The system of delivering healthcare services is at a crossroads: While fee-for-service continues as the primary model of reimbursement, a transition to a value-based model is imminent. Even if the healthcare reform law is invalidated, healthcare spending as a share of total national spending is unsustainable. Healthcare leaders must prepare their organizations for this fundamental shift and must do so at an appropriate pace. Moving too slow could leave the system ill prepared for an environment that bundles payments and rewards the prevention of illness, while moving too fast could reduce utilization under a system that financially rewards it, leading to poorer margins.
Kevin Fickenscher, MD, founder and president of CREO Strategic Solutions, a healthcare consulting firm, calls this transition a "reformation" within healthcare delivery. The move toward value means providers will be financially at risk for providing comprehensive coordinated care, which requires integration between physicians and acute, ambulatory and preventive services and a fundamental shift toward preventing healthcare utilization. The level of integration, standardization and information sharing required to achieve this will be a challenge for most healthcare organizations — save the Kaisers, Geisingers and Mayo Clinics of the world — which have not until recently made collaboration with non-acute providers a priority. As the industry evolves toward this new model, healthcare systems will be forced to evolve with it; innovators will flourish and laggards will suffer, and new business models will emerge.
Impactful innovation
While hospitals have instituted performance improvement initiatives for many years as a way to innovate their managerial processes, David P. Hunter, senior managing director and principal at Hunter Partners, a hospital management consulting firm, says hospitals now must focus on driving costs out of clinical processes. "In the late 1990s into the early 2000s, a huge focus of performance work was around more traditional management initiatives — things like productivity and supply chain management," he says. "Today, labor and supply chain management is pretty good. Focus is on the patient-care side. What we're looking for now is innovation that allows for significant improvement in cost and quality through changing professional — that is physician, nurse and other ancillary personnel's — behaviors."
Specifically, health systems must work to remove variation in the practice of medicine, ensuring adherence to the best clinical practices, which requires alignment with physicians and other care providers. "It's amazing the range of variation in practices. Some physicians spend four, five or six times the resources as other physicians for the same or lower outcomes, which creates a huge opportunity to reduce cost and improve quality. "The question then is how can systems get all physicians to use the practices of the physician with the best results?" asks Mr. Hunter. Moving clinicians toward innovation in their care practices can be a challenging one, but the payoff is huge. To ease the process, health systems should keep in mind the following five best practices.
1. Innovation starts at the top. To develop a culture of innovation, especially in clinical practices, innovation must be encouraged by top leadership. These leaders must then ensure a structure is in place to support clinical leadership and innovation. According to Dr. Fickenscher, this means developing more clinical leaders, providing them the training needed to manage other physicians and ensuring physician leadership within ambulatory services are put on the same level as physician leaders of inpatient services — a way of thinking that will be required for success under value-driven delivery models. Dr. Fickenscher also recommends pairing physician leadership with an administrative leader in a dual leadership model that oversees "longitudinal" services lines. For example, the oncology service line would oversee various related disciples, such as medical, surgical and radiation oncology, and would incorporate both inpatient and ambulatory services.
Many large integrated systems have also appointed chief innovation officers to oversee both clinical and non-clinical quality improvement initiatives, notes Dr. Fickenscher. The appointment of such a leader further demonstrates an organization's and its leadership's commitment to innovation.
2. Focus on culture. While support from leadership begins to spur innovation, the health system's culture must also support innovation. "People don't want to change, ever. So, you have to create an environment that encourages change," says Mr. Hunter. "In the old culture of hospitals, the doctors could basically do whatever they wanted to do. The goal now is to work toward a culture of transparency — where the doctors are much more transparent and much more concerned about how they compare to their colleagues."
While a culture of transparency doesn't happen with the flip of a switch, C-suite encouragement for this type of culture and an organizational structure of physician-leader champions can begin to shift the organization. However, these two elements alone won't significantly alter the organizational environment. Incentives are needed.
3. Provide incentives. Both Dr. Fickenscher and Mr. Hunter say financial incentives for providing high value care are critical to bringing about innovation that reduces costs while improving quality. "One of the core issues creating an impediment toward high value care is the current reimbursement system. The system is responding exactly as incentives are telling it to," says Dr. Fickenscher. "Until we start paying people differently, we shouldn't expect to see a lot of innovation."
Mr. Hunter agrees. "People innovate because of rewards. They aren't going to start searching for better ways to do things unless they derive some value out of it," he says. While he does note there are softer incentives — physicians inherently what to do what's best for their patients, for example — organizational-wide change requires more formal incentives. Therefore, hospitals will need to develop a compensation method, such as bonuses for employed physicians or a gainsharing model, to reward physicians and other providers for high quality, low cost care. He warns, though, systems must be very cautious when gainsharing with independent physicians due to Stark law and other regulations.
4. Provide high-quality data. After physicians have been given a reason to change their behaviors, they have to be given information about why and how to change their behavior. Without this information, efforts by health systems to change providers' clinical practices will be futile. "The hardest thing for many hospitals, particularly the less sophisticated ones, is the accuracy and cleanliness of the information you're giving the data-driven physicians to work with," says Mr. Hunter. "Hospitals are notorious for data problems. We don't even count things in the same way." Data provided to physicians must be accurate and understandable. If physicians can't make sense of it or have any reason to question its accuracy, they certainly will not rely on it to drive clinical decision-making, says Mr. Hunter.
