1. The patient-provider relationship is central to innovation.
2. Learn from positive deviants. Learn from the extreme, not the mean.
3. Backload constraints instead of frontloading them.
4. Collaborate with creative rule breakers.
5. Follow your vision, be accountable, be persistent and be brave enough to act on your passion.
Clinical Transformation will elevate those who embrace it the ranks of an elite group of health organizations (Mayo Clinic, Dartmouth-Hitchcock, Keiser Permanente, Intermountain Healthcare, Geisinger Health System and Johns Hopkins Hospital and Health System) that endeavor to solve the health industry's most vexing problem — to provide accessible, timely, appropriate, integrated, high quality and high-value care.
A dedicated team of innovators from the areas of information technology, operations, finance, performance improvement, learning and training and clinical medicine and led by a visionary, persuasive leader with deep and expansive knowledge of the healthcare delivery system and its constituents is the best recipe for success.
Dr. Boutros is an executive with a 20-year record of success leading hospitals. He is President of BusinessFirst Healthcare Solutions, an international advisory firm to health systems. He has led successful projects focused on strategic repositioning, operational redesign, clinical and physician integration and Accountable Care Organization development.
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