John Toussaint, MD, CEO, led Appleton, Wis.-based ThedaCare for eight years before becoming CEO of the ThedaCare Center for Healthcare Value, a resource hub dedicated to performance improvement, transparency and payment reform.
Dr. Toussaint was in Chicago last week for the American College of Healthcare Executives 2014 Congress. There, he accepted ACHE's 2014 Dean Conley Award for his article, "A Management, Leadership and Board Road Map to Transforming Care for Patients," which published in the spring 2013 issue of Frontiers of Health Services Management.
Dr. Toussaint took some time to speak with me about what he is seeing CEOs grapple with most, why he sometimes feels frustrated with industry conversations about accountable care, and how he's seen one health system reduce its patient wait times by 47,000 days over four years. 
Question: Over time, have you seen anything different about the health system CEO role that maybe you didn't notice while you were in it?
Dr. John Toussaint: I think these are some of the more complicated times if you think about the problems health system CEOs are facing today. The payment system is rapidly changing, and what are you supposed to do in that new world? That's a challenge. Revenues are going down significantly. We cannot just charge more and get away with it. I think from a financial management perspective, there's a new set of pressures. I talk to a lot of CEOs and they are really feeling it. I don't think we had these kinds of financial pressures [before] — a country going bankrupt because of increasing healthcare costs, Wall Street Journal headlines continuing to highlight how high healthcare costs are.
We have good evidence that you can dramatically improve the cost and quality of healthcare in this country. I've published quite a few articles about that, just in the last year. It's not as if we don't have anything we can do. There's a lot we can do. I think that's the challenge now for healthcare CEOs — what are you going to do? You can't just wait for the insurance company to agree to a more lucrative contract. That's not going to work anymore.
Q: Does that frustrate you ever? That you feel that there is evidence, but [accountable care] is still up for debate a lot?
JT: I said it this morning in my talk, I published in the Journal of the American Medical Association in October an article that showed the Bellin ThedaCare Pioneer ACO reduced the total cost of care by 4.6 percent for 20,000 people and improved quality at the same time. So it's not like this can't be done. Now we know it can be done. Why aren't more people doing it? I'm a bit frustrated. That's why I come to meetings like ACHE and talk about it and talk to young [people] so they can try to fix the system.
Most people I talk to on the delivery side think that the ACO is the right experiment to run. It is forcing us to work together and build a process that will, over time, improve care. We need to have the payment system redesigned though, for this to work. If you don't have a methodology to improve throughout the organization, you're not going to be as likely to improve. The method of lean is what I published in JAMA. It's not the management flavor of the day; it's actually a system.
Q: What are some issues you're seeing CEOs grapple with most?
JT: I think it's unclear what the right structure needs to be for the ACO. You're seeing a lot of mergers and acquisitions, so systems are getting bigger. I'm not sure bigger is better. The bigger organizations get, the harder it is to build a culture of continuous improvement. You're bringing all these cultures together that are very disparate. I think that's a real dilemma. Is bigger really better? If it is, how big is big enough?
One of the problems, and this is a problem the government handed us, is an organization must have at least 15,000 Medicare beneficiaries to be considered for the [Pioneer ACO] program. Well, ThedaCare I think had around 13,500, so it needed to partner with another organization. So that drives more of this bigger-is-better concept. The answer is definitely not in on that issue. I'm concerned that bigger is not better, especially with the operational components of what we have to do, which is improve the quality of care and reduce the costs. It requires teams to do that, and by bringing in all these disparate organizations, it's more difficult to create team behavior.
Q: The common argument is that by owning more of the continuum, [providers] will keep things…
JT: More integrated, is what they're thinking. "If we own it, we'll integrate it." I can guarantee you that ownership doesn't necessarily lead to integration. It's creating an aligned culture [that] is the hard part. If you look at any merger, one of the hardest things about that work is integrating the cultures of the organizations. In many cases, performance goes down before it goes up. I think that is part of the problem with bigger is better. The other question is — are we just going to end up with a few monopolies in different markets? And are those monopolies going to be used to set prices in the commercial market? I think there's a real risk there.
Q: And what about the issues CEOs are most excited about?
JT: I think there is some excitement around the fact that we can improve the system. I think the more forward-thinking people who actually know that we spend too much money on healthcare want to change it. And I think there are plenty of leaders in the United States today who think that's true. They'll be the ones to run these experiments and see if we can fix some of these problems.
The Bellin ThedaCare Pioneer ACO is one of those experiments. They were one of the lowest-cost Pioneers to begin with, and to reduce costs by 4.6 percent on top of that means there is a huge amount of waste in the system. Even if you're good, you can improve. The highest cost Pioneers were around $16,000 per Medicare beneficiary per year — Bellin ThedaCare is at $8,000. There clearly is huge room for improvement.