For many hospitals, arriving at accurate data can be a challenge. "An electronic health record doesn't give organizations much intelligence from a population-health standpoint," says Dr. Fickenscher. Beyond an EMR, systems must have a way to collect, mine and interpret that information, which requires data warehousing capabilities and employees or to analyze the data and report it in an easy-to-understand manner.
One health system well versed in the use of data mining is Salt Lake City-based Intermountain Healthcare. Lee Pierce, director of business intelligence for the system, says Intermountain began pulling data from its electronic medical records, financial and other disparate information systems approximately 13 years ago, to build an Enterprise Data Warehouse. Today the EDW is an "integral part" of the health system's ability to fulfill its mission of providing the highest quality care at the lowest appropriate cost, he says. At Intermountain, data architects pull data from the organization's disparate systems into the data warehouse and then data analysts, or business intelligence developers, as they're called at Intermountain, pull the data and create reports and analysis that can be shared with various service line leaders. At Intermountain, these service lines are referred to as clinical programs. Each clinical program has a physician leader, an operations leader, a data manager and a data analyst who work with the leaders to build structures and tools able to interpret data in a way that is meaningful. For example, surgical services leaders receive reports on physician adherence to the multidisciplinary colon surgery care process model, which has decreased length of stay by 1.5 days and average hospital cost by $1,763 for colon resection patients. This information is then made available to physicians, nurses and administrators to reinforce the efficacy of following the MDCS CPM and used to identify areas for improvement.
For health systems that want to expand their data mining abilities, Mr. Pierce recommends they begin with building an analytics culture through leadership support of data-driven quality improvement initiatives. "It's about leadership and building an analytics culture. It can't just be an IT project. The value comes when IT partners with the business and clinical leaders and staff to deliver analytics," he says. "Start small, one quality improvement project at a time, and build upon those successes to advance analytics efforts in your organization."
5. Let the physicians drive the changes. Finally, allowing the physicians to guide innovation is critically important for success. "You have to provide physician leadership with data and then create an environment — through incentives and executive support — so they'll work with colleagues to improve their colleagues' practices," says Mr. Hunter. "It doesn't work if it's driven by bureaucrats. It has to be driven by the doctors." Hospitals can additionally support the physician leaders with training and development opportunities to help them determine which changes will create the biggest return in terms of value created for resources spent and ensure they have the interpersonal and management skills to drive clinical process coordination.
"How do you get good performers to influence the poorer performers, and how do you get poorer performers to respond?" he asks. "A lot has to do with peer pressure. Share what the great performers are doing, and then have them work with the others to bring them to their level."
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Kevin Fickenscher, MD, founder and president of CREO Strategic Solutions, a healthcare consulting firm, calls this transition a "reformation" within healthcare delivery. The move toward value means providers will be financially at risk for providing comprehensive coordinated care, which requires integration between physicians and acute, ambulatory and preventive services and a fundamental shift toward preventing healthcare utilization. The level of integration, standardization and information sharing required to achieve this will be a challenge for most healthcare organizations — save the Kaisers, Geisingers and Mayo Clinics of the world — which have not until recently made collaboration with non-acute providers a priority. As the industry evolves toward this new model, healthcare systems will be forced to evolve with it; innovators will flourish and laggards will suffer, and new business models will emerge.
Impactful innovation
While hospitals have instituted performance improvement initiatives for many years as a way to innovate their managerial processes, David P. Hunter, senior managing director and principal at Hunter Partners, a hospital management consulting firm, says hospitals now must focus on driving costs out of clinical processes. "In the late 1990s into the early 2000s, a huge focus of performance work was around more traditional management initiatives — things like productivity and supply chain management," he says. "Today, labor and supply chain management is pretty good. Focus is on the patient-care side. What we're looking for now is innovation that allows for significant improvement in cost and quality through changing professional — that is physician, nurse and other ancillary personnel's — behaviors."
Specifically, health systems must work to remove variation in the practice of medicine, ensuring adherence to the best clinical practices, which requires alignment with physicians and other care providers. "It's amazing the range of variation in practices. Some physicians spend four, five or six times the resources as other physicians for the same or lower outcomes, which creates a huge opportunity to reduce cost and improve quality. "The question then is how can systems get all physicians to use the practices of the physician with the best results?" asks Mr. Hunter. Moving clinicians toward innovation in their care practices can be a challenging one, but the payoff is huge. To ease the process, health systems should keep in mind the following five best practices.
1. Innovation starts at the top. To develop a culture of innovation, especially in clinical practices, innovation must be encouraged by top leadership. These leaders must then ensure a structure is in place to support clinical leadership and innovation. According to Dr. Fickenscher, this means developing more clinical leaders, providing them the training needed to manage other physicians and ensuring physician leadership within ambulatory services are put on the same level as physician leaders of inpatient services — a way of thinking that will be required for success under value-driven delivery models. Dr. Fickenscher also recommends pairing physician leadership with an administrative leader in a dual leadership model that oversees "longitudinal" services lines. For example, the oncology service line would oversee various related disciples, such as medical, surgical and radiation oncology, and would incorporate both inpatient and ambulatory services.