Q: A big criticism has been that all the Pioneers that have positive results were high-spenders to begin with, so they're getting back to normal.
JT: But Bellin Thedacare was the third lowest to start with and moved to the lowest, so the point is no matter where you are starting from, significant improvement in cost can and should be made. But organizations must have an operating system in place to deliver reliable results. Most healthcare organizations do not have an operating system. Healthcare is a business, and most businesses actually have an operating system — if they're successful.
That's what we've been learning over the last decade, not only at ThedaCare, but at a number of places around the country. We administer a peer-to-peer learning community called the Healthcare Value Network. It's a group of 59 health systems around North America, and they are all trying to apply these principles of operational excellence using the Toyota Production System applied to healthcare. Almost everyone has been showing really remarkable improvements in cost and quality.
The New York Health and Hospital Corporation, a very large public safety-net, has taken almost $350 million out of its cost structure while improving quality, and they have it documented. Akron Children's measured waste in terms of wait times for kids. They've reduced wait times for kids by 47,000 days [over four years]. That's unbelievable! I love that number.
Q: Now is that an observation you've held for a while, or is it something you've noticed in this role over the last few years? About the lack of operating systems?
JT: Well, I've had the privilege of visiting many, many healthcare systems: 130 at this point, in 13 countries. So I've been looking for the Toyota of healthcare for the last 11 years. I haven't found it yet. But what I have been doing is helping organizations understand how they might become that, and that's where this Healthcare Value Network is coming in. What [hospital leaders are] really trying to do is learn from each other, so we facilitate that learning.
We bring the executives together and then go visit each one of these hospitals. Thirty to 40 executives go visit each of the organizations, and we facilitate the learning around what they're doing well. [Organizations] have to be willing to share everything to be part of the network, because our goal is that we're going to steal shamelessly. That's how we're going to change the system: When we learn something, we're going to share it with others. And it's working. A lot of [hospitals] are really willing to open their doors and [say], "Come in and see how we did it, what we learned, what we did badly and what we did well."
Q: Do you see competitive attitudes shifting? Maybe [changes in] people who may not have wanted you to see what they were doing wrong before? Was that always there, this spirit of collaboration?
JT: Over the years, manufacturing organizations have been very unwilling to share their journeys and what works. What we've found in healthcare is that's not true. Healthcare is really willing to share. Even from the standpoint of competitors in markets. They'll actually share improvements, which is really remarkable. Not all, but for the most part, people go into this business for the right reasons. When they find something that really works, they're willing to share that, versus other industries that [are] more competitive and unwilling. Healthcare is actually pretty good at sharing.
Q: I wanted to get into price transparency and the conversation about value. You mentioned the Wall Street Journal — more newspapers have taken it upon themselves to delve into prices in their market. Some hospitals get very defensive and the conversation can shift to, "Well that's our chargemaster. That's our sticker price. That's not what patients are paying." There are a lot of loops and loopholes. I'm wondering if you were to sit down with a CEO at a high-cost hospital, what tips would you share with him or her to narrow the focus on how to address this?
JT: Well, first of all, I'm all for transparency. I think that it's important for customers to know what they're buying, not only from price but from a quality standpoint. There's more price transparency and quality transparency regarding a refrigerator than there is about your heart surgery. As a patient, we need to know these things. I think we'll see more price transparency. It's coming because there are sophisticated databases emerging throughout the country. Executives can't avoid this.
In addition, bundled pricing is happening. This is leading employers to demand reference pricing for certain elective procedures. For example, employers are willing to only pay up to a certain price for a procedure, such as $27,000 for a hip replacement. We're working on a payment experiment in Wisconsin right now in which we are designing a total cost of care, per member, per year experiment with a group of employers. These experiments will throw the entire existing pricing model out the door. This will drive a whole different set of behaviors, I think.
Q: What are some initiatives you're working on now at the Center?
JT: We are working on teaching the lean management system. Most organizations that I work with and visit don't know anything about that. It's really quite different from the typical way healthcare organizations are managed. In a typical management system, the higher up on the ladder you are, the more decisions you make. We need to throw that system out and develop a new system that's focused on helping employees identify and solve problems at the front-line every day. That's where we're seeing the biggest breakthroughs in terms of performance improvement. That takes a different management system than the command and control [model].
We actually have a new book being published this month called "Beyond Heroes: A Lean Management System for Healthcare." That will be the core of the teaching program, but we're also doing training within hospitals. The training is from the CEO to the front-line staff. We have to teach each level, otherwise it doesn't work. If we engage all levels, we can really start to change the system to deliver this daily problem-solving and defect-removal, which is where we're getting waste out, which is how we're reducing cost and improving quality.
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