Many large integrated systems have also appointed chief innovation officers to oversee both clinical and non-clinical quality improvement initiatives, notes Dr. Fickenscher. The appointment of such a leader further demonstrates an organization's and its leadership's commitment to innovation.
2. Focus on culture. While support from leadership begins to spur innovation, the health system's culture must also support innovation. "People don't want to change, ever. So, you have to create an environment that encourages change," says Mr. Hunter. "In the old culture of hospitals, the doctors could basically do whatever they wanted to do. The goal now is to work toward a culture of transparency — where the doctors are much more transparent and much more concerned about how they compare to their colleagues."
While a culture of transparency doesn't happen with the flip of a switch, C-suite encouragement for this type of culture and an organizational structure of physician-leader champions can begin to shift the organization. However, these two elements alone won't significantly alter the organizational environment. Incentives are needed.
3. Provide incentives. Both Dr. Fickenscher and Mr. Hunter say financial incentives for providing high value care are critical to bringing about innovation that reduces costs while improving quality. "One of the core issues creating an impediment toward high value care is the current reimbursement system. The system is responding exactly as incentives are telling it to," says Dr. Fickenscher. "Until we start paying people differently, we shouldn't expect to see a lot of innovation."
Mr. Hunter agrees. "People innovate because of rewards. They aren't going to start searching for better ways to do things unless they derive some value out of it," he says. While he does note there are softer incentives — physicians inherently what to do what's best for their patients, for example — organizational-wide change requires more formal incentives. Therefore, hospitals will need to develop a compensation method, such as bonuses for employed physicians or a gainsharing model, to reward physicians and other providers for high quality, low cost care. He warns, though, systems must be very cautious when gainsharing with independent physicians due to Stark law and other regulations.
4. Provide high-quality data. After physicians have been given a reason to change their behaviors, they have to be given information about why and how to change their behavior. Without this information, efforts by health systems to change providers' clinical practices will be futile. "The hardest thing for many hospitals, particularly the less sophisticated ones, is the accuracy and cleanliness of the information you're giving the data-driven physicians to work with," says Mr. Hunter. "Hospitals are notorious for data problems. We don't even count things in the same way." Data provided to physicians must be accurate and understandable. If physicians can't make sense of it or have any reason to question its accuracy, they certainly will not rely on it to drive clinical decision-making, says Mr. Hunter.
For many hospitals, arriving at accurate data can be a challenge. "An electronic health record doesn't give organizations much intelligence from a population-health standpoint," says Dr. Fickenscher. Beyond an EMR, systems must have a way to collect, mine and interpret that information, which requires data warehousing capabilities and employees or to analyze the data and report it in an easy-to-understand manner.
One health system well versed in the use of data mining is Salt Lake City-based Intermountain Healthcare. Lee Pierce, director of business intelligence for the system, says Intermountain began pulling data from its electronic medical records, financial and other disparate information systems approximately 13 years ago, to build an Enterprise Data Warehouse. Today the EDW is an "integral part" of the health system's ability to fulfill its mission of providing the highest quality care at the lowest appropriate cost, he says. At Intermountain, data architects pull data from the organization's disparate systems into the data warehouse and then data analysts, or business intelligence developers, as they're called at Intermountain, pull the data and create reports and analysis that can be shared with various service line leaders. At Intermountain, these service lines are referred to as clinical programs. Each clinical program has a physician leader, an operations leader, a data manager and a data analyst who work with the leaders to build structures and tools able to interpret data in a way that is meaningful. For example, surgical services leaders receive reports on physician adherence to the multidisciplinary colon surgery care process model, which has decreased length of stay by 1.5 days and average hospital cost by $1,763 for colon resection patients. This information is then made available to physicians, nurses and administrators to reinforce the efficacy of following the MDCS CPM and used to identify areas for improvement.
For health systems that want to expand their data mining abilities, Mr. Pierce recommends they begin with building an analytics culture through leadership support of data-driven quality improvement initiatives. "It's about leadership and building an analytics culture. It can't just be an IT project. The value comes when IT partners with the business and clinical leaders and staff to deliver analytics," he says. "Start small, one quality improvement project at a time, and build upon those successes to advance analytics efforts in your organization."
5. Let the physicians drive the changes. Finally, allowing the physicians to guide innovation is critically important for success. "You have to provide physician leadership with data and then create an environment — through incentives and executive support — so they'll work with colleagues to improve their colleagues' practices," says Mr. Hunter. "It doesn't work if it's driven by bureaucrats. It has to be driven by the doctors." Hospitals can additionally support the physician leaders with training and development opportunities to help them determine which changes will create the biggest return in terms of value created for resources spent and ensure they have the interpersonal and management skills to drive clinical process coordination.
"How do you get good performers to influence the poorer performers, and how do you get poorer performers to respond?" he asks. "A lot has to do with peer pressure. Share what the great performers are doing, and then have them work with the others to bring them to their level."
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